Thursday, February 7, 2013

Stocks Drift Lower on Unemployment, Productivity Figures

It appears that the stock market may well be topped out for the short term, though the background of $85 billion in additional monthly stimulus will almost certainly help contain any declines to mere "noise" other than a true correction or change in market sentiment.

About the only thing that could alter the relentless, upward direction of stocks would be war, a series of natural disasters or an alien space invasion, and of those three, war would be the most likely. The suspected antagonists would be China vs. Japan, Israel vs. Iran or an expansion of US efforts in Northern Africa. Even in such a scenario, so intent is the Federal Reserve on its path to devaluing the currency in the name of progress or some nebulous, idealized vision of "growth at all costs," one would tend to believe their efforts at keeping stocks high and interest rates low would only redouble.

So it is that the major indices have come nearly all the way back to previous highs in the nearly five years since the epic crash of 2008-09 without the participation of many individual investors. The reasons contributing to such widespread investor shyness are manifold, highlighted by fear of high frequency trading, flash crashes, suspected manipulation, or the plain and simple conclusion that the stock market is riding on a bubble of Fed largesse which is eventually unsustainable.

It's unfortunate that so many have fled from the market in the midst of one of its most stridently bullish eras, but doubts and fears can linger for generations, and, beyond the market there is widespread distrust of other institutions which place themselves above the common man and often, the law.

While the United States, and, to a large part, Europe, struggles through this long winter of discontent, millions have made adjustments to their lifestyles, opting for more sustainable personal economies as opposed to the heavy-handed debt-as-money regime that seemed to have creaked and cracked in the '08-09 economic downturn. Many such individuals will never return to the market and among those that do, they will be cautious to a fault and ready to flee at the first signs of trouble.

Even though economists and stock-pushers continue the mantra of "recovery,' for most, the results of five years of heavy stimulus has produced perceptibly limited results, keeping the skeptics unconvinced.

Today's action was possibly (who knows for sure?) a reaction to economic data released this morning that say initial unemployment claims nearly steady at 366,000 and a dip in productivity for the fourth quarter of 2012 of two percent, pushing unit labor costs to an inflation-inducing 4.5% gain over the same period.

It is just those kinds of choppy data sets and unintended consequences that serve to amplify fears from main Street to Wall Street. the level of uncertainty about everything from price discovery to government machinations over the budgetary process continuing to put a ceiling on true progress toward a resoration of normalcy.

Dow 13,944.05, -42.47 (0.30%)
NASDAQ 3,165.13, -3.35 (0.11%)
S&P 500 1,509.39, -2.73 (0.18%)
NYSE Composite 8,892.85, 41.38 (0.46%)
NASDAQ Volume 1,916,361,875
NYSE Volume 3,865,233,750
Combined NYSE & NASDAQ Advance - Decline: 2441-3979
Combined NYSE & NASDAQ New highs - New lows: 357-26
WTI crude oil: 95.83, -0.79
Gold: 1,671.30, -7.50
Silver: 31.40, -0.474

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