EmailWe concluded yesterday's note with an observation that we were likely to see a "woeful Wednesday" of participation in the stock market. We were right.
Although volume picked up a bit from Tuesday, a paltry 542 mln shares traded at the NYSE, which is roughly 40% below recent averages.
Wednesday, though, was simply woeful overall. The volume was light, but the losses were heavy. The S&P 500 declined 1.3% and fell back into negative territory for the year.
The way things are unfolding, it is looking like it will come down to the last trading day of the year to determine if the S&P 500 price index ends 2011 up or down. The line of demarcation is 1257.64.
In such thinly-traded markets, it is difficult to pinpoint the real reasons behind the market's performance. The two, most commonly cited reasons for Wednesday's showing were concerns about Iran's saber rattling and worries that record-high overnight deposits at the ECB suggested European banks are not going to be active buyers of eurozone debt as many had hoped.
OK. There wasn't any meaningful change on either front overnight and yet the S&P futures were up three points ahead of the weekly initial claims report.
The positive slant followed on the heels of Italy conducting an auction of three- and 10-year government bonds, both of which saw average yields drop from the prior auction.
Specifically, Italy sold EUR 2.54 bln of 3-year bonds at 5.62% versus 7.89% in November and EUR 2.50 bln of 10-year paper at 6.98% versus 7.56% in November. Altogether Italy sold EUR 7.0 bln of government securities, which was just above the midpoint of an indicated range of EUR 5.0 - 8.5 bln.
The early takeaway is that it was a serviceable auction but not a great auction. The euro has weakened against the dollar in its wake and is currently off 0.15% at 1.2889; meanwhile, the 10-year yield in the secondary market has risen 16 basis points to 7.02%.
These indications are enough to challenge the reasoning behind the positive slant in the futures market, but as we alluded to above, things sometimes are what they are in thinly-traded markets.
Separately, there wasn't much reaction to the initial claims report, even though it was weaker than expected.
Initial claims for the week ending December 24 increased by 15,000 to 381,000 (Briefing.com consensus 368,000) while continuing claims for the week ending December 17 rose by 34,000 to 3.601 mln (Briefing.com consensus 3.600 mln). A Reuters report appearing on CNBC.com is indicating a Labor Department official said claims for seven states, including California, had been estimated due to a public holiday on Monday.
The four-week moving average for both series continued to trend lower, with initial claims at 375,000 (down 5,750) and continuing claims at 3.599 mln (down 39,000). These are encouraging movements. They point to an improvement in the labor sector and have been an offsetting factor for the headline miss this week for initial claims.
The Chicago PMI report for December (Briefing.com consensus 60.1; prior 62.6) will be released at 9:45 a.m. ET.
It will be a fitting market-moving report today since it emanates from the Windy City. Although that moniker really has political roots, that moniker is cited often by tourists when the wind kicks up off Lake Michigan.
On that note, there is no telling which way the wind will blow today in this thinly-traded market.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
