The Market Today

The yield curve finally inverted today. Unlike most things Wall Street freaks out about, I actually agree that this is a big deal. An inverted yield curve is when short-term interest rates are higher than long-term rates. The norm is that long-term rates are higher. Investors typically get more by shouldering the risk of having their money tied up for a longer period of time. That’s the theory anyway, and it ain’t happening now.
When people aren’t paid to take risks, they stop taking them. The yield curve has often been a good barometer for future economic performance. It’s actually been a lot better than most economists.
Interest rates had been headed this way for along time, but today the yield two-year Treasury note briefly topped the yield on the 10-year Treasury bond. This seemed to scare the market as stocks lost ground all afternoon. The S&P 500 lost 0.96% and our Buy List lost 0.53%.
We can thank our avoidance of energy stocks to today’s out-performance. For December, the Buy List is up 0.95% to the S&P’s 0.57%. The energy sector was clobbered in today’s session. Natural gas prices plunged 10% today, and they’re down 23% since Wednesday.
Frontier Airlines (FRNT) did very well today. Bob McAdoo, the analyst at Prudential, raised his earnings guidance for next year by four cents a share to 12 cents.
Also Boston Scientific (BSX), against all reason, logic and common sense, is sticking by Guidant’s side. Well…at least they get points for loyalty.

Posted by on December 27th, 2005 at 9:06 pm


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