Thursday, January 31, 2013

Red Alert: Markets Leak Lower Second Straight Session

The 0.1% decline in fourth quarter 2012 GDP appears to have been taken a bit more seriously than first expected, as stocks fell for the second consecutive session on Thursday. Adding to the dour sentiment on the US economy, initial unemployment claims spiked to 368,000 after last week's multi-year low of 330,000 was seen as initially buoyant but now looks to be more of an aberration than a harbinger of things to come.

Stocks were higher in the morning, but drifted through the day, eventually ending lower despite a furious, failed attempt to paint the tape in the final ten minutes of trading. Of the major indices, only the NASDAQ was close to the break even mark, closing down fractionally.

Chicago PMI for January was a major surprise, coming in at 55.6 on expectations of 50.0%, but even this was not enough to bolster the markets.

The real story came in terms of personal income, which sported a gain of 2.6% in December, a boon for the average consumer, a bane for business, but overall, likely a wash, as the reading was prior to government's decision to roll back the temporary cut in Social Security deductions. Wage earners are seeing less in their paychecks while oil, fuel and food are beginning to show signs of ramping up in price, a formula not apparently anticipated by by the Fed/government/business brian trust which wants to control everything from guns, to stock prices to health insurance premiums.

There's an eventuality about all of this control-orientation that reeks of collapse, anarchy and non-compliance from the general populace. If not for food stamps, rent subsidies and other socialist mechanisms polluting the formerly-free markets, the economy would have been dead and buried long ago.

As for the skimmers on Wall Street, their attempts to manage the markets lower amid weakening expectations are, for now, succeeding, though on this final day of trading in January - one of the best months ever for stocks - there was little in the way of window dressing, the usual ritual of fund managers seeking to impress clients.

With non-farm payroll data due out prior to Friday's opening bell, everything is on hold, though sentiment seems to be turning a bit more negative than usual. Estimates are for a net increase of 200,000 jobs created in December, after ADP reported a gain of 192,000 on Wednesday, counting only the private sector.

Washington's been eerily silent of late, supposedly getting down to work on immigration and possibly other pressing issues, but debate will soon liven over a budget, something congress and the president has failed to address for four years.

A big discrepancy in the Advance-Decline line - 3546-2897 - the opposite of what one would expected on a negative trading day, indicates that investors were busily unloading losers and scrambling for safety. Consumer stocks, in addition to energy, healthcare and transportation were the largest sector losers, with utilities and services the only sectors slightly positive.

Wall Street's tea leaves will tell more tomorrow, and if hiring was less than expected in December, downward pressure will remain in charge and perhaps be amplified.

Dow 13,860.58, -49.84 (0.36%)
NASDAQ 3,142.13, -0.18 (0.01%)
S&P 500 1,498.11, -3.85 (0.26%)
NYSE Composite 8,892.59, -11.73 (0.13%)
NASDAQ Volume 2,134,474,750
NYSE Volume 4,027,212,000
Combined NYSE & NASDAQ Advance - Decline: 3546-2897
Combined NYSE & NASDAQ New highs - New lows: 316-39
WTI crude oil: 97.10, -0.84
Gold: 1,663.80, -16.10
Silver: 31.42, -0.60

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