Commodities and equities telling two different stories

The intra-day story has been the US equity market bouncing on the increasing strength of credit markets while the commodities market continues to decline on fears of slower economic growth than what is currently priced in. The near month contract for light/sweet closed down 4% to the lowest level in over a month at $64/barrel while the equity market has gained back against the losses from earlier in the day.

Of course this could mean everything... or it could mean nothing. It is easy to chalk up the price action in crude to a rationalization back to supply/demand reality but it is also important to think about the implied expectations for unemployment and the USD (especially in light of last week's news releases). As always, the reality is somewhere in the middle but we have to think there is some truth to be uncovered here (especially with the sluggishness of the equity market's reactions to news releases). This week (and possibly the next) will determine who's telling the truth but for now we stick to dollar strength until we get more insight into what's going on. 

Comments

[Glen]

Yeh, 3:45 ramp kicked in just as programmed.

[Steak]

Shadiness afoot, my favorite example from the past couple of days is the consumer staple space (namely PG) being up big on dollar strength.  These are the guys who are supposed to eat it with dollar strength since it erodes their margins.  If anything its reminescent of August 08 when equities were rising despite the beginnings of the commodity crash.

[FischerBlack]

Well, Alcoa got spanked today ahead of earnings on Wed. This company has always been considered a bellwether as to near-term economic activity, so it's worth listening in on the call to hear the guidance. Spot aluminum prices certainly aren't reflecting heavy demand.

[Anonymous]

Whoa, what just happened to the grains? Either I'm getting bad quotes, or they were just pushed off the edge of the cliff.