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Economic Data (USA)

Tuesday, December 27, 2005

All 3 Majors Down On News of An Inverted Yield Curve and Falling Energy Prices

The morning numbers looked great, as investors responded to a report that Xmas 2005 holiday sales topped last year's Xmas season sales by 8.7 percent. But in the end, all 3 major indices closed down on news of lower oil and gas prices, and a significant event in the U.S. bond market: an inverted yield curve.

What the heck is an inverted yield curve (a.k.a. a "negative yield curve") you ask? Well, right now, the yield on a 10-year U.S. Treasury Note is 4.33%, while the yield on a 2-year U.S. Treasury Note is 4.34%. This really makes no sense, from an investment point of view, because a 10-year Treasury Bond investment involves more risk, and should therefore offer a better return for investors. This inverted situation causes investors to get butterflies in their collective stomachs, because statistics have shown that an inverted yield curve in the U.S. Treasury Bond market is almost certain to be followed by, at best, an economic slowdown and, at worst, a recession. The 13 consecutive interest rate hikes by The Fed contributed much to today's inverted yield curve situation.

Warm weather has been predicted for the first week of 2006 for the Northeast United States by the National Weather Service, and you know what that means--all together now: Falling oil and gas prices. Shares in Exxon-Mobil fell by $1.23 to close @ $55.87 per share. Shares in the oil refiner Valero fell by $1.93 to close @ $50.90 per share (San Antonio, Texas-based Valero Energy Corporation is America's largest independent refiner of crude oil.)

Shares in Wal-Mart fell by $0.61 (1.3%) to close @ $47.73 per share. Shares in Best Buy also fell by $0.61 to close @ $43.69 per share.

The FDA won't let Guidant Corporation export heart-rhythm devices from the company's plant in St. Paul, Minnesota as a result of a September inspection. Shares in Guidant fell by $2.29 to close @ $64.69 per share.

Mercury Interactive fell by $2.37 (7.6%) to close @ $28.99 per share.

American Express fell by $1.04 to close @ $51.27 per share.

Intel fell by $0.51 to close @ $25.46 per share.

GE fell by $0.36 to close @ $35.06 per share.

OfficeMax fell by $3.17 (12%) to close @ $24.35 per share.

Continental Airlines closed up today @ $21.56 per share.

Today's Numbers:

DJIA: Closed Down @ 10,777.77 (-105.50)

NASDAQ: Closed Down @ 2,226.89 (-22.53)

S + P 500: Closed Down @ 1,256.54 (-12.12)


NYMEX crude oil future closed @ $57.92/barrel
New York Spot Gold closed @ $507.60/ounce

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