每日市场点评 --- January 14, 2008

It has been really a while that we have a trading day opening higher and closing even higher. Today’s market performance may really mean something. I remember that back in Oct 2002, the darkest time during the previous bear market, it was a surprisingly positive earning report from IBM that essentially reversed the market. Today, it was IBM again but we need more time to tell whether the general market will follow suit just as they did more than 5 years ago. IBM’s surprising earning pre-announcement along with a positive report from SAP AG gave tech stocks a big boost today, but several other important sectors including commodity and financial were also doing well. The US dollar was weak against most major currencies as the Fed is widely expected to aggressively cut interest rates further (currently the market has priced in more than 30% chance of 75 bps cut before the end of January with the balance pointing to a 50 bps cut) while European central banks may hold their interest rates steady amid concerns of higher inflation (UK’s manufacturing cost last month increased most in more than 16 years showing more inflation pressure caused by higher commodity prices). Not surprisingly, weak dollar led to strong prices in many commodities. The CRB Commodity Index hit a new record high as a wide range of commodities from corn to wheat to gold hitting fresh new highs. Gold price is now sitting above $900 after rising more than $100 in one month. Clearly, the economy is going to face more inflation pressure in the near term and this could complicate Fed’s current stance of aggressively cutting interest rates. We are going to get some inflation reports both Tuesday (PPI) and Wednesday (CPI) and if any number comes significantly higher than consensus, it can mean problem for the market to move much higher from the current level. One positive note: the 3-month US LIBOR rate has the biggest drop in more than four months today and the current level of 4.06% is well below the Fed fund rate, indicating liquidity is coming back in the credit market. Fed also sets to auction another $30 billion 28-day loan today and it could lower the LIBOR rate even further in coming weeks.