Published January 09, 2013
Volatility remains low on Wall Street after the fiscal cliff saga was resolved at the beginning of the year. The long-term uptrend for equities remains intact and investors seem content to sit on their hands and ride the gentle upswing in stock prices for the time being. The major story for the market right now is the beginning of earnings season which was kicked off yesterday with reports from Monsanto (MON) and Alcoa (AA).
Domestic Crude Oil Output - Weekly data released by the Energy Information Administration showed that soaring domestic production of crude oil continues to lead a decline in imported crude. For the week ended January 4, imports fell to 7.9 million barrels per day, a nearly 16 percent year-over-year decline.
U.S. oil production is now at its highest level since March 1993 and the International Energy Agency predicts that the United States will surpass Saudi Arabia in crude production by 2020. The new American oil boom has been triggered by technological drilling breakthroughs which are being used in the large shale formations that have been discovered all over the country.
The Dow Jones Industrial Average closed the session with a gain of almost 62 points to 13,390. On a percentage basis, the Dow added 0.46 percent.
The S&P 500 climbed a little less than 4 points, or 0.27 percent, to close the day at 1,461.
The Nasdaq was the second leading major market average after the Dow, adding 14 points, or 0.45 percent, to close at 3,106.
The U.S. dollar was higher on Wednesday with the PowerShares DB US Dollar Index Bullish ETF (UUP), which tracks the performance of the greenback versus a basket of foreign currencies, adding 0.27 percent heading into the closing bell. The closely watched EUR/USD pair was last trading down 0.19 percent to $1.3054.
Most of the other major currency pairs were close to flat on the day with the exception of the USD/JPY. At last check, the greenback had risen a little over one percent against the Yen.
Crude oil was only very slightly negative on Wednesday's trading session. At last check, NYMEX crude futures had lost 0.05 percent and were trading at $93.10.
Brent crude contracts, the benchmark for European crude, had lost 0.30 percent to $111.61.
Natural gas remains in a downtrend and had shed almost 3 percent on the day to $3.13.
Precious metals prices were also slightly lower on the session. COMEX gold futures had lost 0.28 percent and were trading at $1,657.40 while silver futures were down 0.41 percent to $30.34. Copper prices were very slightly positive on the day.
Corn and wheat futures headed in opposite directions on Wednesday with CBOT corn contracts rising 0.80 percent and wheat falling around 0.70 percent. Volatility was limited in the soft commodity complex with the only mover over 1 percent being orange juice concentrate which rose 1.23 percent.
Long-term Treasury prices were slightly close to unchanged on the session. The iShares Barclays 20+ Year Treasury Bond ETF (TLT) fell 0.09 percent to $119.12.
Despite the small loss for the TLT, yields actually ticked slightly lower in shorter-term debt. The yield on the 2-Year Note fell one basis point to 0.24 percent while the 5-Year yield loss 2 basis points to 0.76 percent.
The yield on the 10-Year Treasury Note declined one basis point to 1.85 percent while the 30-Year Bond yield was unchanged at 3.06 percent.
Volatility and Volume
The VIX, which has been in a steep downtrend, rose a little less than 2 percent on Wednesday despite higher stock prices. At just below 14, the VIX is sitting at a level where it makes sense for investors to buy some protection for their portfolios even if they are not expecting a spike in volatility.
Volume was very light for the third day this week. Only around 73 million SPDR S&P 500 ETF (SPY) shares traded hands on the session compared to a 3-month daily average of over 141 million. Overall, the markets are very quiet right now.
Herbalife (HLF) shares were volatile on the day after noted hedge fund manager Dan Loeb revealed an 8.2 percent stake in the company which has been targeted by short-seller Bill Ackman and his hedge fund Pershing Square Capital Management.
Loeb runs Third Point Capital. Dow Jones reported that the SEC had opened an inquiry into the company. The stock closed the day with a gain of a little more than 4 percent to $39.95.
Apollo Group (APOL) fell almost 8 percent on the session to $19.33 after the company reported its first-quarter earnings results on Tuesday after the closing bell. Apollo lowered the top range of its full-year revenue guidance and the soft sales outlook weighed on the entire for profit education sector. DeVry (DV) lost 5 percent, ITT Educational Services (ESI) shed 5 percent and Strayer Education (STRA) lost nearly 8 percent.
Facebook (FB) surged more than 5 percent to $30.59 as traders speculated about an upcoming corporate event scheduled for next Tuesday.
Mistras Group (MG) fell 11 percent on Wednesday after the company released its quarterly earnings results on Tuesday after the market close.
Comstock Resources (CRK) fell almost 8 percent on the session after issuing disappointing guidance.
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