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Heading into today’s trading, there were ample signs of over-sold condition around and a rally seemed to be a sensible conclusion. Indeed, we got one this morning. However, the rally was so short-lived and by the end of the closing, stocks gave back most of the early gains. In fact, none of the three major indices managed to advance more than 0.5%. It was certainly disappointing to bulls considering the Dow was up as much as 180 points earlier. We had some mixed economic news this morning. Start with the weekly initial jobless claims. The number came at 384K, a jump of 25K from the previous week’s revised figure of 359K and higher than 370K expected. In addition, continuing claims moved up by 58K to a 3.139 million, a new high in this round of economic weakness. Move on to retail sales. Here we got some surprisingly good numbers. The headline retail sales for May jumped 1%, the most in 6 months and double what economists expected. Excluding auto sales, the increase was more impressive at 1.2% pace compared to 0.7% expected. The previous month’s figure was also revised higher from negative 0.2% to positive 0.4%. It seems that the tax-rebate checks are working, at least for the month of May.
Energies were among the biggest losers for the session despite a late-afternoon rebound in crude oil. Financials were paring some of the recent losses following management changes in Lehman Brothers. The CRB commodity index was little changed. It is worth noting that the Baltic Dry Index(BDI) tumbled almost 1000 points or more than 8% in a single day with the Cape index down more than 15%. Could it be the beginning of a sharp correction in the closed-watched shipping index? The US dollar was higher against most major currencies. Treasuries continued the recent slump with the yields on the 10-year notes climbing to the highest level this year. In fact, traders started to bet that there is a small chance the Fed may increase the interest rate in the June meeting. The VIX index eased from a run-up in the past few days while the market breath was neutral.
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