每日市场点评 --- June 17, 2008

The market couldn’t hold onto its early gains amid continuous worries in the financial sector. All three major indices were lower by around 0.7% by the close. It was a busy day in term of economic news but unfortunately, most came short of expectation. Start with the closely watched housing data. The Housing Starts for May dropped to an annual rate of 975K from a revised 1008K in the previous month. That was lowest reading in 17 years and below economists’ forecasts. To be fair, based on data from the previous cycles, the Housing Starts almost always dip below the 1 million mark before a meaningful rebound can be anticipated. Given the degree and scale of the latest housing boom (or bubble), it might require the number to go well below 1 million for the new balance to be achieved. In other words, it is a safe bet that we are going to see even lower Housing Starts in the months ahead. In a related note, Building Permits for May fell to 969K from a revised 982K in April. Move on to the inflation front. Here the picture was not pretty either. The headline PPI for May jumped 1.4%, exceeding 1.0% expected by economists. Excluding food and energy, the core PPI came at 0.2% vs. 0.2% expected. Year over year, the PPI increased 7.2% vs. 6.5% a month ago. Finally, the industrial production for May decreased 0.2% following a drop of 0.7% in April and economists called for an increase of 0.1% instead. The capacity utilization rate, meanwhile, dropped to 79.4% from a revised 79.6%.

Commodities were among the biggest winners of the day. The CRB commodity index hit a near high led by agriculture products. Crude price dropped for the third straight session at this option expiry date but it was less than 5% below the all-time high reached early yesterday. The US dollar continued to slide against major currencies. Articles from Wall Street Journal and FT suggested that traders probably were ahead of themselves in terms of interest rate hikes. As a result, treasuries rallied across the board and the chances of rate hikes in the next few Fed meetings were reduced. The VIX index was little changed while the breath was negative.