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Dailyfutures.com
U.S. Dollar Index, Eurodollars, Treasury Bonds, and the S&P 500 Index
U.S. Dollar index
Chart Comments
Long-term (not shown): The U.S. dollar was in a down-trend for roughly six years after 9/11 before it found a bottom at 71 cents in March of 2008. Now, it appears to be trading between 80 and 90 cents (updated 7-1-09).
Daily (below): Technically, the U.S. dollar index is well-below the 125-day average and fundamentally, the Fed is still a long way from raising interest rates (updated 7-2).
Key Events - U.S.
2009
7-2 - Unemployment rate increased from 9.4% to 9.5% in June with a loss of 467,000 jobs, a bigger loss than expected.
6-25 - Final Q1 U.S. GDP -2.5% from a year ago.
6-24 - OECD est.: U.S. real GDP -2.8% in 2009 and +.9% in 2010.
6-15 - Revised IMF estimate: 2009 U.S. GDP -2.5% and 2010 GDP up .75%.
6-11 - Retail sales +.5% in May, the first gain in three months.
6-10 - U.S. exports down 2.3% in April to the lowest in nearly three years.
6-5 - Unemployment rate increased from 8.9% to 9.4% in May with a loss of 345,000 jobs, a smaller decline than expected.
6-2 - U.S. pending home sales index posts biggest monthly gain in over seven years.
5-29 - Q1 GDP revised to -2.5% from a year ago.
5-21 - Investors ask: Is the U.S. AAA credit rating at risk?
5-8 - April shows a net loss of 539,000 jobs... a little better, but still weak.
5-7 - Stress test results after close: 10 banks need $74.6 billion more capital.
4-29 - Weaker than expected GDP report: Q1 down 2.6% from a year ago.
4-27 - Outbreak of swine flu in Mexico becomes an international health emergency.
4-9 - Wells Fargo announces record $3 billion first quarter profit.
3-23 - Treasury announces plan to give investors incentives to buy up to $1 trillion of troubled assets from banks.
3-18 - Fed will buy $300 billion in Treasuries and $750 billion of mortgage securities.
3-12 - Bank of America CEO says his company probably won't need any more government aid.
3-10 - Surprise at Citigroup: $8.3 billion operating profit in first two months of 2009.
3-6 - U.S. unemployment rate increased from 7.6% to 8.1%, the highest in 25 years.
3-2 - AIG lost $61.7 billion in the fourth quarter, the largest loss in U.S. corporate history. Government adds another $30 billion to the company.
2-27 - U.S. GDP revised lower - down an annual rate of 6.2% in the fourth quarter.
2-6 - U.S. unemployment rate increases from 7.2% to 7.6%, the highest in 16 years.
1-30 - U.S. GDP down an annual rate of 3.8% in the fourth quarter, the worst quarter in 26 years.
1-27 - Bloomberg news reports that commercial paper market is steadily improving.
1-16 - Merrill Lynch loses $15.3 billion in the fourth quarter. U.S. gives Bank of America $20 billion capital and $118 billion in loan guarantees.
1-9 - U.S. unemployment rate increased from 6.7% to 7.2%, the highest in 16 years.
2008
12-16 - Fed cut federal funds rate from 1.00% to .125%.
11-24 - U.S. buys $20 billion of preferred stock in Citigroup.
11-7 - U.S. unemployment rate increases from 6.1% to 6.5%, highest in 14 years.
11-5 - Obama wins election.
10-29 - Fed cuts interest rate from 1.50% to 1.00%.
10-17 - Warren Buffett: Now is the time to buy stocks.
10-8 - Six central banks cut interest rates.
9-17 - U.S. takes over 80% of AIG with an $85 billion investment.
9-15 - Lehman Brothers goes bankrupt. Bank of America buys Merrill Lynch.
9-8 - U.S. government takes over Fannie Mae and Freddie Mac.
7-14 - "Home Prices Are About To Bottom" says Barron's.
6-6 - U.S. unemployment rate increases from 5.0% to 5.5%.
Fundamental Notes
U.S. real GDP was down 2.5% in the first quarter from a year ago. For all of 2008, real GDP was up 1.1%, down from a 2.0% gain in 2007. On June 24, 2009, the OECD predicted that real GDP will be down 2.8% in 2009 and up .9% in 2010. On June 15, 2009, the IMF predicted that real GDP will be down 2.5% in 2009 and up .75% in 2010.
In 2008, we learned (again) that economic freedom in the financial industry is not a good idea. On October 9, 2008, a survey by the World Economic Forum said that the soundness of the U.S. banking system ranked number 40 in the world - far from the top. Overall, the U.S. government spends 37% of the nation's income which is high when you consider that it does not include universal healthcare (which costs 15% of GDP privately, but 9% of GDP publicly). Tax revenues total 28% of GDP.
U.S. Stats:
Latest real GDP growth: -2.5% in the first quarter v. year ago.
Unemployment rate: 9.5% in June (26-yr high) v. 9.4% in May.
Consumer price index: -1.3% in May v. year ago (biggest annual decline since 1950).
Latest interest rate change: Reduced from 1.00% to .125% on December 16, 2008.
GDP: US$14.0 trillion (Q1 2009 BEA estimate).
Public debt/GDP: 61% and rising (2007 CIA estimate). Possibly 100% by 2014.
Population: 307.2 million (2009 CIA estimate).
Heritage Foundation Economic Freedom Ranking: 6th in 2009.
Components of the U.S. dollar index: 58% Euro; 13% Yen; 12% Pound; 9% Canadian dollar;
4% Swedish krona; 4% Swiss franc.
Eurodollars
Chart Comments
Long-term (not shown): The December 2010 eurodollars broke higher in November of 2007 and went to extreme levels with help from the financial crisis. This move is getting old and these prices are likely near a top (updated 7-1-09).
Daily (below): The December 2010 eurodollars broke decisively lower on June 5th after a better-than-expected U.S. jobs report, but then closed back above the 125-day average after a disappointing jobs report on July 2nd. Overall, the economy is improving, but it is still too early for the Fed to allow higher short-term rates. It is hard to get excited about buying eurodollars at these levels. I would rather wait for the next sign of weakness to come along... but that may be a while (updated 7-2).
Fundamental Notes
As the financial panic progressed, investors fled to short-term government securities for safety and they show no signs yet of letting go. Also, the Fed flooded the market with liquidity and wants low short-term rates to help banks make money. As long as economic demand remains depressed, inflation expectations remain low, but it is hard to say how long that will last. The CBO said on March 20, 2009 that it expects three-month T-bill rates to average .3% in 2009. The consumer price index is expected to be down .7% in 2009.
Treasury bonds
Chart Comments
Long-term (not shown): After 9/11, T-bond prices were remarkably stable between 105 and 120 until the financial crisis in late-2008. Prices broke above 120 in November of 2008 while the economy contracted, went to 140, but then sold off quickly with concerns about too much new public debt. Investors are understandably concerned about the Treasury's huge borrowing needs and that is pressuring prices. Possible resistance at 120? (updated 7-1-09).
Daily (below): On March 18th, the U.S. T-bonds jumped higher after the Federal Reserve said that it would be buying $300 billion of long-term treasuries over the next six months. Since then however, prices failed to follow through and, on April 28th, posted their lowest close in two months - not a good sign. So far, prices remain below the 125-day average (updated 7-2).
Standard and Poor's 500 index
Chart Comments
Long-term (not shown): In January of 2008, the S&P 500 ended its four-year uptrend, hurt by a weak housing markets and growing financial problems. Little did anyone know that the worst financial crisis since the Great Depression would start in September and send stock prices to their lowest levels in 12 years. The low in March around 700 was probably the worst of it, but that doesn't mean all the problems are solved (updated 7-1-09).
Daily (below): The first piece of good news in a long time came on March 10th (a profit at Citigroup) followed by more on the 12th. That helped to lighten the mood and push the S&P 500 higher. On April 9th, the index closed above the 125-day average and on April 29th, the index closed at its highest level in over three months - decent signs of improvement. The disappointing jobs report on July 2nd was troubling - will prices stay above the 125-day average? (updated 7-2).
Fundamental Notes
The financial crisis of 2008 will go down in history as the worst contraction since the Great Depression, but conditions finally appear to be easing. The federal government intervened massively to keep the credit markets working and, so far, it is helping. On June 9, 2009, Standard & Poors said that operating earnings for the S&P 500 companies were down 40% in 2008, but they expect a 13% gain in 2009 and a 33% gain in 2010.
Abbreviations
CBO - Congressional Budget Office.
GDP - Gross Domestic Product.
IMF - International Monetary Fund.
OECD - Organization for Economic Cooperation and Development.
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