It has been a morning of conflicting reports regarding Anthrax detection at several location in Washington DC and New York, which has kept bulls at bay since this morning's open.
Earlier today, House Speaker Dennis Hastert said the House would be closed for five days after the close of business today as anthrax spores were detected in the filtration system. There have been some conflicting reports here by other Senators claiming that there has not been any detection of anthrax in the filtration system.
Later in the morning, reports surfaced that New York Mayor George Pataki's offices in New York may have been exposed to anthrax contamination as tests run there were returned as positive.
In short, today's anthrax reports have had stocks trading rather volatile and earlier session gains were erased.
Fed Chairman Alan Greenspan's testimony revealed little new information and the bulk of this morning's stock action seemed to be a reaction to anthrax scares. Mr. Greenspan said prospects for the U.S. economy are "scarcely diminished" and that he sees a "promising future for our free nation." Mr. Greenspan acknowledged that "NOBODY has the capacity to fathom fully how the effects of the tragedy of September 11 will play out in our economy."
30-year YIELD gives hint that market is defensive
I view today's action in the 30-year YIELD as a defensive move by the market and would suggest that bullish traders that are short- term oriented be taking some defensive action in stocks at this time. This morning's higher open for stocks, even ahead of anthrax reports didn't find a lot of sellers in the longer end of the Treasury market (the riskiest end of Treasuries) and the dip back below the 5.34% level is a level I didn't feel equity bulls wanted to see violated to the downside.
30 -year Treasury YIELD ($TYX.X)
We continue to monitor Treasury bond YIELDS to try and get a feel for the MARKETS perception on the current environment. My thinking here is that the willingness to buy a 5.332% YIELD for 30-years is an avoidance of risk when compared to stocks. With YIELD falling back under the 5.34% level, this now has us looking more defensive toward stocks. The recent move above the 5.34% level was on October 8th. On that day, the Dow Industrials closed at 9,067 and currently trade 9,333. This can serve as somewhat of a benchmark for traders to perhaps be assessing some risk levels to should bond YIELDS continue to decline and we see a rotation of capital away from stocks and into bonds.