The US dollar continued to face increased pressures as fresh economic data pointed to further weakening in the economy, and caused investors to take a bearish stance on the troubled currency. During the session, the US dollar lost against most of its major currency counterparts, but was able to hold its ground against the British Pound and the Canadian dollar. The Canadian dollar went for a dive as manufacturing shipments from Canada unexpectedly staggered into negative territory, signaling that the economy may share a similar fate as the US. The Euro showed surprising resilience as it touched 1.47 amid the first trade balance deficit in six months, while the Yen took the biggest bite out of the US dollar as the Bank of Japan held key rates at 0.50 percent, with the pair retracing back to trade at the 107.6 range.
The US economy continued to deteriorate as the Empire Manufacturing index unexpectedly plunged to minus 11.7 from 9.0, and was the first contraction since 2005 as new orders and shipments faltered. Consumer confidence continued to worsen as the U. of Michigan index fell more than expected to a 16 year low of 69.6 from 78.4, indicating that the increase in fiscal policy by the Bush Administration proved to be ineffective in improving overall confidence. The Treasury International Capital Flow index also added increased stress on the US as it rose less than expected, raising concerns that foreigners are becoming increasingly reluctant in holding US assets. The only positive outcome for the US was the Industrial Production figure as it held up at 0.1 percent. As a result, we expected the Fed to make more aggressive rate cuts in the near future as they shaved 2.25 percent since September.
The securities markets continued to take a hit as the US remains on the brink of a recession, and prices were sent downhill as investors became weary of the mounting pressures in the economy. The DJIA fell 28.61 points to 12,348.37 as United Technology Corp topped the losers, with Honeywell and Caterpillar following. Only eight of the big 30 advanced in today’s volatile session as pharmaceutical giant Merck lead the winners, with Hewlett Packard and Alcoa Inc next in line. Amongst the broader indices, the S&P500 advanced by 1.12 points to 1,350.00 with Arris Group and Barnes Group share taking the biggest plunge, while Cognex and Priceline saw share prices accelerating as fourth quarter profits jumped.
US Treasury yields plummeted today as bearish sentiment took hold of investors and spurred greater demand for risk free investments. Bond prices were sent higher as the 10-Year yield fell to 3.77 percent while the 2-Year yield dropped to 1.91 percent. The US economic calendar for next week remains bare until the Housing Market and the ABC Consumer Confidence indices will be released on the 19th.