3SOF

Thursday, April 7, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are trading down -1.5 ticks. T-note prices yesterday weakened as inflation expectations rose along with carry-over weakness from a jump in the 10-year German bund yield to a 1-1/2 year high: TYM11 -12.5, FVM11 -6.5, EDU11 +0.5. The 10-year T-note yield climbed to a 4-week high of 3.546%.

                Bearish factors included (1) an increase in inflation expectations after the difference between yields on 5-year T-notes and 5-year TIPS, or the break-even rate, reached 2.41 points, the widest in 2-3/4 years, and (2) carry-over weakness after the 10-year German bund yield surged to a 1-1/2 year high of 3.436%.

                Bullish factors included (1) dovish comments from Atlanta Fed President Lockhart who said he doesn't expect the Fed to tighten monetary policy by year-end with inflation still low and the economic recovery fragile, and (2) the Fed's action to purchase $1.970 billion of Treasuries as part of its QE2 asset-purchase program.



•   The dollar index this morning is higher with the dollar/yen -0.43 yen and the euro/dollar -0.50 cents. The dollar index yesterday slumped to a 1-1/2 week low as the euro strengthened to a 14-1/2 month high against the dollar on speculation the ECB will raise interest rates even further after they raise them on Thursday: Dollar Index -0.368, USDJPY +0.626, EURUSD +0.01088. The yen tumbled to a 6-1/4 month low against the dollar.

                Bearish factors included (1) speculation the euro's interest rate differentials will widen further in favor of the euro as the ECB begins to hike interest rates while the Fed maintains its overly easy monetary policy, (2) the larger-than-expected increase in the Feb German factory orders, which is euro supportive, (3) supportive interest rate differentials for the euro after the 3-month Euribor rate increased for the fourteenth consecutive day, +0.7 bp to a 1-3/4 year high of 1.269%, and (4) comments from Atlanta Fed President Lockhart who said he is not "leaning" to Fed policy tightening this year.

                Bullish factors included (1) the fall in the yen to 6-1/4 low against the dollar on the outlook for further emergency stimulus from the BOJ, and (2) the attempt from Jean-Claude Juncker, head of the Euro-Zone finance ministers, to jawbone the euro down from a 14-1/2 month high against the dollar when he said the euro's exchange rate may be "slightly overstated."



•   May crude oil prices this morning are trading up +9 cents a barrel and May gasoline is -0.41 of a cent per gallon. Crude oil and gasoline prices yesterday rallied to 2-1/2 year highs but finished mixed as gasoline closed lower on the smaller-than-expected drop in weekly inventories and crude settled higher after German factory orders surged: CLK11 +$0.49, RBK11 -0.84.

                Bullish factors included (1) the slide in the dollar index to a 1-1/2 week low, which boosts investment demand in commodities, and (2) the surge in Feb German factory orders by nearly 5 times estimates, which signals economic strength that may lead to increased energy demand.

                Bearish factors include (1) weakness in gasoline after weekly DOE gasoline inventories fell less than expected (-357,000 bbl versus expectations of -1.9 million bbl), and (2) comments from the UAE Energy Minister who said that world oil markets are "adequately supplied" and "the surge in prices is a reflection of geop olitics and natural disaster but not the fundamentals."

Friday, April 8, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are trading down -13.5 ticks at a 1-month low. T-note prices yesterday rebounded from a 1-month low and closed higher after a 7.1 magnitude earthquake struck Japan along with dovish comments from ECB President Trichet: TYM11 +3, FVM11 +6.2, EDU11 +3.0. The 10-year T-note yield rose to a 1-month high of 3.572%.

                Bullish factors included (1) increased safe-haven demand for Treasuries after a 7.1 magnitude earthquake struck Japan, which fuels concern that the global economy may slow as Japan's recovery from last month's earthquake is delayed, (2) dovish comments from ECB President Trichet who said after raising interest rates Thursday that the increase wasn't the "first of a series" of rate hikes, which eased concern that the ECB will continue to raise interest rates, and (3) the Fed's purchase of $6.58 billion of Treasuries as part of its asset-purchase program.

                Bearish factors included (1) the larger-than-expected decline in weekly initial unemployment claims (-10,000 to 382,000 versus expectations of -3,000 to 385,000), and (2) an early slump in prices on carry-over weakness from an increase in the 10-year bund yield to a 1-1/2 year high after the ECB raised interest rates by 25 bp.



•   The dollar index this morning is weaker and slumped to a 16-month low with the dollar/yen +0.39 yen and the euro/dollar +1.06 cents t a 14-3/4 month high. The dollar index yesterday moved higher on comments from ECB President Trichet along with a larger-than-expected drop in weekly initial unemployment claims: Dollar Index +0.011, USDJPY -0.578, EURUSD -0.00237.

                Bullish factors included (1) comments from ECB President Trichet who said after raising interest rates Thursday by 25 bp that the increase wasn't the "first of a series" of rate hikes, which dampened speculation that the ECB will be overly aggressive in tightening monetary policy, (2) the larger-than-expected decline in weekly jobless claims, which signals economic strength and is dollar supportive, and (3) the ongoing European sovereign-debt crisis after Portugal became the third Euro-Zone country to ask for a bailout.

                Bearish factors included (1) improved interest rate differentials for the euro af ter the ECB hiked interest rates 25 bp, and (2) the stronger-than-expected Feb German industrial production which is euro supportive.



•   May crude oil prices this morning are trading +$1.54 a barrel and May gasoline is +3.90 cents per gallon, both at fresh 2-1/2 year highs. Crude oil and gasoline prices yesterday settled mixed as a strong dollar and an ECB rate hike undercut gasoline but strong economic data along with an oil field fire in Libya lifted crude: CLK11 +$1.47, RBK11 -0.64. May crude posted a 2-1/2 year high.

                Bullish factors included (1) a fire at the al-Sarir oil field in Libya caused by Qadaffi's forces, and (2) stronger than expected economic data on weekly US jobless claims and Feb German industrial production, which signals economic strength that may boost energy demand.

                Bearish factors include (1) the stronger dollar, which reduces investment demand in commodities, and (2) the action by the ECB to raise interest rates, which bolsters concern that economic growth and energy demand will slow.

Monday, April 11, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are trading down -4.5 ticks. T-note prices last Friday tumbled to a 2-month low on mounting inflation concerns and hawkish Fed speak: TYM11 -3, FVM11 -3, EDU11 +1.0. The 10-year T-note yield rose to a 1-3/4 month high of 3.614%.

                Bearish factors included (1) increased inflation concerns after the difference in yields between 10-year T-notes and TIPS widened to a 3-year high of 2.64 percentage points, (2) comments from Dallas Fed President Fisher who said the Fed is "near a tipping point" and risks over-stimulating the economy and generating inflation, and (3) carry-over weakness from the plunge in bund prices as the 10-year German bund yield rose to a 1-1/2 year high of 3.496%.

               A supportive factor for Treasuries was comments from Atlanta Fed President Lockhart who said the Fed should be "patient" in withdrawing stimulus due to the fragile quality to the economy.



•   The dollar index this morning is higher with the dollar/yen -0.07 yen and the euro/dollar -0.27 cents. The dollar index last Friday plunged to a 16-month low on the dollar's negative interest rate differentials along with strong exports from Germany: Dollar Index -0.513, USDJPY -0.167, EURUSD -0.01759.

                Bullish factors included (1) strength in the euro which rallied to a 14-3/4 month high against the dollar after Feb German exports rose more than expected to their best level in 5 months, (2) supportive interest rate differentials for the euro with the 3-month Euribor rate rising to a 1-3/4 year high of 1.294%, (3) strength in the British pound which rallied to a 14-1/2 month high against the dollar after Mar UK PPI output prices rose +5.4% y/y, their fastest pace of increase in 29 months, and (4) dollar negative comments from Atlanta Fed President Lockhart who said the Fed should be "patient" in withdrawing stimulus due to the fragile quality to the economy.

                A bearish factor were comments from ECB President Trichet who attempted to jawbone the dollar higher when he said that it's important that the US dollar is a "strong currency.



•   May crude oil prices this morning are trading down -97 cents a barrel and May gasoline is -3.30 cents per gallon. Crude oil and gasoline prices last Friday rallied sharply as the dollar plunged and fighting intensified in Libya: CLK11 +$2.49, RBK11 +7.42. May crude posted a 2-1/2 year high and May gasoline soared to a 2-3/4 year high.

                Bullish factors included (1) the plunge in the dollar index to a 16-month low, which bolsters investment demand for commodities, (2) the ongoing strife in Libya with the prediction from Barclays Capital that damage to oilfields in Libya by forces loyal to Mummar Qaddafi are the "ultimate blow" to hopes for a prompt resumption of exports, and will help send oil prices towards $130 a barrel, and (3) the larger-than-expected increase in Feb German exports which boosts confidence in the global economic outlook and energy demand.

                A bearish factor was the report from JBC Energy GmbH that a jump in oil prices to an average of $125 a barrel this year may erode the economic recovery and reduce crude demand by 700,000 barrels a day.

Tuesday, April 12, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are trading up +6 ticks as equity markets decline. T-note prices yesterday traded mixed into early afternoon when they moved higher into the close on dovish comments from Fed Vice Chairman Yellen: TYM11 +2.5, FVM11 +1.0, EDU11 -0.5.

                Bullish factors included (1) comments from New York Fed President Dudley who said "We're probably going to have excess slack in the US labor market at least through the end of 2012, and that's one reason that colored my view that we shouldn't be overly enthusiastic about tightening monetary policy too early," and (2) comments from Fed Vice Chairman Yellen who said the increase in food and fuel costs will only have a temporary impact on inflation and consumer spending and warrants no reversal of record monetary stimulus.

                Bearish factors included (1) increased inflation concerns after the difference in yield between 10-year T-notes and 10-year TIPS widened to 2.67 percentage points, the highest in 3 years, and (2) supply pressures ahead of Tuesday's $32 billion auction of 3-year T-notes.



•   The dollar index this morning is lower with the dollar/yen -0.35 yen and the euro/dollar +0.16 cents. The dollar index yesterday strengthened on renewed European sovereign-debt risks and after US lawmakers averted a government shutdown: Dollar Index +0.201, USDJPY -0.149, EURUSD -0.00479.

                Bullish factors included (1) the action by US lawmakers to avert a government shutdown by agreeing to budget cuts, and (2) euro weakness on renewed European sovereign-debt concerns after German Finance Minister Schaeuble said it is "unclear" whether Greece will need another cut in its bailout rate or a further extension of repayment terms to return to fiscal health.

                Bearish factors included (1) dovish comments from New York Fed President Dudley who said the Fed shouldn't rush to tighten monetary policy "too early," which suggests he favors keeping the Fed's overly easy monetary policy in place, and (2) the action by the IMF to cut its GDP estimate for the US this year to 2.8% from a Jan estimate of 3.0%, which is dollar negative.



•   May crude oil prices this morning are trading down -24 cents a barrel and May gasoline is +2.45 cents per gallon. Crude oil and gasoline prices yesterday pulled back after the IMF cut its GDP growth estimates for the US and after Libyan leader Qaddafi agreed to a cease fire: CLK11 -$2.87, RBK11 -6.02. May crude posted a 2-1/2 year high but erased its gains and closed lower.

                Bearish factors included (1) a stronger dollar, which discourages investment demand in commodities, (2) the action by the IMF to cut its GDP estimate for the US this year to 2.8% from a Jan estimate of 3.0% and to cut its GDP forecast for Japan this year to 1.4% from 1.6%, which signals reduced fuel consumption, and (3) the report from the African Union that said Libyan leader Qaddafi agreed to a cease-fire plan, which bolstered speculation that Libyan oil exports may recover.

                Bullish factors included (1) the statement from Libyan rebels that they will not agree to a cease-fire deal if Libyan lead er Qaddafi or his sons are allowed to stay in power, and (2) the larger-than-expected increase in Mar China exports, which indicates economic strength that may lead to increased energy demand.

Wednesday, April 13, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are trading down -6 ticks. T-note prices yesterday moved higher on increased safe-haven demand after the severity of Japan's nuclear crisis was raised along with dovish Fed comments: TYM11 +20.5, FVM11 +15, EDU11 +2.0.

                Bullish factors included (1) increased safe-haven demand for Treasuries after the action from Japan's Nuclear and Industrial Safety Agency to raise the level of the Fukushima crisis to 7, the highest in the standard global scale, which fuels concern that Japan's nuclear crisis may linger and slow Japanese and global economic growth, (2) comments from New York Fed President Dudley who said the US economy is "far away" for what the Fed aims for on employment and job creation to allow for an exit from crisis-imposed policy measures, and (3) strong demand for the Treasury's $32 billion auction of 3-year T-notes that had a bid-to-cover ratio of 3.25, higher than the 12-auction average of 3.14.

                Bearish factors i ncluded (1) inflation concerns after Mar import prices rose more than expected and at their fastest pace since Jun 2009 (+2.7% m/m and +9.7% y/y versus expectations of +2.0% and +8.6% y/y), and (2) supply pressures ahead of Wednesday's $21 billion auction of 10-year T-notes.



•   The dollar index this morning is weaker with the dollar/yen +0.50 yen and the euro/dollar +0.31 cents. The dollar index yesterday slumped to a 16-1/4 month low and closed lower after the Feb US trade deficit widened more than forecast along with hawkish comments from ECB Council member Stark which lifted the euro: Dollar Index -0.203, USDJPY -1.016, EURUSD +0.00415.

                Bearish factors included (1) strength in the euro which rallied to a 14-3/4 month high against the dollar after comments from ECB Council member Stark who said the ECB will adjust interest rates at an "appropriate" pace, which indicates the ECB has embarked on a gradual tightening cycle, despite last week's comments from ECB President Trichet that last week's rate hike wasn't necessarily the start of a series of rate hikes, (2) the larger-than-expected US trade deficit for Apr (-$45.8 billion versus expectations of -$44.0 billion), and (3) strong safe-haven demand for the yen which rallied to a 1- week high against the dollar after Japan's Nuclear and Industrial Safety Agency raised the level of the Fukushima crisis to 7, the highest in the standard global scale.

                Bullish factors included (1) the weaker than expected Apr German ZEW economic sentiment which fell to a 4-month low and is euro negative, and (2) weakness in the British pound which slid to a 1-week low against the dollar after Mar UK core CPI rose less than expected, which undercut expectations for a BOE interest rate hike.



•   May crude oil prices this morning are trading up +18 cents a barrel and May gasoline is +2.07 cents per gallon. Crude oil and gasoline prices yesterday sold-off for a second day after the IEA said that prices above $100 a barrel are starting to hurt the global economy: CLK11 -$3.67, RBK11 -3.64. May crude posted a 1-1/2 week low and May gasoline slid to a 1-week low.

                Bearish factors included (1) the monthly report from the IEA that stated there are signs of an oil-demand "slowdown" due to current oil prices above $100 a barrel, (2) the statement from investment bank Rajhi Capital that Saudi Arabia plans to expand its oil rig count by about 28% in order to ensure adequate spare production capacity, and (3) expectations for weekly crude supplies to increase for the sixth straight week when the DOE releases its weekly inventory figures on Wed.

                Bullish factors included (1) the slump in the dollar index to a 16-1/4 month low, which encourages investment demand i n commodities, (2) the action by the US Energy Department to raise its crude oil price forecast for 2011 to $106.38 a barrel from an earlier forecast of $101.77 a barrel, and (3) the outlook for US gasoline supplies to fall for the eighth consecutive week when the DOE releases its weekly inventory figures on Wed. Expectations for Wednesday's weekly DOE inventories are for crude oil to climb +1.0 million bbl, gasoline stockpiles to fall -850,000 bbl, distillate supplies to climb +500,000 bbl and the refinery utilization rate to rise +0.5 to 84.9%.

Thursday, April 14, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are up +8 ticks at a 2-week high. T-note prices yesterday recovered from early weakness and closed higher after President Obama said he's seeking $4 trillion in deficit reduction in 12 years or less: TYM11 +9.5, FVM11 +5.7, EDU11 +1.0.

                Bullish factors included (1) President Obama's plan to cut $4 trillion in cumulative deficits within 12 years with $3 in spending cuts and interest savings for every $1 in tax increases, (2) the Fed's action to purchase $5.01 billion of Treasuries as part of its QE2 asset-purchase program, and (3) strong demand for the Treasury's $32 billion auction of 3-year T-notes that had a bid-to-cover ratio of 3.25, higher than the 12-auction average of 3.14.

                Bearish factors included (1) relatively strong Mar US retail sales which increased for the 9th consecutive month and signals economic strength (+0.4% and +0.8% less autos versus expectations of +0.5% and +0.7% less autos), (2) comments from Dallas Fed Pre sident Fisher who was quoted in the German newspaper Handelsblatt saying "I see the risk that we won't be able to keep inflation under control," (3) slack demand for the Treasury's $21 billion auction of 10-year T-notes that had a bid-to-cover ratio of 3.13, weaker than the 12-auction average of 3.16, and (4) supply pressures ahead of Thursday's $13 billion auction of 30-year T-bonds.



•   The dollar index this morning is higher with the dollar/yen -0.72 yen and the euro/dollar -0.68 cents. The dollar index yesterday rebounded from early losses and finished higher on President Obama's plan to cut the US budget deficit by nearly $4 trillion in 12 years: Dollar Index +0.127, USDJPY -0.255, EURUSD -0.00341.

                Bullish factors included (1) President Obama's plan to cut the US deficit by $4 trillion in cumulative deficits within 12 years, which is dollar bullish, (2) the increase in Mar US retail sales for the 9th consecutive month, which signals economic strength and is dollar supportive, and (3) increased safe-haven demand for the dollar after the warning from the IMF that Euro-Zone nations face bank and sovereign funding "challenges" and that European banks will probably need government help to increase the quality and quantity of their capital to regain access to funding markets.

                Bearish factors included (1) strength in the euro after Mar German w holesale prices rose at their fastest pace in 29 years while Mar French CPI increased at its strongest pace in 29 months, which stokes speculation the ECB will continue to tighten monetary policy and is euro supportive, and (2) hawkish comments from ECB Council member Coene who said the ECB gave a clear signal that last week's rate increase wasn't a one-off by saying monetary policy remains supportive for economic growth and employment.



•   May crude oil prices this morning are trading down -99 cents a barrel and May gasoline is -3.09 cents per gallon. Crude oil and gasoline prices yesterday moved higher on a weak dollar and a plunge in US gasoline inventories to a 5-month low: CLK11 +$0.86, RBK11 +7.83. May crude posted a 1-1/2 week low but recovered its losses and finished higher.

                Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the larger-than-expected drop in weekly gasoline inventories which fell to a 5-month low (-7.0 million bbl to 209.7 million bbl versus expectations of -850,000 bbl), (3) increased demand after US gasoline demand rose +3.7% w/w in the week ended Apr 8 to 9.18 million barrels a day, and (4) the unexpected plunge in the refinery utilization rate to a 2-month low, which indicates reduced output of gasoline and distillate products in the weeks ahead (-3.0 to 81.4% versus an expected increase of +0.5 to 84.9%).

                Bearish factors in cluded (1) the larger-than-expected increase in weekly crude oil inventories which rose for the sixth consecutive week to a 3-1/2 month high of 359.3 million bbl (+1.63 million bbl versus expectations of +1.0 million bbl), and (2) the +26,000 bbl increase in weekly crude inventories in Cushing, OK, delivery point for WTI crude, to 41.9 million bbl, the highest since the DOE began tracking stockpiles at the hub in 2004.

Friday, April 15, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are up +6.5 ticks. T-note prices yesterday rose to a 3-week high after weekly jobless claims unexpectedly rose and Germany's Finance Minister said Greece may need to restructure its debt but then they gave up all of their gains and closed lower after the stock market rebounded from sharp losses: TYM11 -6, FVM11 -6.5, EDU11 -2.0.

                Bullish factors included (1) increased safe-haven demand for Treasuries after yields on Greek and Portuguese government debt rose to records when German Finance Minister Schaeuble told Germany's Die Welt newspaper Greece may need to restructure its debt, (2) the unexpected jump in weekly initial unemployment claims (+27,000 to 412,000 versus expectations of -2,000 to 380,000), (3) the smaller-than-expected increase in Mar PPI (+0.7% m/m and +5.8% y/y versus expectations of +1.0% m/m and +6.1% y/y), (4) comments from Minneapolis Fed President Kocherlakota who said core inflation "is very low right now&q uot; and he doesn't see "much signs" of price pressures, and (5) strong demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.83, higher than the 12-auction average of 2.69.

                Bearish factors included (1) the larger-than-expected increase in Mar core PPI (+0.3% m/m versus expectations of +0.2% m/m), and (2) reduced safe-haven demand for Treasuries after equity markets rebounded from 2-week lows.



•   The dollar index this morning is higher with the dollar/yen -0.27 yen and the euro/dollar -0.34 cents. The dollar index yesterday fluctuated on either side of unchanged and finished lower as US jobless claims rose and producer prices advanced at a slower pace, which may encourage the Fed to keep interest rates at record lows: Dollar Index -0.267, USDJPY -0.337, EURUSD +0.00447. The dollar index dropped to a 1-1/3 year low and the Japanese yen climbed to a 2-week high against the dollar.

                Bearish factors included (1) the unexpected increase in weekly US jobless claims along with a smaller-than-expected increase in Mar PPI, which may prompt the Fed to keeping interest rates at record lows, and (2) comments from ECB Council member Kranjec who said the ECB's policy stance is still "very accommodative," even after last week's interest rate increase, which is euro supportive as it bolsters the outlook for additional ECB rate hikes.

                Bullish factors included (1) ear ly weakness in the euro on concern Europe's debt crisis may worsen after yields on Greek and Portuguese government debt rose to records when German Finance Minister Schaeuble told Germany's Die Welt newspaper Greece may need to restructure its debt, and (2) short-covering in the dollar ahead of Friday's G-20 meeting in Washington.



•   May crude oil prices this morning are trading down -2 cents a barrel and May gasoline is +1.20 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as a report that Saudi Arabia cut crude production boosted crude while an unexpected increase in jobless claims undercut gasoline: CLK11 +$1.00, RBK11 -0.77.

                Bullish factors included (1) the report from Banque Saudi Fransi that said Saudi Arabia cut its crude output by 300,000 barrels a day because it couldn't find buyers for the lighter blend of crude it was producing after Libya's crude output was halted, (2) the fall in the dollar index to a 1-1/3 year low, which boots investment demand in commodities, and (3) early strength in gasoline after Sunoco FCC was forced to close a processing unit at its Philadelphia refinery, which may tighten gasoline supplies on the east coast.

                Bearish factors included (1) the unexpected jump in weekly US initial unemployment claims, which signals labor market weakness th at may reduce fuel demand, and (2) the report from the China Securities Journal that said China is likely to raise the reserve requirements for banks in the "near future," which may slow its economy and demand for fuel.

Monday, April 18, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are up +10 ticks as equity prices slide. T-note prices last Friday climbed to a 3-week high and finished with moderate gains on increased safe-haven demand from the European debt crisis along with a smaller-than-expected increase in Mar core CPI: TYM11 +19.5, FVM11 +15, EDU11 +2.0.

                Bullish factors included (1) increased safe-haven demand for Treasuries on heightened European sovereign-debt concerns after Moody's Investors Service cut Ireland's credit rating two levels to Baa3 with a negative outlook and after credit-default swaps to insure Greece's government debt climbed to a record 1,147 bp, (2) the smaller-than-expected increase in Mar CPI ex food & energy (+0.1% m/m versus expectations of +0.2% m/m), and (3) comments from Chicago Fed President Evans who said low inflation and high unemployment both call for continued easy US monetary policy.

                Bearish factors included (1) the unexpected increase in the Apr Empire manufacturi ng index which expanded at its fastest pace in a year (+4.2 to 21.7 versus expectations of -0.5 to 17.0), (2) the larger-than-expected increase in Mar industrial production (+0.8% m/m versus expectations of +0.6% m/m), and (3) the larger-than-expected increase in Apr US University of Michigan consumer confidence (+2.1 to 69.6 versus expectations of +1.2 to 68..



•   The dollar index this morning is stronger and at a 1-week high with the dollar/yen -0.31 yen and the euro/dollar -1.23 cents. The dollar index last Friday strengthened and finished higher after Moody's downgraded Ireland's credit rating and as US consumer confidence and industrial production increased: Dollar Index +0.119, USDJPY -0.379, EURUSD -0.00592.

                Bullish factors included (1) weakness in the euro after Moody's Investors Service cut Ireland's credit rating two levels to Baa3, the lowest investment grade, from Baa1 with a negative outlook, and after credit-default swaps to insure Greece's government debt climbed to a record 1,147 bp, and (2) the stronger-than-expected Apr US University of Michigan consumer confidence and Mar industrial production, which signals economic strength and is dollar supportive.

                Bearish factors included (1) the weaker than expected Feb net long-term TIC flows, which indicates weakened foreign demand for US dollar assets, and (2) the lar ger-than-expected increases in Mar Euro-Zone and Mar China consumer prices, which may lead to additional interest rate hikes from the ECB and PBOC that will further weaken the dollar's interest rate differentials.



•   May crude oil prices this morning are trading down -$1.30 a barrel and May gasoline is -2.07 cents per gallon. Crude oil and gasoline prices last Friday moved higher after US consumer sentiment and industrial output increased more than expected: CLK11 +$1.55, RBK11 +5.45. May gasoline rose to a 2-3/4 year high.

                Bullish factors included (1) the stronger-than-expected Apr US University of Michigan consumer confidence and Mar industrial production, which signals increased energy consumption, and (2) stronger-than-expected Q1 China GDP, which signals higher fuel demand.

                Bearish factors included (1) the stronger dollar, and (2) the larger-than-expected increases in Mar Euro-Zone and Mar China consumer prices, which may lead to additional interest rate hikes from the ECB and PBOC that may slow global economic growth and energy demand.

Tuesday, April 19, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are down -4.5 ticks. T-note prices yesterday whipsawed higher and lower and finished higher as increased safe-haven demand for Treasuries offset the action by S&P to cut its outlook on the US credit rating: TYM11 +12, FVM11 +11.2, EDU11 -0.5. The 10-year T-note yield fell to a 3-1/2 week low of 3.358%.

                Bullish factors included (1) increased safe-haven demand for Treasuries on heightened European sovereign-debt concerns after credit-default swaps to insure Greek and Portuguese government bonds rose to records on speculation both countries may have to restructure their debts, (2) the unexpected decline in the Apr HAHB housing market index (-1 to 16 versus expectations of unchanged at 17), and (3) comments from Atlanta Fed President Lockhart who said he expects a "soft" Q1 in the US due to rising fuel costs.

                Bearish factors included (1) the action by Standard & Poor's to cut its outlook on the AAA credit rating of the US to negative from stable, citing a "material risk" that government leaders will fail to deal with rising budget deficits and debt, and (2) comments from St. Louis Fed President Bullard who said the economic outlook in 2011 is "reasonably strong" and that the pace of US job creation will accelerate.



•   The dollar index this morning is lower with the dollar/yen -0.20 yen and the euro/dollar +0.39 cents. The dollar index yesterday rallied to a 1-week high and closed higher after St. Louis Fed President Bullard said the economic outlook for 2011 remains positive and as the euro tumbled on European debt concerns: Dollar Index +0.672, USDJPY -0.461, EURUSD -0.01950.

                Bullish factors included (1) the slide in the euro to a 1-1/2 week low against the dollar after credit-default swaps to insure Greek bonds jumped 56 bp to a record 1,211 bp and swaps to insure Portuguese government debt climbed 16 bp to a record 614 bp, (2) dollar supportive comments from St. Louis Fed President Bullard who said "the outlook for the remainder of 2011 remains reasonably strong, and (3) euro negative comments from ECB Council member Bonello who said the ECB mustn't raise interest rates at the expense of growth in debt-strapped Euro-Zone nations because the sovereign debt crisis is not yet b ehind us.

                Bearish factors included (1) strength in the yen which rallied to a 2-week high against the dollar after Standard & Poor's put a negative outlook on the AAA credit rating of the US, and (2) euro supportive comments from ECB Council member Nowotny who said that expectations the ECB's 2-week refinancing rate will be increased by another 50 bp in 2011 are "well-founded" and from fellow ECB Council member Coene who said that monetary "conditions are too accommodative."



•   May crude oil prices this morning are trading dowm -87 cents a barrel and May gasoline is -3.35 cents per gallon. Crude oil and gasoline prices yesterday weakened and finished sharply lower after Saudi Arabia said the global oil market has enough crude and after China raised banks' reserve requirements: CLK11 -$2.54, RBK11 -3.64.

                Bearish factors included (1) the rally in the dollar index to a 1-week high, which undercuts investment demand for commodities, (2) comment from Saudi Arabian Oil Minister Ali al-Naimi who said the global "market is oversupplied" with crude, and (3) the action by China to raise banks' reserve requirements for the fourth time this year, which may slow economic growth and energy demand.

                Bullish factors included (1) ongoing fighting in Libya between rebel forces and troops loyal to Mummar Qadaffi, which may prolong the lack of Libyan crude exports, and (2) the prediction from JPMorgan Chase that oil prices may surge past $130 a barrel if OPEC doesn't increase its crude output by Q3.

Wednesday, April 20, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are down -13 ticks. T-note prices yesterday rallied as comments from Japan's Finance Minister offset the stronger-than-expected US housing starts and building permits: TYM11 +2, FVM11 unchanged, EDU11 unchanged. The 10-year T-note yield fell to a 3-1/2 week low of 3.344%.

                Bullish factors included (1) comments from Japanese Finance Minister Noda who said that US government debt remains "attractive" even after S&P on Monday lowered its US rating outlook, (2) increased safe-haven demand for Treasuries on concern the European sovereign-debt crisis will worsen after the yield on Greece's 2-year government note reached an all-time high of 20.64%, and (3) the action by the Fed to buy $6.678 billion of Treasuries as part of its QE2 asset-purchase program.

                Bearish factors included (1) the larger-than-expected increase in Mar US housing starts (+7.2% to 549,000 versus expectations of +8.6% to 520,000), (2) the larger-than-exp ected increase in Mar US building permits (+11.2% to 594,000 versus expectations of +1.1% to 540,000), and (3) rising inflation concerns after the price of gold rallied to record high of $1,500 an ounce.



•   The dollar index this morning is weaker and at a 16-1/2 month low with the dollar/yen +0.18 yen and the euro/dollar +1.95 cents. The dollar index yesterday closed lower as the euro strengthened on an unexpected increase in Apr European manufacturing along with strength in the Canadian dollar after Canadian consumer prices accelerated to a 2-1/2 year high: Dollar Index -0.475, USDJPY -0.071, EURUSD +0.01005.

                Bearish factors included (1) strength in the euro after the unexpected increase in the Apr Euro-Zone PMI composite index, and (2) the rally in the Canadian dollar to a 1-week high against the US dollar after Mar Canada CPI rose more than expected to a 2-1/2 year high of +3.3% y/y, which may prompt the BOC into additional rate hikes.

                Bullish factors included (1) the larger-than-expected increases in May US housing starts and building permits, which signals economic strength and is supportive for the dollar, and (2) the prediction from Mizuho Corporate Bank that the Japanese yen may slide to 90 per dollar over the next year as Japan struggles to revive its earthquake-hit economy and restrain a widening budget deficit.



•   June crude oil prices this morning are trading up +$1.34 a barrel and June gasoline is +3.19 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as crude oil gained on comments from OPEC's Secretary General while gasoline fell on concern high prices will slow the economy and fuel demand: CLM11 +$0.59, RBM11 -1.91.

                Bullish factors included (1) the weak dollar, which encourages investment demand in commodities, (2) comments from OPEC Secretary General El-Badri who said he expects crude prices to stay above $100 a barrel until at least next year, and (3) the outlook for weekly US gasoline inventories to decline for the ninth consecutive week when the DOE releases its weekly inventory numbers on Wed.

                Bearish factors included (1) heightened concern that fuel prices at 2-3/4 year highs will slow the US economic recovery and fuel demand, and (2) the outlook for US crude inventories to increase for the seventh straight week when the DOE releases its weekly inventory figures on Wed. Expectations for Wednesday's DOE inventories are for crude oil supplies to rise +1.35 million bbl, gasoline stockpiles to fall -1.75 million bbl, distillate inventories to increase +400,000 bbl and the refinery utilization rate to rise +0.9 to 82.3%.

Thursday, April 21, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are down -3 ticks. T-note prices yesterday closed lower as the stock market rallied and after US exiting home sales rose more than expected: TYM11 -11, FVM11 -8.2, EDU11 unchanged.

                Bearish factors included (1) the larger-than-expected increase in Mar US existing home sales (+3.7% to 5.10 million versus expectations of +2.5% to 5.00 million), (2) reduced safe-haven demand for Treasuries after the stock market rallied sharply, and (3) inflation concerns after gold prices surged to an all-time high.

                Bullish factors included (1) a possible increase in the safe-haven demand for Treasuries on concern the European sovereign-debt crisis may worsen after credit-default swaps to insure Greek and Portuguese government debt climbed to all-time highs, and (2) the action by the Fed to buy $1.5 billion of TIPS as part of its QE2 asset-purchase program.



•   The dollar index this morning is weaker and at a 2-2/3 year low with the dollar/yen -0.53 yen and the euro/dollar +0.82 cents. The dollar index yesterday plummeted to a 16-1/2 month low as commodity currencies rallied and as surging equity markets reduced the dollar's safe-haven demand: Dollar Index -0.661, USDJPY -0.030, EURUSD +0.01886.

                Bearish factors included (1) a rally in commodity currencies as the Australian dollar rose to a record $1.0599 against the US dollar, the strongest since it was freely floated in 1983, and the Canadian dollar climbed to a 3-1/4 year high against the dollar after commodities rallied on expectations for further global economic growth, (2) strength in the euro which climbed to a 15-month high against the dollar as European debt concerns eased when demand for a Spanish auction of government debt strengthened, and (3) reduced safe-haven demand for the dollar after the equity market rallied sharply.

                Bullish factors included (1) the larger- than-expected increase in Mar US existing home sales, which signals economic strength and is supportive for the dollar, and (2) a possible increase in the safe-haven demand for the dollar after ECB Council member Nowotny warned that a restructuring of Greek government debt could lead to a debt spiral as "the fear could spread on financial markets that this may become a precedent."



•   June crude oil prices this morning are trading up +78 cents a barrel and June gasoline is +2.02 cents per gallon. Crude oil and gasoline prices yesterday rallied sharply on a slump in the dollar and the unexpected decline in weekly crude inventories: CLM11 +$3.17, RBM11 +4.91. June crude posted a 1-week high.

                Bullish factors included (1) the slide in the dollar index to a 16-1/2 month low, which encourages investment demand in commodities, (2) the unexpected decline in weekly crude oil inventories (-2.32 million bbl versus expectations of +1.35 million bbl), (3) the -1.58 million bbl decline in weekly gasoline inventories which fell for the ninth consecutive week to a 5-month low of 308.1 million bbl, and (4) the rally in the S&P 500 to a 1-week high, which bolsters confidence in the economic outlook and energy demand.

                Bearish factors included (1) weakened demand for gasoline after US gasoline demand in the week ended Apr 15 fell -1.2% w/w to 9.06 million barrels a day, and (2) the larger-than expected increase in the weekly refinery utilization rate, which bodes well for increased output of gasoline and distillate products in the weeks ahead (+1.1 to 82.5% versus expectations of +0.9 to 82.3%).

Monday, April 25, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are up +2.5 ticks. T-note prices last Thursday finished higher as weaker-than-expected economic data offset the negative effects of a strong stock market: TYM11 +2.5, FVM11 +0.5, EDU11 +0.5.

                Bullish factors included (1) the smaller-than-expected decrease in weekly initial unemployment claims (-13,000 to 403,000 versus expectations of -22,000 to 390,000), (2) the larger-than-expected decline in the Apr Philadelphia Fed manufacturing index which fell to its lowest level in 5 months (-24.9 to 18.5 versus expectations of -7.0 to 36.4), and (3) the larger-than-expected decline in Feb FHFA home prices along with the downward revision to Jan (Feb -1.6% m/m versus expectations of -0.3% m/m and Jan revised down to -1.0% m/m from the originally reported -0.3% m/m).

                Bearish factors included (1) the larger-than-expected increase in Mar leading indicators which have risen for 9 straight months along with the upward revision to Feb (Mar +0.4% v ersus expectations of +0.3% and Feb revised up to +1.0% from the originally reported increase of +0.8%), and (2) reduced safe-haven demand for Treasuries after the stock market rallied.



•   The dollar index this morning is lower with the dollar/yen +0.06 yen and the euro/dollar +0.58 cents. The dollar index last Thursday dropped to a 2-2/3 year low as weaker-than-expected US economic data fueled speculation the Fed will keep its overly easy monetary policy intact and further weaken the dollar's interest rate differentials: Dollar Index -0.373, USDJPY -0.708, EURUSD +0.00291. The yen climbed to a 3-week high against the dollar and the euro soared to a 16-month high.

                Bearish factors included (1) the smaller-than-expected decline in weekly US jobless claims along with the larger-than-expected decline in the Apr Philadelphia Fed manufacturing index to a 5-month low, which hints at economic weakness and is dollar negative, (2) the rally in the British pound to a 16-month high against the dollar after Mar UK retail sales unexpectedly rose, and (3) supportive interest rate differentials for the euro after the 3-month Euribor rate rose to a 1-3/4 year high of 1. 356%.

                Bullish factors included (1) the surge in yields on Greek, Portuguese and Irish government debt to euro-era records, which may boost the safe-haven demand for the dollar as it suggests a worsening of the European sovereign-debt crisis, and (2) the larger-than-expected decline in the Apr German IFO business climate, which is euro negative.



•   June crude oil prices this morning are trading up +45 cents a barrel and June gasoline is +1.53 cents per gallon. Crude oil and gasoline prices last Thursday fluctuated on either side of unchanged and finished higher as the weak dollar offset the larger-than-expected decline in the Apr Philadelphia Fed manufacturing index: CLM11 +$0.84, RBM11 +2.39. June crude rallied to a 1-1/2 week high and Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high.

                Bullish factors included (1) the plunge in the dollar index to a 2-2/3 year low, which encourages investment demand in commodities, and (2) the rally in the S&P 500 to a 1-1/2 week high, which bolsters confidence in the economic outlook and energy demand.

                Bearish factors included (1) the larger-than-expected decline in the Apr Philadelphia Fed manufacturing index which fell to a 5-month low and suggests weakened energy demand, and (2) the smaller-than-expected drop in weekly US jobless claims, which indicates labor market weakness that may limit fuel demand.

Tuesday, April 26, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are up +1 tick. T-note prices yesterday finished higher after the stock market erased an early rally and as the Fed bought Treasuries as part of its QE2 asset-purchase program: TYM11 +11, FVM11 +8.2, EDU11 -0.5.

                Bullish factors included (1) increased safe-haven demand for Treasuries after the stock market declined, and (2) the Fed's action to purchase $7.24 billion of Treasuries as part of its QE 2 asset-purchase program.

                Bearish factors included (1) the stronger than expected Mar US new home sales along with the upward revision to Feb (Mar +11.1% to 300,000 versus expectations of +12.0% to 280,000 and Feb revised up to a -13.5% drop to 270,000 from the originally reported -16.9% decline to 250,000), and (2) supply pressures ahead of the Treasury's $35 billion 2-year T-note auction on Tuesday.



•   The dollar index this morning is weaker with the dollar/yen -0.17 yen and the euro/dollar +0.25 cents. The dollar index yesterday weakened on speculation that the FOMC this week will keep interest rates at a record low, which will keep the dollar's interest rate differentials weak: Dollar Index -0.122, USDJPY -0.017, EURUSD +0.00288.

                Bearish factors included (1) an early rally in commodity currencies against the dollar after crude oil rose to a 2-1/2 year high, and (2) speculation that the FOMC this week will keep interest rates at a record low, which may prompt inventors to shy away from dollar assets in favor of higher yielding ones.

                Bullish factors included (1) increased safe-haven demand for the dollar as the stock market declined, and (2) weakness in the yen against the dollar on speculation the BOJ this week will signal an increase in stimulus to help Japan's economy recover from its earthquake crisis.



•   June crude oil prices this morning are trading down -41 cents a barrel and June gasoline is +0.28 of a cent per gallon. Crude oil and gasoline prices yesterday retreated after an early rally faded and prices finished mixed on profit taking: CLM11 -$0.01, RBM11 +0.62. June crude rallied to a 2-1/2 year high but closed lower and Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high.

                Bearish factors included (1) the decline in the equity market which erodes optimism in the economic outlook and energy demand, and (2) technical selling after the energy markets failed to hold its gains to 2+ year highs.

                Bullish factors included (1) the weak dollar which encourages investment demand in commodities, and (2) comments from a Saudi Arabian oil official who said his country's oil output will stay at 12.5 million barrels a day, squashing rumors that the country was considering hiking output to 15 million barrels a day.

Wednesday, April 27, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are down -6 ticks ahead of the conclusion of the FOMC meeting later today. T-note prices yesterday rallied to a 1-month high and settled higher on speculation the Fed on Wed will announce steps to keep Treasury yields from rising as the June end of the QE2 asset-purchase program approaches: TYM11 +11, FVM11 +7.2, EDU11 +0.5. The 10-year T-note yield slipped to a 1-month low of 3.306%.

                Bullish factors included (1) the as-expected -3.3% y/y decline in the Feb S&P/CaseShiller composite-20 home price index, the biggest y/y decline in 15 months and a sign that the US housing market remains depressed, (2) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after credit-default swaps to insure Greek and Portuguese government debt jumped to records, (3) the unexpected decline in the Apr Richmond Fed manufacturing index which fell to its lowest level in 5 months (-10 to 10 versus expectations of un changed at 20), (4) strong foreign demand for the Treasuries $35 billion 2-year T-note auction in which indirect bidders bought 37.9% of the notes, stronger than the 33.5% average of the past 10 auctions, and (5) the Fed's action to purchase $1.99 billion of Treasuries as part of its QE 2 asset-purchase program.

                Bearish factors included (1) the stronger-than-expected Apr US consumer confidence (+1.6 to 65.4 versus expectations of +1.4 to 64., and (2) supply pressures ahead of the Treasury's $35 billion 5-year T-note auction on Wednesday.



•   The dollar index this morning is weaker and posted a fresh 2-1/2 year low in overnight trade with the dollar/yen +0.69 yen and the euro/dollar +0.29 cents. The dollar index yesterday closed lower on speculation that the FOMC on Wednesday will keep interest rates at a record low along with strength in the euro which rallied to a 16-1/4 month high against the dollar on hawkish comments from ECB President Trichet: Dollar Index -0.149, USDJPY -0.277, EURUSD +0.0630.

                Bearish factors included (1) speculation that the FOMC on Wednesday will keep interest rates at a record low, which may prompt inventors to shy away from the dollar in favor of higher yielding assets, (2) comments from ECB President Trichet who said the ECB must continue "solidly anchoring" inflation expectations, which bolstered speculation for further ECB rate hikes, and (3) reduced safe-haven demand for the dollar after stock prices rallied to 2-3/4 year highs.

                Bullish factors included (1) a possi ble increase in the safe-haven demand for the dollar after credit-default swaps to insure Greek and Portuguese government debt jumped to records, which raises concern the European sovereign-debt crisis will worsen, (2) the stronger-than-expected Apr US consumer confidence, which is dollar supportive, and (3) comments from Treasury Secretary Geithner who reaffirmed the US commitment to a "strong dollar".



•   June crude oil prices this morning are trading up +39 cents a barrel and June gasoline is +1.28 cents per gallon at a contract high. Crude oil and gasoline prices yesterday finished mixed as a weak dollar, strong equities and stronger-than-expected US consumer confidence lifted gasoline while comments from Saudi Arabia's national oil company undercut crude: CLM11 -$0.07, RBM11 +2.87. Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high.

                Bullish factors included (1) the weak dollar which encourages investment demand in commodities, (2) the stronger-than-expected US Apr consumer confidence, which may lead to increased consumer spending and fuel demand, (3) strength in gasoline prices on the outlook for weekly DOE gasoline supplies to fall for the tenth consecutive week when they are reported on Wed, and (4) the rally in the S&P 500 to a 2-3/4 year high, which bolsters confidence in the economic outlook and energy demand.

                Bearish factors included (1) comments from the CEO of Saudi Arabia's state oil company who said it is "not comfortable" with the current price of oil and is concerned about its effect of global economic growth, which fueled speculation of an increase in Saudi Arabian oil production, and (2) the outlook for weekly DOE crude oil stockpiles to increase for the seventh time in eight weeks when they are released on Wed. Expectations for the DOE's weekly inventory report are for crude supplies to gain 1.7 million bbl, gasoline stockpiles to fall -1.0 million bbl, distillate inventories to rise +500,000 bbl and the refinery utilization rate to increase +0.9 to 83.4%.

Thursday, April 28, 2011...

Today's Market Focus

•   June 10-year T-notes this morning are up +8 ticks. T-note prices yesterday closed lower on supply pressures and after the Fed raised its inflation estimates for this year: TYM11 -8, FVM11 -1, EDU11 unchanged.

                Bearish factors included (1) reduced safe-haven demand for Treasuries after the S&P 500 rose to a 2-3/4 year high, (2) the Fed's action to raise its core inflation estimate for this year to 1.3% to 1.6%, higher than a Jan estimate of 1.0% to 1.3%, and (3) supply pressures ahead of the Treasury's $29 billion 7-year T-note auction on Thursday.

                Bullish factors included (1) the action by the Fed to cut its growth forecast for the US economy this year to 3.1% to 3.3% from a Jan forecast of 3.4% to 3.9%, (2) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all rose to records, and (3) the post-FOMC statement that said the economy is recovering at a "moderate pace" and a pickup in inflation is likely to be temporary.



•   The dollar index this morning is weaker and fell to a fresh 2-3/4 year low in overnight trade with the dollar/yen -0.41 yen and the euro/dollar +0.18 cents. The dollar index yesterday fell to a 2-2/3 year low and closed lower after the Fed lowered its growth forecast for this year and said it will finish its QE2 bond purchase program: Dollar Index -0.318, USDJPY +0.598, EURUSD +0.01437.

                Bearish factors included (1) the action by the Fed to cut its growth forecast for the economy this year to 3.1% to 3.3% from a Jan forecast of 3.4% to 3.9% and to raise its core inflation estimate for this year to 1.3% to 1.6%, higher than a Jan estimate of 1.0% to 1.3%, (2) the action by the Fed to maintain its QE2 asset-purchase program, which further weakens the dollar's interest rate differentials, and (3) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-3/4 year high.

                Bullish factors included (1) a possible increase in the safe-haven demand for the dol lar after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all rose to records, which raises concern the European sovereign-debt crisis will worsen, and (2) weakness in the yen after Standard & Poor's cut Japan's sovereign-rating outlook to "negative" from "stable," citing the costs for rebuilding after lest month's earthquake.



•   June crude oil prices this morning are trading down -16 cents a barrel and June gasoline is +0.35 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated after the release of the DOE weekly inventories but finished higher as gasoline supplies plunged to a 1-2/3 year low: CLM11 +$0.55, RBM11 +5.10. Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high.

                Bullish factors included (1) the fall in the dollar index to a 2-2/3 year low, which boosts investment demand in commodities, (2) strength in gasoline prices after weekly DOE gasoline supplies fell more than expected (-2.51 million bbl to a 1-2/3 year low of 205.6 million bbl versus expectations of a -1.0 million bbl decline), (3) the unexpected decline in weekly distillate inventories (-1.80 million bbl versus expectations of a +500,000 bbl increase), (4) the smaller-than-expected increase in the refinery utilization rate, which signals reduced output of gasol ine and distillate products in the weeks ahead (+0.2 to 82.7% versus expectations of +0.9 to 83.4%), and (5) the rally in the S&P 500 to a 2-3/4 year high, which bolsters confidence in the economic outlook and energy demand.

                Bearish factors included (1) the larger-than-expected increase in weekly crude oil supplies (+6.16 million bbl versus expectations of +1.7 million bbl), and (2) the action by the Fed to cut its growth forecast for the US economy this year, which signals reduced energy demand and consumption.