Update 1:05 p.m.:

Update 10:15 a.m.:

The Treasury's 3-year auction went well.  The results were in line with previous 3-year auctions despite the fact this was the lowest yield ever on a 3-year note auction.  Bond prices remain somewhat lower on the day as stocks hold on to gains.  The 2-year is .74%, the 5-year 1.97%, and the 10-year is lower by 8/32s to yield 3.17%.

The Dow peaked so far today at +80 as the euro popped over 1.20.  But the euro backed down a bit from that level, and stocks followed obediently.  The Dow is now +40 with the euro back at 1.196.

Update 9:00  a.m.:

Shortly after the update below, stocks finally found some buyers at the lows.  But, the big deal was the euro suddenly surged to 1.20 vs. the dollar.  Central bank intervention?  Maybe.  But it could also just be some short-covering.  Whatever the reason, the Dow is now higher by 65 points and the NASDAQ loss of 1.5% has been sliced to .3%.

Bond prices have retreated on the rebound.  The 2-year is .74%, the 5-year 1.98%, and the 10-year is now down 10/32s to yield 3.18%.

Update 8:15 a.m.:

Here's something different.  The euro is up very slightly at 1.1956, but the Dow is now down 44 points.  The blame is being placed on the NASDAQ.  That index is now down 1.5%, led by declines Google and Apple.  

The 2-year is .73%, the 5-year 1.95%, and the 10-year is now down just 3/32s to yield 3.16%. 
 
Update 7:30 a.m.:

There is nothing surprising happening today.  The Dow opened higher by 46 points with the euro at 1.1949, fell to -28 when then euro fell to 1.192, and the index is now -2 with the euro 1.1934.  Needless to say, this market is strictly for traders with computers tied to the currency market.

Bond prices are still down on the day but not by much.  The 2-year is .73%, the 5-year 1.96%, and the 10-year is down only 5/32s to yield 3.17%.  Gold is higher again today at $1,248. 

Think 0.73% is a low yield on the 2-year note?  It certainly seems so, but that is just relative to historical standards.  The Japanese 2-year note is 0.13%, and the German 2-year note is .44%.  In comparison, 0.73% doesn't seem so bad.

Morning Comment:

Yesterday’s late selloff was fueled by a drop in the euro toward 1.19.  Dow futures are trading higher by about 50 points in pre-opening trading this morning, and that’s mostly because the euro was bounced to 1.1949.  That’s not exactly a big bounce, but it’s enough to bring in a few traders than insist that nothing else matters but the short-term euro wiggles. 

There is a secondary reason being tossed around for the early lift in prices. Ben Bernanke spoke last night.  I read the articles and he didn’t say anything we haven’t heard before, but he did talk more about tightening than he had in the past.  He emphasized the economy still was a long way to go before any tightening, but he feels the economy is making steady progress.  He also said the Fed would likely need to tighten while the Unemployment Rate is still high to insure inflation will be held at bay.  That’s nothing new, but the markets are trying to make something out of nothing. 

Bond prices are lower with stocks higher.  Dealers are also concerned about demand for the new $36 billion three-year note today.  The 2-year is .74%, the 5-year 1.97%, and the 10-year is lower by 12/32s to yield 3.19%. 

Virtually all economists got the last Nonfarm Payroll number all wrong because of the weak private payroll growth.  Perhaps that was just an aberration.  I don’t think you should ever draw conclusions from a single month data point.  We’ll know more next month.  But some economists continued to search for reasons why they were wrong on the number – or should I say the number was misleading.  Yesterday a couple of economists offered the explanation for the weak data.  Although they have absolutely nothing to support the theory, the claim is that the census hiring of workers “crowded out” hiring in the private sector.  They the hiring by the Census Bureau took away people that would have been hired in the private sector.  The Census Bureau hired 411,000 temporary workers.  That leaves only a mere 15,000,000 or so people without any job at all, either permanent or temporary.  Did they all apply for the census jobs only?  I don’t think so.  You would think that economists would just accept the fact they got something wrong and move on.  After all, economists have a lot of practice in getting things wrong.

There are no economic statistics today.  It’s another day of euro-watch.  I’ll be back with updates.

Dwight Johnston