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Midday Market Update

Posted by Larry Doyle on February 19, 2009 12:37 PM |

Very interesting price action in today’s markets:

The day started off with stock markets higher by 1.5-2% given a little bit of a relief rally in overseas markets. 

At 8:30AM, the Producer Price Index was released and it was significnatly higher than expected (it rose .8 and, without the volatile food and energy components, it rose .4; the consensus was for an increase of .3 and ex-food and energy .1). Unemployment claims were also released and remain at the elevated level of 627K.

Concerns about inflation along with concerns about an ongoing supply of government debt have driven bonds across all sectors down by .5-1%.  High yield bonds are down more than that with concerns of the deepening recession leading to an increase in defaults.

All sectors of the stock market have reversed course and are now down .5-1%. The fact that the stock market could not hold earlier gains reinforces the strength of the bear market. We should look for a further selloff of another 4% to retest lows in the DJIA seen back in late 2002.

Currency markets are having a little bit of a reversal today with the Euro strengthening on indications of potential German intervention. The dollar is strengthening versus the Japanese yen.


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