Dec 9, 2004

Three Things

The 5-yr auction yesterday saw a record level of central bank participation. While done to move the dollar higher this also had the effect of moving commodities lower with some gusto. With the Fed expected to move short rates to 3.0% it makes little sense to be picking up 5-yr notes at 3.50%.

Last night both Altera and Xilinx missed badly on their mid-quarter updates adding to the inventory problems already highlighted by Texas Instruments.

Oil is trading higher on a new weather forecast for the U.S. involving the word "arctic". I keep watching the stock market rationalize it ups and downs with the price of oil and wondering when it will stop. The bottom line is that the high price of oil was a drag on the economy which kept bond prices lower than they should have been. Even with that drag the Fed has been hiking rates. In a vacuum lower oil prices stimulate the economy but the Fed knew this when it hiked in Nov and it will know that when it hikes in Dec. As for the story at hand I don't think the Arctic blast will have a lasting effect on the price of oil.

No comments:

Post a Comment