Markets continue to trade mixed but with upward bias. The Dow closed up 37 points to 27,219 on lighter trading volume. Meanwhile the NASDAQ and the S&P 500 Index were down slightly. For the week the Dow tacked on about 1.5%. Banks led markets higher as the prospect of higher interest rates could improve their already robust profits.
Interest rates continue to rise with the 10-year US Treasury yield now approaching 1.9% after briefly trading below 1.5% a couple weeks back. The move higher in rates is coupled with a broad move by the US markets back to near record territory and is further indication that money is flowing out of bonds and back into stocks. The transportation index, which is viewed as a forward indicator, has been flat since February but is suddenly up 10% while the Russel 2000 is up 8%. These moves, if they hold true, would indicate a strong market heading into the end of the year. Cash levels are still high but some gurus are saying that the biggest fear could be missing out on a rally should a trade deal get done.
Christine McCracken, senior guru at global financial firm Rabobank in Europe put out a research piece about pork production problems in China (PPPC). She notes the swine flu epidemic is expected to cut China’s pig production in half meaning they might lose between 300 to 350 million porkers. Pork prices in China are on the rise and yesterday President Xi exempted soybean and pork imports from the US from additional tariffs. Chinese buyers immediately after this news came out snapped up 10 boatloads of soybeans according to both Reuters and the South China Morning Post. China had put tariffs on frozen US pork which amounted to 72% but with internal pig production falling and prices rising something had to give. China celebrates its 70th anniversary on October 1st and the move to ease the pork shortage is a way to keep the population fat and happy ahead of that all-important event plus it paves the way for a possible trade deal next month with the US.