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Bonds moving higher as yields drop to 22-month low

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With the bond market just opening, traders immediately started snapping up both the 10-year (TNX.X) and 30-year (TYX.X) treasuries this morning, dropping the yield on the 30-year bond to 5.332%. Yesterday we saw the same type of activity near the open and this morning's activity along with lower equity futures should have some equity bulls nervous near the open.

30-year Treasury Bond Index - last four years

Back in November, I became concerned that a break below our "yield objective" of 5.475% could be "bad news" for stocks, especially if the Gold/Silver Index (XAU.X) started to show signs of life. So far those concerns have kept traders cautious in stocks as gold/silver stocks have moved higher, bond yields dropped and many technology stocks have seen their lofty valuations trimmed. Eventually this trend will reverse itself and a new bull market will take shape. Until then, traders should be very short-term in their bullish views.

Futures lower

The major equity futures are looking lower before the open and we're currently seeing S&P futures (SP01H) trade lower by 6 points, NASDAQ futures are off 56 and Dow futures are down 27. Fair value for today is $15.22, with buy programs set at $17.31 and sell programs set at $13.04.

Foreign markets set the stage

Yesterday's poor performance by equities here in the U.S. spilled over to foreign markets yesterday and it looks like this snowball has come full circle this morning and is now affecting the opening here in the U.S. In the Asia/Pacific Rim region, Hong Kong's Hang Seng fell 1.89%, Japan's Nikkei-225 fell 1.16% and Taiwan's Taiwan Weighted fell 0.82%. Trading wasn't negative across the region as India's BSE-30 rose 1.02% and Pakistan's Karachi-100 traded higher by 1.86%. In European trading Finland's Helsinki General is down better than 7%, France's CAC- 40 is down 2.77%, Germany's DAX is off 1.78% and London's FTSE- 100 is lower by 1.84%.

Office Depot to close 70 stores

Business products retailer Office Depot (ODP) said it expects to take a fourth-quarter charge in the range of $280-$300 million as a result of closing 70 of its North American retail stores. For 2001, the office product retailer plans to invest more than $100 million to improve quality and efficiency in its retail operations. Separately, the company said it expects fourth- quarter same-store sales to be down 5%, resulting in full-year 2000 earnings per share, before charges, to be approximately 70 cents. A survey of analysts by First Call had ODP earning 73 cents in the current quarter. Yesterday, shares of IDP finished the session at $7.31.

Jeff Bailey
Staff Analyst

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