Market Review: Imbalance, Weakness and Concern

The Daily Reckoning

Weekend Edition

January 06-07, 2001

Paris, France

By Addison Wiggin

Despite Greenspan’s finest efforts on Wednesday…and a surprise 50 point Fed rate cut… stocks lost ground during the first week of the new millennium. Earnings weakness and the looming menace of historic credit-levels reasserted themselves as trading this year recovered from its New Year’s revelry.

The "Greenspan Put" also left many analysts concerned about what the Fed chairman may know… that the rest of don’t. The last time the Fed cut rates between FOMC meetings was just prior to the Russian default crisis in the fall of 1998. So far, the other shoe has yet to drop.

On Friday, the Dow shed 2.3% or 250 to finish the week at 10,662… the late week selling gave up all but 16 points of its Wednesday 299-point surge.

Also on Friday, the Nasdaq plunged 159 – or 6.2% – to 2407, relieving itself, too, of the balance of Wednesday’srate-cut inspired gains. On Wednesday… the Nasdaqhad jumped a whopping 325 – it’s largest single day advance ever.

The S&P 500 lost 34 to end the week at 1298… a loss of a 2.6% for the day bringing its early YTD total back to negative territory. The S&P is down 1.7% after the first week of trading. The Dow closed the first week of 2001 off by 124. The Nasdaq ended the first week lower, too – down 62.

Markets around the globe: The Nikkei gained 1.3%; Germany’s DAX index inched up 0.1%, the FT-SE 100 in London rose 0.2%, and France’s CAC-40 fell slightly – 1.0%.

The Russell 2000 index fell 14 to 463. The Wilshire 5000… the broadest measure of stocks was down 351 to 11,872.

PRICES FOR THE WEEK: Dollar Headin’ South…

Gold: $269

Crude Oil: $27.95

Natural Gas: $9.26

CRB Index: 228

Dollar Index: 108

The Euro: $.95

British Pound: $1.50

Japanese Yen: $.86

MARKET COMMENT: …Gas Remains A Strong Play

"In 2001, The lion’s share of new energy headed for U.S. borders will be natural gas. Here’s why:

OPEC is ready to cut production by as much as 1.5 million barrels per day to backstop sliding oil prices. That according to United Arab Emirates Oil Minister Obaid bin Saif al-Nasseri.

Meanwhile, North American oil-men are looking at ways to deliver hydrocarbons from the far north. According to the National Post, Arctic oil and gas exploration will dominate Canada-U.S. relations over the next four years. President- elect George W. Bush is a strong proponent of arctic exploration and is reported to be eager to expand gas pipelines from Canada and all points north. Given the rising cost of power in the U.S., expect political pressure to fall on the side of arctic development.

‘The industry has pretty well given up on finding another Prudhoe Bay,’ said one oil company president. ‘Still,’ he added ‘there is awful lot of natural gas to keep the wheels to the economy spinning.’"

John Myers

The Daily Reckoning