Treasuries rose while the cost to protect Irish debt surged to a record on concern about European government debt levels and an unexpected drop in American consumer confidence. U.S. stocks fluctuated and the euro fell.
Ten-year Treasury notes climbed, pushing the yield down 3 basis points to 2.73 percent at 11:41 a.m. in New York. Costs to protect Irish government debt from default and the yield premium investors demand to own the nation’s 10-year bonds instead of benchmark German bunds both reached all-time highs. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,124.37, wiping out a gain of as much as 0.6 percent. The euro weakened from a five-week high against the yen.
Speculation that Ireland and Portugal will need outside assistance to fund budget deficits fueled concern that the European debt crisis is deepening. European Central Bank council member Axel Weber said today that the financial crisis is “still with us.”
“The signals are still mixed,” said John Carey, Boston- based money-manager at Pioneer Investment Management, which oversees about $230 billion. “People and companies perhaps are not as confident as they should be. There are remaining issues in Europe. We’re not in a double dip recession, but the recovery is fragile.”
Treasuries Extend Gains
Treasuries extended gains after confidence among U.S. consumers unexpectedly fell in September to a one-year low. The yield on the 10-year Irish bond surged 29 basis points to 6.32 percent in London. The spread with bunds widened to as much as 387 basis points, or 3.87 percentage points, the most on record, according to Bloomberg generic data.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 66.6 following a reading of 68.9 in August, the group said today. Economists forecast the measure would rise to 70, according to the median estimate in a Bloomberg News survey.
The cost of living in the U.S. climbed in August for a second month as energy and food prices increased, while other goods and services showed little change. The consumer-price index rose 0.3 percent for a second month, figures from the Labor Department showed. Excluding food and fuel costs, the so- called core rate was unchanged.
Technology Earnings
Losses in U.S. equities were tempered by gains in Oracle Corp., leading a gauge of software companies to a 0.7 percent advance. Oracle jumped 6.3 percent after its first quarter earnings and sales forecast exceeded analysts’ estimates.
Research In Motion Ltd. reported second-quarter revenue and profit that beat analysts’ estimates on rising demand for phones that can access the Web and manage e-mail. Oracle also beat estimates as sales of database software and Sun Microsystems Inc. server computers helped it capitalize on a recovery in information-technology spending.
U.S. stock swings will likely be stronger today as the expiration of futures and options on stocks and equity indexes adds to market volatility, said Dave Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. The process known as quadruple witching occurs every three months.
“It’s encouraging to see technology companies showing positive results,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $55 billion. “They have a fair amount of cash and healthy balance sheets,” he said. “The European debt situation is a protracted problem. It’s going to take years to move past. Unfortunately, the market moves in minutes. It ends up being a frustrating match.”
Irish Financing Concerns
Ireland isn’t facing difficulty raising funds, Finance Minister Brian Lenihan said today, seeking to quell speculation that the country may need financial aid from outside sources. Barclays Plc said in a note to investors yesterday that the country may need to accept external assistance if there are additional financial-sector losses or the economy worsens.
Portugal may have to seek aid from the International Monetary Fund to address the problems of external financing, Diario de Noticias reported on its Web site, citing three former finance ministers Eduardo Catroga, Medina Carreira and Miguel Beleza.
The euro weakened against 14 of 16 of its most-traded peers, falling 0.2 percent to 111.93 yen, after appreciating to as strong as 112.98 yen. The common European currency slipped to $1.3048 after climbing to $1.3159, the highest level since Aug. 11.
China’s yuan was set for its biggest weekly advance in 28 months on speculation a faster pace of appreciation will be tolerated after U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains. The central bank set the reference rate at 6.7172 per dollar today, the strongest level since July 2005.
Chinese IPO
SouFun Holdings Ltd., the operator of China’s biggest real- estate website, jumped as much as 63 percent after raising $125 million in this month’s first U.S. initial public offering.
The company that controls almost half of China’s online real-estate advertising market was valued about 14.3 times earnings, or 14 percent less than the average of six Internet portals and property information providers, data compiled by Independent International Investment Research Plc and Bloomberg show.
European shares wiped out gains, with the benchmark Stoxx Europe 600 Index falling 0.1 percent, erasing an earlier 1.1 percent rally. Crucell NV soared 56 percent after Johnson & Johnson said it planned to offer 1.75 billion euros ($2.3 billion) to take full control of the vaccine maker. A total of $1.43 trillion of deals has been announced around the world so far this year, up from $1.25 trillion for the same period last year, according to data compiled by Bloomberg.
European Creditworthiness
Corporate creditworthiness in Europe is the best ever compared with governments, credit-default swap prices show, as companies cut debt while governments struggle with budget deficits.
The difference between the Markit iTraxx Europe Index of corporate credit-default swaps and the Markit iTraxx SovX Western Europe Index of contracts tied to government debt widened 1 basis point to a record 49, according to data from CMA and JPMorgan Chase & Co.
Corn jumped 2.2 percent to $5.07 a bushel on the Chicago Board of Trade, rising above $5 for the first time in almost two years, on concern that falling U.S. yields and higher demand from importers will erode supplies in the world’s largest exporter. Goldman Sachs Group Inc. also raised its three-month forecast for the grain. Tyson Foods Inc. and Smithfield Foods Inc. both declined at least 2.8 percent on speculation feed costs will increase.
Gold futures climbed as much as 0.8 percent to a record $1,284.40 an ounce and silver rose to within 1 cent of a 30-year high. Copper rose 0.5 percent in New York. October crude oil slipped 1.2 percent to $73.69 a barrel in New York.
Why is the Butterfly pattern important?
How do I find a Butterfly pattern?
Butterfly patterns are similar to Gartley patterns in that they resemble a skewed “W” or "M" shape on a price chart. However, a butterfly pattern completes at the convergence of 2 separate Fibonacci extension levels whereas the Gartley completes at the convergence of a Fibonacci retracement and extension.
The beauty of the butterfly lies in its symmetry between the two connecting triangles at point B. As with all geometric patterns, a buy or sell signal occurs as the pattern completes at point D.
Bullish Butterfly Pattern Rules (buy at point D)
1. Swing down from A-to-D is 127.2% or 161.8% extension of XA
a. D must be below X
3. Additional confirmation attained when time and price are in proportion
a. Time of XAB and BCD triangles ideally "equal," but BCD may fall within 61.8%-161.8%
4. Move beyond 161.8% negates the pattern
a. May indicate strong continuation move in progress
Bearish Butterfly Pattern Rules (sell at point D)
a. D must be above X
2. Valid ABCD must be observed in extension move (AD)
3. Additional confirmation attained when time and price are in proportion
a. Time of XAB and BCD triangles ideally "equal," but BCD may fall within 61.8%-161.8%
4. Move beyond 161.8% negates the pattern
a. May indicate strong continuation move