Gold Holds Its Own As Oil Jumps And Equities Follow Like A Puppy

What is the feeling in your financial ear? That’s the dizziness from the swooping, climbing, falling and twisting of oil prices and the effects of those maneuvers on other markets.

Yesterday’s settlement price of West Texas Intermediate was $32.15 per barrel. In mid-afternoon trading today, it was trading at about $33.11 for a while, or up about 3.00% on the session. As we near 3 o’clock on the East Coast, though, it is now up only 2.50%. WTI has swung all around the place today: down close to $31, and up close to $33.50. (Now at 3:30, as we write, it is up 2.70% at $33.02.)

The equities, acting like puppies on a leash, also started weak before following oil up. This was especially true on the Dow where oil companies are a large component of the index.

The Dow is up 0.90% at 3:30 in New York. The S&P500 is up about 3/4ths of a percentage point and the NASDAQ has risen by 0.40%.

In Shanghai, things were looking less rosy than in the U.S. and far less rosy than in Europe, which had a good day all around. Europe shook off the Brexit worries for the moment and focused on stronger fundamentals and some good earnings news.

The Shanghai composite was down 6.5% on questions involving liquidity in China’s banking system and its effect on stock purchases from the biggest to the smallest investor.

Worse, the developing liquidity crisis is based on a revised set of outlooks that are predicting a return on investment in China stocks that will be about half of what experts were predicting only going back to Q4 of last year.

Safe-haven plays were neutralized today by the false hopes in the oil/equities tandem.

Gold was up modestly, about 0.37 %, closing at 1233, while silver suffered, losing about 0.66% on the day. 

The U.S. 10-year Treasury bond yield was down marginally, indicating that risk appetite was neither here nor there among that trading set. German and Japanese bond yields were also down ever so slightly.

The U.S. dollar was stronger, most importantly against the yen, which often functions as a haven currency. The greenback also flexed its muscle against the euro and British pound.

Today was also a listening-in-on-the-Fed day.

St. Louis Fed president James Bullard said that stocks were closer to fair value now that we have experienced what he terms a “correction.” He also said it was a strategic mistake that traders factored in four rate hikes this year so that the recent drop in equities’ prices came all at once, causing chatter about a recession.

"Markets got the idea that once the Fed gets going, there's no stopping it. It's like train leaving the station," he said. This harks back to the mid-2000s when the Fed raised rates 17 consecutive times at FOMC meetings.

Bullard says he is not in the least worried about recession, and perhaps with good reason.

Information released on Thursday showed that U.S. durable goods orders rebounded much more than expected in January. Data from the Commerce Department showed that durable goods orders jumped by 4.9% after slumping by a revised 4.6% in December.

Wishing you as always, good trading,