Thursday, April 19, 2012

Early Earnings Euphoria Turns to Tears as Economic Data Disappoints

In the most classic of all classic bear market chart moves, the major indices took the ball that was handed to them by the like of Bank of America (BAC) and DuPont (DD), both of which reported 1st quarter earnings before the bell, opening to the upside, though without much conviction as the 380,000 initial unemployment claims hung over the markets like the Sword of Damocles.

Sporting gains by the 10:00 hour, the next set of economic data included the index of leading indicators from the shills at the Conference Board posting a gain of 0.3%, the Philadelphia Fed index showing a number of 8.3 when the expectations were for 12.0 and existing home sales - the real killer number - sporting a 2% decline from 4.60M in February to 48.8 in March.

Adding to the housing debacle is the fact that the numbers are woefully behind the times and generally a best-guess situation, indicating that April's figures, which will be released about this time in May, will be off the mark as well.

With those key economic data points in hand, the markets began to turn south and continued to do so until reaching the lows of the day before 3:00, though, of course, no Ponzi-scheme market would be complete without the requisite end-of-session tape painting that chopped off about 40% of the losses.

Still, it was an ugly chapter for a market struggling to find any kind of positive momentum. Those who based their hopes on bank earnings from BofA were sorely disappointed to find that the nation's most hated banking entity (though JP Morgan Chase and Citigroup are running close behind) produced a quarterly earnings report that more resembled a work of fiction rather than a well-reasoned, accurate accounting of their financial position.

Since 2008 - and probably even before then - all bank earning statements from the big five have been wholly fraudulent, based on assumptions like mark to model and other accounting gimmicks designed only to obfuscate the truth. Bank of America does't really make money any more than a dead person inhales oxygen, and the metaphor is appropriate, since BofA is technically a dead bank walking.

So, on a day in which the pundits and cheerleaders were looking for positives in corporate earnings, they got egg on their collective faces from the economy, which, after all, is the real harbinger of good or ill tidings. Continued high unemployment and a crippled housing market added to burgeoning government debt does not paint a very pretty picture, though Wall Street likes to view these things though rose-colored glasses.

Eventually, reality strikes home and the only option is to hit the sell button. Notably, today's volume was much higher than what has been the norm, not a good sign for any bulls still holding corporate shares.

Dow 12,964.10, -68.65 (0.53%)
NASDAQ 3,007.56, -23.89 (0.79%)
S&P 500 1,376.92, -8.22 (0.59%)
NYSE Composite 7,995.94, -34.43 (0.43%)
NASDAQ Volume 1,965,208,125
NYSE Volume 4,138,306,500
Combined NYSE & NASDAQ Advance - Decline: 2162-3363
Combined NYSE & NASDAQ New highs - New lows: 134-91
WTI crude oil: 102.27, -0.40
Gold: 1,641.40, +1.80
Silver: 31.78, +0.29

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