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Ground attack begins

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The major market indexes have now moved back to unchanged levels on word that coalition forces have now moved across Iraq’s borders as the ground assault as reportedly begun.

The NASDAQ Composite (COMPX) 1,399 +0.13% and narrower NASDAQ-100 Index (NDX.X) 1,078 +0.28% now post gains of 1 and 2 points respectively, while the Dow Industrials (INDU) 8,237 –0.35%, which moved into positive territory on news of a ground assault currently trades down 27 points. The S&P 500 Index (SPX.X) 870 –0.36% and narrower S&P 100 Index (OEX.X) 443 –0.3% both show fractional losses, with sector action mixed.

Sectors showing gains of more than 1% are few, with the CBOE Semiconductor Index (SOX.X) 330 +1.2% showing gains with sector bellwether’s Intel (NASDAQ:INTC) $18.27 +1.6% and Applied Materials (NASDAQ:AMAT) $14.06 +3.9% both trading higher. Also leading semi-gainers is Novellus Systems (NASDAQ:NVLS) $30.20 +4.46% and LSI Logic (NYSE:LSI) $5.11 +3.8%. Micron Technology (NYSE:MU) $7.98 –2% and Texas Instruments (NYSE:TXN) $18.07 –1% are lagging the move higher.

Earlier and confirmed reports of oil well fires in southern Iraq have the Oil Service Index (OSX.X) 87.63 +2.4% building on earlier gains when these reports first surfaced.

U.S. Treasuries have turned more mixed with fractional selling now being seen in the 30-year Treasury as the June futures contract (us03m) $111’020 –0.28% trades down 10/32, with the 30- year YIELD ($TYX.X) rising fractionally to 4.935%. The shorter- dated 5-year June futures contract (fv03m) $112’160 +0.08% gains 3/32, while the intermediate 10-year June futures contract (ty03m) $113’195 +0.02% shows a fractional gain of 2/32. The benchmark 10-year YIELD ($TNX.X) slips fractionally lower at 3.963%.

War events has the U.S. Dollar exhibit marginal weakness against the seven major foreign currencies as the U.S. Dollar Index (dx00y) 101.13 –0.44% falls 0.45.

The action between stocks and bonds at this point represents a somewhat cautiounary type of trade, but it would be my view that this action represents a market that is currently focused more on how coalaition forces are doing in Iraq and the war effort there, than anything else. Again... my observation is that a more “neutral” type of trade will be seen in equities at this point, and successes or difficulties with the war effort, which is somewhat difficult to predict, will give fluctuation to equities.

While it is widely thought that coalition forces will prevail, the markets do look to be somewhat neutral and not really willing to build bullishness or bearishness with the plethora of data being released by various news agencies around the world.

If I had to lean bullish or bearish for equities at this point, the trading in the currency and Treasury markets would have to swing me toward the bullish side at this point, as if the war effort is going “to plan” based on the bulk of scenario’s that could be in play.

Jeff Bailey

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