Friday, November 2, 2012

Wall Street Taketh Away: Jobs, Sandy Aftermath Not Pretty

Remember the big ramp-up in stocks yesterday, based upon the new, revised-metholdology ADP October jobs data?


That is despite a big beat in the non-farm payroll data released prior to Friday's open. The BLS said that the US created 171,000 net new jobs in the month of October, and, initially, the stock jocks loved it, pushing futures higher and sending the Dow Jones Industrials up 57 points at the open.

Trouble was, however, that the positive jobs data had already been priced in, off of the ADP beat. So, sorry, Charlie, no profit for you if you're a dollar short and a day late, as is the case. By 10:00 am, the Dow was flat. It and the other indices crawled lower through out the day, with the losses accelerating in the final two hours of the session.

There were other factors to stocks - and commodities - giving back everything on the final day of trading for the week. Corporate reporting for the third quarter has been seminally sour. Today's miss was by Chevron (CVX), a Dow component, which saw third-quarter net income fall to $5.25 billion, or $2.69 per share, from $7.83 billion, or $3.92 per share, a year earlier.

Chevron earned $2.55 per share, compared with the analysts' average estimate of $2.83. Oops! Poor babies, their efforts to skin every last dollar from the pockets of US consumers weren't quite as good as last year. The price of oil is down and headed even lower today.

Somebody send a memo to the CEOs of the energy companies and other Fortune 500 CEOs: there's a global slowdown going on, mostly because you guys have overpriced everything from baby formula to burials, and people simply can't foot the bill any more.

Other than sliding corporate earnings (note: Most major corporations are still massively profitable, just not as profitable as last year, or, in some cases, last quarter, but some, like Sharp and Panasonic are close to bankruptcy, with more to follow), there's a litany of issues facing the global economy, like the fiscal cliff and mountains of debt and unfunded liabilities worldwide (no small matter), the continuing crisis in Europe (still unresolved and getting worse), the uncertainty of the presidential election in the US (hint: Obama's going to win easily, which is another reason Wall Street is unhappy), and this little inconvenient storm called Hurricane Sandy, which still has most of the New Jersey shoreline, Long Island, Staten Island and lower Manhattan still without power and people suffering in cold weather, without fuel, food, and gas lines extending for miles in Jersey and New York, not because there's no gas, but no electricity to power the pumps and stations, many of which remain closed.

Yep, things are not good overall, and, from the looks of things, they're not getting any better. The damages from Sandy will easily exceed those of Katrina. It doesnt take a genius to figure out that a massive storm which wreaked havoc on the most densely-populated area of the country is going to cost more than the laughable estimates of $20 billion that have been bandied about by so-called experts. Try $60 billion or more, maybe in excess of $100 billion, and that number is going to pt a serious dent in fourth quarter GDP.

The current wisdom being foisted upon the supposedly-knowledgeable investing community - that all the destruction from Hurricane Sandy will eventually be a net positive for the economy a la Frederic Bastiat's "broken window" parable - is complete media hogwash put forward by economist goon-whores like Moody's Mark Zandi, Mesirow's Diane Swonk and Deutsche Bank's Joe LaVorgna (yes, the Germans always like to have Italians do their dirty work), and are completely off base.

While NYC Mayor Bloomberg has been catching considerable flak - most of it well-deserved - for pushing ahead with the New York City Marathon this weekend, the long tail of Hurricane Sandy is likely to help push the US economy into recession in the fourth quarter of 2012 and beyond. Unlike Katrina, which concentrated its wrath upon New Orleans and the Southern shores, Sandy hit the highest income folks in the country, and that's not something that's going to be erased from the memory or the bottom line very easily. Just to make sure everybody's on the same page here, expect every fourth quarter profit miss to mention - at least in part - the effects of the hurricane on profits, whether real or imagined. Hurricanes and weather overall make for great scapegoats.

So, this week on Wall Street was more or less a wash. Two days closed, a flat day Wednesday, up Thursday and down Friday. The sharpie day-traders made a huge buck to be sure, but America and the global economy suffered terribly, NY marathon or not.

And, not to forget, Apple's iPad Mini was released for sale globally today. Lines were much shorter than for other Apple product launches, which goes to figure: you introduce a mini-tablet, you get mini-lines.

And, just to rub some salt into already open wounds, another storm is setting up to hit the Northeast next week.

Just what we all need.

Dow 13,093.16, -139.46 (1.05%)
NASDAQ 2,982.13, -37.93 (1.26%)
S&P 500 1,414.20, -13.39 (0.94%)
NYSE Composite 8,234.91, -76.45 (0.92%)
NASDAQ Volume 1,820,933,250
NYSE Volume 3,576,460,250
Combined NYSE & NASDAQ Advance - Decline: 1575-3880
Combined NYSE & NASDAQ New highs - New lows: 211-87
WTI crude oil: 84.86, -2.23
Gold: 1,675.20, -40.30
Silver: 30.86, -1.391

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