(Simultaneously published at Downtown Magazine)
In case anybody is growing weary of the recent volatility that has sent stocks soaring and diving over the past three to four weeks, prepare for more of the same. There will be no respite in daily swings of two percent, three percent or more, as yesterday proved, as stocks staged a monumental rally in the latter part of the the session, the Dow rising more than 1000 points in the final two hours.
At the end of the day, all major indices were approaching gains of five percent. Keeping with the trend of record-breaking sessions, the Dow's rise was the third largest point gain in market history. The other two occurred earlier this month. On March 2nd, the Industrials set the mark with a gain of 1,293.96 points. Tow days later, it came close to breaking that, up by 1,173.45 points.
With an eye toward the VIX - the market's preferred measure of volatility - this kind of roller coaster ride should continue until there's resolution to the downside. The VIX has recently hovered in the 40-50 range, ripping as high as 55. Normal volatility is usually measured in the teens.
The NASDAQ and S&P also experienced massive upside Tuesday afternoon, resulting in a record point gain on the NASDAQ, up 393.58 points, surpassing the record set just over a week ago, on March 2nd (+384.80). The S&P's gain of 135.67 points fell just shy of the record mark, also recorded on March 2nd, at +136.01.
In this regime of wild swings, it's probable that some traders are going to make massive profits while others fail miserably. It's all about timing and nerves. Anybody with poor timing and a thin appetite for risk is likely to be wiped out in short order. Those who relish the thrill of the hunt and have money to burn should come out ahead in the end, varying trades between long and short, at least until the market overseers ban short sales or profiting on put options.
It may not be obvious to the general public, but where this is head seems pretty clear. The coronavirus, COVID-19, has wreaked havoc on human society, thus disrupting the normal flow of business, a trend that's only just begun. Businesses are only beginning to feel the effects of breaks in the supply chain from China, and soon enough the entire planet's trade will be paralyzed by delays, outages, work stoppages, quarantines, deaths, and all the assorted maladies that accompany global pandemics, the likes of which have not presented themselves in the lifetimes of anybody alive today.
Estimates from medical experts are frightening, which is why the numbers being released by the CDC in the United States are nothing short of a bad joke. Over the past week, the CDC has "officially" recorded anywhere between 2 and 19 new cases of COVID-19 daily, this in a country with a projected population of 333,546,000.
Actual incidence of infection is orders of magnitude higher; that can be safely assumed. With the aid of the CDC, the US government has chosen to protect the economy rather than the people, a strategy doomed to fail. Without effective measures for controlling and containing the spread of the disease - as has been accomplished to a relatively high degree in places like Hong Kong, Singapore, and South Korea - via testing, contact tracking, and quarantine - it will spread virtually unchecked through a population. The evidence from the epicenter in Wuhan, China is compelling in this regard. Akin to what happened there, the US approach is dangerously close to causing a widespread outbreak in any number of cities by ignoring simple precautions and putting money ahead of human health.
What would an economy look like with 200 deaths per day, hospitals overwhelmed and people forced to stay indoors and away from others for weeks at a time? We, and some European nations are about to find out. With a population spoiled by the luxuries of freedom, it's not going to be much fun watching entitled populations melt down under the imposition of travel bans, quarantines, and other draconian measures.
As for stocks, well, their pathway will be all but assured. The Dow Jones Industrials bounced off a mark of declination on Tuesday when it bottomed out at 23,690.34. It was down 19.88% from the intraday high of 29,568.57, recorded on February 12 of this year. It was about to fall into bear market territory. The day's gains may have staved off capitulation for now, but it's coming, and soon. The end of the 11-year bull market and the beginning of what could be a prolonged bear market is at hand.
At the Close, Tuesday, March 10, 2020:
Dow Jones Industrial Average: 25,018.16, +1,167.14 (+4.89%)
NASDAQ: 8,344.25, +393.58 (+4.95%)
S&P 500: 2,882.23, +135.67 (+4.94%)
NYSE: 11,793.27, +494.84 (+4.38%)
Showing posts with label VIX. Show all posts
Showing posts with label VIX. Show all posts
Wednesday, March 11, 2020
Wednesday, May 9, 2018
PPI Moderates, Stocks Rise On Hope, Noise
With today's gains, the Dow Jones Industrial Average has nearly doubled - in one day - all of its monthly gains from the previous six trading days.
Hardly a notable event, it overshadowed two days (5/3 and 5/8) in which the general averages barely budged at all.
In a market that is supposed to be highly volatile, what are flat sessions doing in there? They are showing something which many may have missed: the volatility from February and March certainly waned in April and is is petering out in May, with the VIX standing at a 16-handle presently.
This being a highly fluid situation, and one in which there remains the narrative of "recovery" or "expansion" getting people to sell their stocks isn't going to be an easy deal, thus, the zig-zag patterning of the past six weeks may maintain for a few weeks or months more before there's a true selloff.
About two weeks ago, Money Daily was of the opinion that the next rally (the one we're currently experiencing) should be good for 1000 points on the Dow. We're not even half way there, so more upside, complete with unicorns and rainbows are to be expected in the near term.
Once the Dow gets beyond 25,000, gains may become more difficult to rationalize. The market will no longer be oversold and approaching the January 26 high (26,616.71) will have traders on their toes and the early departures feeling a little bit queasy, though, being early is not the same as being wrong.
Whether or not the machinations of the algorithms and AI computers will undo 100+ years of Dow theory remains to be seen.
BTW: Oil is going out of sight, again. That is not a good sign for a buoyant, expansive economy, but rather one that is tightening up and about to relapse into melancholy and the doldrums of stagflation.
For now, most of what's moving stocks is noise, and it is not very loud.
Dow Jones Industrial Average May Scorecard:
At the Close, Wednesday, May 9, 2018:
Dow Jones Industrial Average: 24,542.54, +182.33 (+0.75%)
NASDAQ: 7,339.91, +73.00 (+1.00%)
S&P 500: 2,697.79, +25.87 (+0.97%)
NYSE Composite: 12,632.53, +112.29 (+0.90%)
Hardly a notable event, it overshadowed two days (5/3 and 5/8) in which the general averages barely budged at all.
In a market that is supposed to be highly volatile, what are flat sessions doing in there? They are showing something which many may have missed: the volatility from February and March certainly waned in April and is is petering out in May, with the VIX standing at a 16-handle presently.
This being a highly fluid situation, and one in which there remains the narrative of "recovery" or "expansion" getting people to sell their stocks isn't going to be an easy deal, thus, the zig-zag patterning of the past six weeks may maintain for a few weeks or months more before there's a true selloff.
About two weeks ago, Money Daily was of the opinion that the next rally (the one we're currently experiencing) should be good for 1000 points on the Dow. We're not even half way there, so more upside, complete with unicorns and rainbows are to be expected in the near term.
Once the Dow gets beyond 25,000, gains may become more difficult to rationalize. The market will no longer be oversold and approaching the January 26 high (26,616.71) will have traders on their toes and the early departures feeling a little bit queasy, though, being early is not the same as being wrong.
Whether or not the machinations of the algorithms and AI computers will undo 100+ years of Dow theory remains to be seen.
BTW: Oil is going out of sight, again. That is not a good sign for a buoyant, expansive economy, but rather one that is tightening up and about to relapse into melancholy and the doldrums of stagflation.
For now, most of what's moving stocks is noise, and it is not very loud.
Dow Jones Industrial Average May Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 5/1/18 | 24,099.05 | -64.10 | -64.10 |
| 5/2/18 | 23,924.98 | -174.07 | -238.17 |
| 5/3/18 | 23,930.15 | +5.17 | -233.00 |
| 5/4/18 | 24,262.51 | +332.36 | +99.36 |
| 5/7/18 | 24,357.32 | +94.81 | +194.17 |
| 5/8/18 | 24,360.21 | +2.89 | +197.06 |
| 5/9/18 | 24,542.54 | +182.33 | +379.39 |
At the Close, Wednesday, May 9, 2018:
Dow Jones Industrial Average: 24,542.54, +182.33 (+0.75%)
NASDAQ: 7,339.91, +73.00 (+1.00%)
S&P 500: 2,697.79, +25.87 (+0.97%)
NYSE Composite: 12,632.53, +112.29 (+0.90%)
Sunday, February 25, 2018
Stocks Stage Strong Rebound To Finish Week Green
While volatility has subsided for the time being, so also has volume, down significantly since the crash-like VIX episode at the beginning of the month. Some may be taking the view that gains on the Dow and other indices are positive, regardless of volume, but the number of shares bought since the early February wash-out are far below those sold during that earlier episode.
Market breadth - gainers versus losers - along with a track of new highs and lows - will continue to help determine short-term direction in the market. Friday's positive close brought the Dow back beyond the 50% Fibonacci retracement though gains for the week were rather modest.
Interest rates remain elevated as compared to a month ago and a year ago, and bond yields will also go a long way toward determining trader conviction. The Dow is the index to watch most closely, because all of the stocks comprising the industrial average pay dividends, some of them at or better than current 10-year treasury yields.
The confounding factor of rising rates and falling stock prices is that dividend yields actually rise in the short term, but that may be seen as a false hope indicator. If companies are not only losing value to stockholders, the real possibility of declining earnings could also erupt into slashing of dividends as companies scramble to horde or save cash.
Considering the massive size of stock repurchases in recent years, the scenario exists that companies could find themselves in a real bind, forced to sell shares back to the public at lower prices than at which they were repurchased, causing an erosion in earnings and a potentially vicious negative feedback loop.
The most savvy investors will be looking for companies which have repurchased inordinate amounts of their own shares and are therefore exposed to a wicked downward price spiral.
If bond yields stabilize at or near current levels (below three percent on the 10-year-note) such a condition will not appear, but stabilizing yields in an environment in which the Fed has telegraphed its intention to raise the federal funds rate and sell (form $20 to $60 billion a month this year) into the market at the same time should - in an ideal, actual free market - cause yields to continue climbing.
Stocks may be nearing a dangerous Rubicon, whereas buyers of bonds should experience bargain prices and healthier yields going forward.
Dow Jones Industrial Average February Scorecard:
At the Close, Friday, February 23, 2018:
Dow Jones Industrial Average: 25,309.99, +347.51 (+1.39%)
NASDAQ: 7,337.39, +127.31, (+1.77%)
S&P 500: 2,747.30, +43.34 (+1.60%)
NYSE Composite: 12,884.11, +172.36 (+1.36%)
For the Week:
Dow: +90.61 (+0.36%)
NASDAQ: +97.93 (+1.35%)
S&P 500: +15.08 (+0.55%)
NYSE Composite: +9.75 (+0.08%)
Market breadth - gainers versus losers - along with a track of new highs and lows - will continue to help determine short-term direction in the market. Friday's positive close brought the Dow back beyond the 50% Fibonacci retracement though gains for the week were rather modest.
Interest rates remain elevated as compared to a month ago and a year ago, and bond yields will also go a long way toward determining trader conviction. The Dow is the index to watch most closely, because all of the stocks comprising the industrial average pay dividends, some of them at or better than current 10-year treasury yields.
The confounding factor of rising rates and falling stock prices is that dividend yields actually rise in the short term, but that may be seen as a false hope indicator. If companies are not only losing value to stockholders, the real possibility of declining earnings could also erupt into slashing of dividends as companies scramble to horde or save cash.
Considering the massive size of stock repurchases in recent years, the scenario exists that companies could find themselves in a real bind, forced to sell shares back to the public at lower prices than at which they were repurchased, causing an erosion in earnings and a potentially vicious negative feedback loop.
The most savvy investors will be looking for companies which have repurchased inordinate amounts of their own shares and are therefore exposed to a wicked downward price spiral.
If bond yields stabilize at or near current levels (below three percent on the 10-year-note) such a condition will not appear, but stabilizing yields in an environment in which the Fed has telegraphed its intention to raise the federal funds rate and sell (form $20 to $60 billion a month this year) into the market at the same time should - in an ideal, actual free market - cause yields to continue climbing.
Stocks may be nearing a dangerous Rubicon, whereas buyers of bonds should experience bargain prices and healthier yields going forward.
Dow Jones Industrial Average February Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 2/1/18 | 26,186.71 | +37.32 | +37.32 |
| 2/2/18 | 25,520.96 | -665.75 | -628.43 |
| 2/5/18 | 24,345.75 | -1,175.21 | -1,803.64 |
| 2/6/18 | 24,912.77 | +567.02 | -1,236.62 |
| 2/7/18 | 24,893.35 | -19.42 | -1,256.04 |
| 2/8/18 | 23,860.46 | -1,032.89 | -2288.93 |
| 2/9/18 | 24,190.90 | +330.44 | -1958.49 |
| 2/12/18 | 24,601.27 | +410.37 | -1548.12 |
| 2/13/18 | 24,640.45 | +39.18 | -1508.94 |
| 2/14/18 | 24,893.49 | +253.04 | -1255.90 |
| 2/15/18 | 25,200.37 | +306.88 | -949.02 |
| 2/16/18 | 25,219.38 | +19.01 | -930.01 |
| 2/20/18 | 24,964.75 | -254.63 | -1184.64 |
| 2/21/18 | 24,797.78 | -166.97 | -1351.61 |
| 2/22/18 | 24,962.48 | +164.70 | -1186.91 |
| 2/23/18 | 25,309.99 | +347.51 | -839.40 |
At the Close, Friday, February 23, 2018:
Dow Jones Industrial Average: 25,309.99, +347.51 (+1.39%)
NASDAQ: 7,337.39, +127.31, (+1.77%)
S&P 500: 2,747.30, +43.34 (+1.60%)
NYSE Composite: 12,884.11, +172.36 (+1.36%)
For the Week:
Dow: +90.61 (+0.36%)
NASDAQ: +97.93 (+1.35%)
S&P 500: +15.08 (+0.55%)
NYSE Composite: +9.75 (+0.08%)
Tuesday, January 30, 2018
Wall Street's Monday Blood-Letting Leads to Global Calamity in Equities
US equity markets were roiled Monday as the dollar jumped and bonds sold off, pushing yields higher, especially on the short end of the curve.
The two-year treasury finished the day at 2.09%, the five at 2.47%, and the benchmark ten-year note briefly touched 2.70% before dipping back to 2.68%. For perspective, consider that the five-year treasury was yielding 2.19% and the ten-year, 2.39, just a month ago. Those are significant moves and, apparently, the stock market has now taken notice as fixed investments begin offering yields competitive with stock dividends, at least.
For more perspective, the S&P and Dow averages suffered their worst one-day drops since early September. The percentage was just two-thirds of a percent on both indices. That shows just how decisive the rally since the election of Donald J. Trump as president has been. There has not been on single-day one percent decline on either in well over a year.
If a sea change in sentiment is occurring, Tuesday's trade could be a determinant day. Futures are pointing well lower and the VIX is cresting over 14 in the US, while global markets are a sea of red.
Japan's NIKKEI was down nearly 1.5%. The Hang Song was off over one percent. European bourses are uniformly lower at their midday.
As the nation prepares for President Trump's first State of the Union speech Tuesday night, more focus could be on internal DC politics, especially the readying for release of the troubling, explosive memo penned by the House Intelligence committee.
On Monday, the Intel committee voted along party lines to declassify the four-page missive. The president has five days to release the memo or keep it classified. Opinion and timing see Thursday as the likely eventual release.
With the FOMC set to keep rates unchanged on Wednesday (the meeting opens Tuesday), that may be the only thing that doesn't change this week.
At the Close, Monday, January 29, 2018:
Dow: 26,439.48, -177.23 (-0.67%)
NASDAQ: 7,466.51, -39.27 (-0.52%)
S&P 500: 2,853.53, -19.34 (-0.67%)
NYSE Composite: 13,524.65, -112.37 (-0.82%)
The two-year treasury finished the day at 2.09%, the five at 2.47%, and the benchmark ten-year note briefly touched 2.70% before dipping back to 2.68%. For perspective, consider that the five-year treasury was yielding 2.19% and the ten-year, 2.39, just a month ago. Those are significant moves and, apparently, the stock market has now taken notice as fixed investments begin offering yields competitive with stock dividends, at least.
For more perspective, the S&P and Dow averages suffered their worst one-day drops since early September. The percentage was just two-thirds of a percent on both indices. That shows just how decisive the rally since the election of Donald J. Trump as president has been. There has not been on single-day one percent decline on either in well over a year.
If a sea change in sentiment is occurring, Tuesday's trade could be a determinant day. Futures are pointing well lower and the VIX is cresting over 14 in the US, while global markets are a sea of red.
Japan's NIKKEI was down nearly 1.5%. The Hang Song was off over one percent. European bourses are uniformly lower at their midday.
As the nation prepares for President Trump's first State of the Union speech Tuesday night, more focus could be on internal DC politics, especially the readying for release of the troubling, explosive memo penned by the House Intelligence committee.
On Monday, the Intel committee voted along party lines to declassify the four-page missive. The president has five days to release the memo or keep it classified. Opinion and timing see Thursday as the likely eventual release.
With the FOMC set to keep rates unchanged on Wednesday (the meeting opens Tuesday), that may be the only thing that doesn't change this week.
At the Close, Monday, January 29, 2018:
Dow: 26,439.48, -177.23 (-0.67%)
NASDAQ: 7,466.51, -39.27 (-0.52%)
S&P 500: 2,853.53, -19.34 (-0.67%)
NYSE Composite: 13,524.65, -112.37 (-0.82%)
Monday, March 28, 2016
Provable Nixed Markets: VIX or Natural Gas, Take Your Pick
Noting that markets are in a near-trance module of late (thank you, Janet Yellen and central bankers everywhere), it has occurred to financial followers that possibly one could track the big movers of the day in an effort to ferret out any semblance of a pattern in the current conundrum.
With that, taken from the list below are the (un)usual suspects, the venerable VIX, which moved up by 3.39% on the session, and natty natural gas, ahead by 2.71%.
Actually, these moves tells nobody nothing (or, perhaps, everybody everything they need to know), since the VIX, a supposed measure of volatility, moved in such a manner as to suggest, well, volatility, when none existed.
As for natural gas, the price alone dictates large moves in percentage terms. With the price generally below two dollars for the past two years, a twenty-cent move is automatically good for 10%. Thus, today's gain of 2.71% was the result of a price move of roughly five cents. So, just because it is expected to be a little cooler than normal in Nashua, NH, next week, it does not automatically imply that the price of natural gas will be necessarily higher, nor does it mean that the price will stay there for any reasonable expectation of time.
Thus, the discovery du jour isn't so much based on any magic or even logical formula, but simple understanding of markets and central bank control through various proxies: markets are in a semi-permanent state of broken, and there's little any concerted effort by any group of individuals, investors, or fund managers can do about it. A volatility index moves when there is no volatility present, and a five-cent move in the price of natural gas won't set the commodity world afire.
In just a few words, these are not real markets, and you only need to have your eyes open to realize that.
Today's Laughable, Lamentable Louse:
S&P 500: 2,037.05, +1.11 (0.05%)
Dow: 17,535.39, +19.66 (0.11%)
NASDAQ: 4,766.79, -6.72 (0.14%)
Crude Oil 39.39 -0.18% Gold 1,220.10 -0.12% EUR/USD 1.1196 +0.28% 10-Yr Bond 1.87 -1.58% Corn 371.25 +0.34% Copper 2.24 +0.63% Silver 15.20 +0.01% Natural Gas 1.93 +2.71% Russell 2000 1,080.23 +0.06% VIX 15.24 +3.39% BATS 1000 20,682.61 0.00% GBP/USD 1.4255 +0.92% USD/JPY 113.3830 +0.08%
With that, taken from the list below are the (un)usual suspects, the venerable VIX, which moved up by 3.39% on the session, and natty natural gas, ahead by 2.71%.
Actually, these moves tells nobody nothing (or, perhaps, everybody everything they need to know), since the VIX, a supposed measure of volatility, moved in such a manner as to suggest, well, volatility, when none existed.
As for natural gas, the price alone dictates large moves in percentage terms. With the price generally below two dollars for the past two years, a twenty-cent move is automatically good for 10%. Thus, today's gain of 2.71% was the result of a price move of roughly five cents. So, just because it is expected to be a little cooler than normal in Nashua, NH, next week, it does not automatically imply that the price of natural gas will be necessarily higher, nor does it mean that the price will stay there for any reasonable expectation of time.
Thus, the discovery du jour isn't so much based on any magic or even logical formula, but simple understanding of markets and central bank control through various proxies: markets are in a semi-permanent state of broken, and there's little any concerted effort by any group of individuals, investors, or fund managers can do about it. A volatility index moves when there is no volatility present, and a five-cent move in the price of natural gas won't set the commodity world afire.
In just a few words, these are not real markets, and you only need to have your eyes open to realize that.
Today's Laughable, Lamentable Louse:
S&P 500: 2,037.05, +1.11 (0.05%)
Dow: 17,535.39, +19.66 (0.11%)
NASDAQ: 4,766.79, -6.72 (0.14%)
Crude Oil 39.39 -0.18% Gold 1,220.10 -0.12% EUR/USD 1.1196 +0.28% 10-Yr Bond 1.87 -1.58% Corn 371.25 +0.34% Copper 2.24 +0.63% Silver 15.20 +0.01% Natural Gas 1.93 +2.71% Russell 2000 1,080.23 +0.06% VIX 15.24 +3.39% BATS 1000 20,682.61 0.00% GBP/USD 1.4255 +0.92% USD/JPY 113.3830 +0.08%
Tuesday, February 9, 2016
Stocks Finish Flat, But Internals Signal Something Is Seriously Wrong
US Stocks closed today marginally on the downside, though appearances can be deceiving, as there was outright catastrophe in Japan which spilled over into worried European markets.
With Chinese markets (including the SSE and Hang Seng) the Nikkei took a magnificent beating on Tuesday, losing 918 points, a 5.40% loss on the day, sending the main index of Japan further into bear market territory. Perhaps even more significant, the JCB 10-year note yield fell to a negative number, under ZERO, for the first time in history. This marks Japan and Switzerland as the only countries in the world with negative yields out to ten years, though other countries are rapidly approaching that benchmark, in particular, Germany.
European bourses all finished their session with losses of one percent or more, and, at the open in the US, the situation appeared dire, with Dow futures down more than 150 points. Stocks quickly gained traction, turned positive near midday, flirted with the unchanged line throughout the session until finally giving it up late in the day.
But, the story is not the minor loss the major indices took, but the skew of all manner of metrics toward the negative. Bond yields continued to collapse, with the ten-year down to 1.71%. The spread between the ten and two-year note compressed down to 1.04, something of a danger zone, as the two-year actually rose two bits, to yield 0.67%.
Bank stocks were unhappy spots, with Bank of America (BAC) closing at 12.20, a new 52-week and multi-year low.
Advancers were also far behind declining stocks by a margin of more than 2-to-1. Also of note, the number of new lows (NASDAQ and NYSE combined) dwarfed new highs, 812-70, with only six of those new highs on the Naz. The central planners at the central banks can pin their hats on the day as they successfully halted the manic rallies in silver and gold, for a day, anyway.
Additionally, oil was sent back well below the $30 mark, finishing in New York at $28.38 a barrel.
The VIX is also signaling more turbulence, hanging steadily in the mid-20s range.
The rout in stocks, however, like the gains for the metals, is far from over. Consensus view on Wall Street is still concerned, but not yet panicked. Stocks are still about 5-7% away from official bear market territory, though a few bad days could send the indices reeling in the wrong direction.
In a story by Bernard Condon (AP) about how much money companies have lost doing stock buybacks, we find that the stock buybacks which goosed the market and individual stocks higher over the past six to seven years has been nothing short of a colossal flop and threatens to become an even heavier weight stopped to the stock market.
What stock buybacks did accomplish was to allow executives to boost their companies' earnings without devoting capital to expansion, while at the same time justifying their extraordinary salaries and cashing out their outrageous stock options and/or bonuses.
Investors should be outraged, and righteously so, because these companies should have been either expanding their capital base or market share or distributing dividends to their shareholders. What these stock buyback kings have done is nothing short of a fiduciary failure, which in other industries would be cause for criminal indictments.
Of course, since this all occurred within the cozy regulatory environment that is Wall Street, nothing even close to that will happen. The executives who personally profited from corporate paper profits will walk away with their cash after hollowing out scores of once-healthy companies. It may turn out to be good overall, if a few of the giant multi-nationals like Wal-Mart, Yum Brands and ExxonMobil get cut down to more reasonable sizes and markets open up for more nimble - and honest - competitors.
Tuesday's Cracker-jack pot:
S&P 500: 1,852.21, -1.23 (0.07%)
Dow: 16,014.38, -12.67 (0.08%)
NASDAQ: 4,268.76, -14.99 (0.35%)
Crude Oil 28.38 -4.41% Gold 1,189.20 -0.73% EUR/USD 1.1294 +0.86% 10-Yr Bond 1.7290 -0.35% Corn 360.50 -0.48% Copper 2.04 -2.61% Silver 15.23 -1.30% Natural Gas 2.10 -2.01% Russell 2000 964.17 -0.53% VIX 26.71 +2.73% BATS 1000 20,030.11 -0.07% GBP/USD 1.4468 +0.29% USD/JPY 115.0020 -0.51%
With Chinese markets (including the SSE and Hang Seng) the Nikkei took a magnificent beating on Tuesday, losing 918 points, a 5.40% loss on the day, sending the main index of Japan further into bear market territory. Perhaps even more significant, the JCB 10-year note yield fell to a negative number, under ZERO, for the first time in history. This marks Japan and Switzerland as the only countries in the world with negative yields out to ten years, though other countries are rapidly approaching that benchmark, in particular, Germany.
European bourses all finished their session with losses of one percent or more, and, at the open in the US, the situation appeared dire, with Dow futures down more than 150 points. Stocks quickly gained traction, turned positive near midday, flirted with the unchanged line throughout the session until finally giving it up late in the day.
But, the story is not the minor loss the major indices took, but the skew of all manner of metrics toward the negative. Bond yields continued to collapse, with the ten-year down to 1.71%. The spread between the ten and two-year note compressed down to 1.04, something of a danger zone, as the two-year actually rose two bits, to yield 0.67%.
Bank stocks were unhappy spots, with Bank of America (BAC) closing at 12.20, a new 52-week and multi-year low.
Advancers were also far behind declining stocks by a margin of more than 2-to-1. Also of note, the number of new lows (NASDAQ and NYSE combined) dwarfed new highs, 812-70, with only six of those new highs on the Naz. The central planners at the central banks can pin their hats on the day as they successfully halted the manic rallies in silver and gold, for a day, anyway.
Additionally, oil was sent back well below the $30 mark, finishing in New York at $28.38 a barrel.
The VIX is also signaling more turbulence, hanging steadily in the mid-20s range.
The rout in stocks, however, like the gains for the metals, is far from over. Consensus view on Wall Street is still concerned, but not yet panicked. Stocks are still about 5-7% away from official bear market territory, though a few bad days could send the indices reeling in the wrong direction.
In a story by Bernard Condon (AP) about how much money companies have lost doing stock buybacks, we find that the stock buybacks which goosed the market and individual stocks higher over the past six to seven years has been nothing short of a colossal flop and threatens to become an even heavier weight stopped to the stock market.
What stock buybacks did accomplish was to allow executives to boost their companies' earnings without devoting capital to expansion, while at the same time justifying their extraordinary salaries and cashing out their outrageous stock options and/or bonuses.
Investors should be outraged, and righteously so, because these companies should have been either expanding their capital base or market share or distributing dividends to their shareholders. What these stock buyback kings have done is nothing short of a fiduciary failure, which in other industries would be cause for criminal indictments.
Of course, since this all occurred within the cozy regulatory environment that is Wall Street, nothing even close to that will happen. The executives who personally profited from corporate paper profits will walk away with their cash after hollowing out scores of once-healthy companies. It may turn out to be good overall, if a few of the giant multi-nationals like Wal-Mart, Yum Brands and ExxonMobil get cut down to more reasonable sizes and markets open up for more nimble - and honest - competitors.
Tuesday's Cracker-jack pot:
S&P 500: 1,852.21, -1.23 (0.07%)
Dow: 16,014.38, -12.67 (0.08%)
NASDAQ: 4,268.76, -14.99 (0.35%)
Crude Oil 28.38 -4.41% Gold 1,189.20 -0.73% EUR/USD 1.1294 +0.86% 10-Yr Bond 1.7290 -0.35% Corn 360.50 -0.48% Copper 2.04 -2.61% Silver 15.23 -1.30% Natural Gas 2.10 -2.01% Russell 2000 964.17 -0.53% VIX 26.71 +2.73% BATS 1000 20,030.11 -0.07% GBP/USD 1.4468 +0.29% USD/JPY 115.0020 -0.51%
Monday, February 3, 2014
Wall Street Has a Problem, So Everybody Will Suffer; Stocks Smashed on Yellen's 1st Day
Fed Chairwoman, Janet Yellen, is just about to head home from her first day as head of the US Federal Reserve System. Judging by what happened on Wall Street, she's probably not going to cook herself a wholesome meal, but rather will order out, Chinese the most likely choice.
Stocks went absolutely South on the first day of February, largely in response to the Fed's decision to continue their asset purchase tapering, but moreso on US and China economic weakness.
China's PMI for January edged down to 50.5, the lowest level in six months, not exactly the kind of news Ms. Yellen was seeking. Making matters worse for the new Fed head, US ISM fell from 56.5 to 51.3, sending stocks, already down on the session, into a tailspin after their release at 10:00 am ET.
The lethal combination of the Fed cutting back on bond purchases, in the face of weakening data from the world's two largest economies, set the stage for a massive selloff on Wall Street and a flight to the safety of US treasury bonds, which closed at their lowest yield level - on the benchmark 10-year note - in three months.
The carnage on Wall Street was not isolated to just today, however. Stocks have been performing poorly all year, and the level of fear is perceptibly rising, with the Dow, NASDAQ and S&P 500 all closing down more than 2%, after the Nikkei fell 295 points and officially into a correction, down 10% off the recent highs.
The losses on Wall Street were monumental. For the Dow, it was the worst start to a month since 1982; for the NASDAQ, the losses were the worst since the inception of the index (1972).
Auto sales were down for January, with weather blamed for sluggish sales. Bond funds saw 20-30 time normal volume of inflows. The VIX has gone from the mid-12s to over 21 in a month, a 70%-plus rise in risk perception. Not only were stocks down, but volume was large, and has been throughout the slide which began in January.
The reaction in bond markets - sending the 10-year down to a yield of 2.58% - was perfectly rational. As risk assets (stocks) deteriorate, safety is sought, and there's nothing safer than US treasuries, or, maybe, German bunds, also lower during the past month and today.
Looking forward, Ms. Yellen should have expected this, or worse. After all, history tells us that all new Fed chairs inherit crises. as did Volker, Greenspan and Bernanke before her. Surely, the shared wisdom of decades of Federal Reserve actions will guide Ms. Yellen to a logical solution, stopping the slide in stocks while keeping the US economy growing.
Or will it?
Yellen is trapped. QE tapering is already the de facto standard policy. To reverse it would be to admit defeat, and possibly undermine any confidence left in the institution of the Federal Reserve, which, admittedly, isn't much. The true solution is for the Fed to stand back, watch the markets deteriorate, witness the destruction of the US and global economy over the near term and hope that people, individuals and businesses, will have enough of their wits remaining to muddle through a few years of truly hard times.
The Fed has no choice. Interest rates are already at zero and QE has had limited effect. It's time for the Fed to turn its back on the economy and the markets and let chips fall where they may. Any other action will only result in more asset dislocations, of which there are already too many.
For those of us who are not heavily invested in stocks (that leaves out anybody depending upon a pension, either now or in the future), SHORT AT WILL. This downward thrust will eventually manifest itself into a correction (the Dow is less than 500 points from it) and, by May or June or July, at the latest, a fully-blown bear market.
Bull markets do not last forever, and this current bull, which began in March, 2009, has reached its end. If proof is needed, check the highs on the indices from December and see how long it takes to get back to those levels. A reasonable guess, at this juncture, would be seven to ten years, maybe as long as 20.
The globalization experiment, as it always does, is failing. Economies must begin to fend for themselves and become more localized. Faith in Wall Street, which took a severe blow in 2008-09, will lose all credibility in coming months. Already, there are hordes of individuals who do not trust the wizards of Wall Street, as it was in the 1930s, during the Great Depression.
Wall Street will not respond well. Stocks will fall. Bond yields and mortgages will be even lower than in recent years. While those who have bought into the system - government employees, pensioners of many stripes, plain idiots and "investors" - will suffer, the prudent, the goldbugs, silverbugs and savers will eventually be rewarded for their patience and their frugality.
Put one's faith not in the data and derivatives of Wall Street, but in the strength of individuals, work ethic and survivability. That's a trade which has stood the test of time.
Note to Dan K (who may or may not be interested), and Adam Smith theorists, corn was up 0.40% today; silver gained 1.51%. Deflation.
DOW 15,372.80, -326.05 (-2.08%)
NASDAQ 3,996.96, -106.92 (-2.61%)
S&P 1,741.89, -40.70 (-2.28%)
10-Yr Note 101.48, +1.21 (+1.21%) Yield: 2.58%
NASDAQ Volume 2.41 Bil
NYSE Volume 4.72 Bil
Combined NYSE & NASDAQ Advance - Decline: 839-4976 (extreme)
Combined NYSE & NASDAQ New highs - New lows: 83-197 (trending)
WTI crude oil: 96.43, -1.06
Gold: 1,259.90, +20.10
Silver: 19.41, +0.289
Corn: 435.75, +1.75
Stocks went absolutely South on the first day of February, largely in response to the Fed's decision to continue their asset purchase tapering, but moreso on US and China economic weakness.
China's PMI for January edged down to 50.5, the lowest level in six months, not exactly the kind of news Ms. Yellen was seeking. Making matters worse for the new Fed head, US ISM fell from 56.5 to 51.3, sending stocks, already down on the session, into a tailspin after their release at 10:00 am ET.
The lethal combination of the Fed cutting back on bond purchases, in the face of weakening data from the world's two largest economies, set the stage for a massive selloff on Wall Street and a flight to the safety of US treasury bonds, which closed at their lowest yield level - on the benchmark 10-year note - in three months.
The carnage on Wall Street was not isolated to just today, however. Stocks have been performing poorly all year, and the level of fear is perceptibly rising, with the Dow, NASDAQ and S&P 500 all closing down more than 2%, after the Nikkei fell 295 points and officially into a correction, down 10% off the recent highs.
The losses on Wall Street were monumental. For the Dow, it was the worst start to a month since 1982; for the NASDAQ, the losses were the worst since the inception of the index (1972).
Auto sales were down for January, with weather blamed for sluggish sales. Bond funds saw 20-30 time normal volume of inflows. The VIX has gone from the mid-12s to over 21 in a month, a 70%-plus rise in risk perception. Not only were stocks down, but volume was large, and has been throughout the slide which began in January.
The reaction in bond markets - sending the 10-year down to a yield of 2.58% - was perfectly rational. As risk assets (stocks) deteriorate, safety is sought, and there's nothing safer than US treasuries, or, maybe, German bunds, also lower during the past month and today.
Looking forward, Ms. Yellen should have expected this, or worse. After all, history tells us that all new Fed chairs inherit crises. as did Volker, Greenspan and Bernanke before her. Surely, the shared wisdom of decades of Federal Reserve actions will guide Ms. Yellen to a logical solution, stopping the slide in stocks while keeping the US economy growing.
Or will it?
Yellen is trapped. QE tapering is already the de facto standard policy. To reverse it would be to admit defeat, and possibly undermine any confidence left in the institution of the Federal Reserve, which, admittedly, isn't much. The true solution is for the Fed to stand back, watch the markets deteriorate, witness the destruction of the US and global economy over the near term and hope that people, individuals and businesses, will have enough of their wits remaining to muddle through a few years of truly hard times.
The Fed has no choice. Interest rates are already at zero and QE has had limited effect. It's time for the Fed to turn its back on the economy and the markets and let chips fall where they may. Any other action will only result in more asset dislocations, of which there are already too many.
For those of us who are not heavily invested in stocks (that leaves out anybody depending upon a pension, either now or in the future), SHORT AT WILL. This downward thrust will eventually manifest itself into a correction (the Dow is less than 500 points from it) and, by May or June or July, at the latest, a fully-blown bear market.
Bull markets do not last forever, and this current bull, which began in March, 2009, has reached its end. If proof is needed, check the highs on the indices from December and see how long it takes to get back to those levels. A reasonable guess, at this juncture, would be seven to ten years, maybe as long as 20.
The globalization experiment, as it always does, is failing. Economies must begin to fend for themselves and become more localized. Faith in Wall Street, which took a severe blow in 2008-09, will lose all credibility in coming months. Already, there are hordes of individuals who do not trust the wizards of Wall Street, as it was in the 1930s, during the Great Depression.
Wall Street will not respond well. Stocks will fall. Bond yields and mortgages will be even lower than in recent years. While those who have bought into the system - government employees, pensioners of many stripes, plain idiots and "investors" - will suffer, the prudent, the goldbugs, silverbugs and savers will eventually be rewarded for their patience and their frugality.
Put one's faith not in the data and derivatives of Wall Street, but in the strength of individuals, work ethic and survivability. That's a trade which has stood the test of time.
Note to Dan K (who may or may not be interested), and Adam Smith theorists, corn was up 0.40% today; silver gained 1.51%. Deflation.
DOW 15,372.80, -326.05 (-2.08%)
NASDAQ 3,996.96, -106.92 (-2.61%)
S&P 1,741.89, -40.70 (-2.28%)
10-Yr Note 101.48, +1.21 (+1.21%) Yield: 2.58%
NASDAQ Volume 2.41 Bil
NYSE Volume 4.72 Bil
Combined NYSE & NASDAQ Advance - Decline: 839-4976 (extreme)
Combined NYSE & NASDAQ New highs - New lows: 83-197 (trending)
WTI crude oil: 96.43, -1.06
Gold: 1,259.90, +20.10
Silver: 19.41, +0.289
Corn: 435.75, +1.75
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