Monday, March 1, 2010

March Comes in Like a Lion

Following weeks of seemingly-relentless snowstorms and market turmoil, investors looked forward (maybe) to new gains with the coming of Spring - now just 19 days away.

The NASDAQ was the clear winner on the day, breaking loose from its moorings at the 50-day moving average and powering ahead for a return of better than 1.5%. The Dow was the laggard of the group, though it may be more indicative of where stocks are really headed: nowhere fast. Both the Dow and S&P 500 indices are stuck at or near their 50-day moving averages in anticipation of Friday's key non farm payroll report for February.

Overall, market conditions are vastly improved from a year ago, though the overhang of debt - federal, state, Greek, household and otherwise - still remains prominent on investor minds. The question remains whether the recovery is actually providing progress or is still a mirage, a house of debt cards that eventually must tumble. Most investors - for today, at least - see the glass as half full. A positive employment report would likely send stocks through the recent January highs, setting off even more speculative market play. The chances for such an event seem very good, given the government's recent effort to manage both expectations and the massaging of key data.

Current expectations are for job losses in February to maintain their level of between 20 and 50,000, which would actually be not very good news, so the government and Wall Street could tag-team to new levels if the data can show an actual increase in the number of people working for a living in the USA. We'll all know by Friday morning, but a good indicator will be ADP's private payroll report on Wednesday, also looking for a decline, albeit, a smaller one.

Meanwhile, cash remains king of all assets, especially with the US dollar continuing to gain versus most other currencies. While the US may have a bad cold, the rest of the world (especially Europe) is suffering from anything ranging from common flu to the bubonic plague.

Notwithstanding the NASDAQ, stocks may be hard-pressed to reach beyond levels seen on February 19, the last interim high, still overhead. Many stocks are approaching p/e levels usually reserved for hot tech stocks in early stages of growth. When stocks such as Home Depot are trading at 20 times earnings, there should be cause for caution and requisite concern. The markets are still at inflection points, and the general trend lower has not been broken.

That stocks may be stuck should come as no surprise after last year's spectacular run-up off the crash. We stand just 6 trading days away from the 1-year anniversary of the market bottom, a notable event.

Dow 10,403.79, +78.53 (0.76%)
NASDAQ 2,273.57, +35.31 (1.58%)
S&P 500 1,115.71, +11.22 (1.02%)
NYSE Composite 7,100.75, +65.71 (0.93%)

Advancers dominated declining issues by a margin of better than 3:1, with 5009 stocks higher and 1528 lower. There were 534 new highs, owing to the comparisons to last year, against just 48 new lows. Volume was very solid on the NASDAQ, but below average on the NYSE.

NYSE Volume 4,388,033,000
NASDAQ Volume 2,373,148,500

For a change, oil actually traded lower, down 90 cents, to $78.76. The metals remained about even, with gold losing 60 cents, to $1,118.30, and silver down 6 cents, at $16.46. More than a few analysts are calling for higher commodity prices, though the deflationists will stick to their guns, expressing the unpopular belief that prices of assets cannot rise in an environment dominated by deficits, debt and destruction of wealth, still ongoing.

Stock traders made the best of the day, though there really is still no major catalyst for another move higher. In fact, housing continues to stagger along, with construction spending falling for the third straight month, down 0.6% in January.

According to the Associated General Contractors of America, construction hit a 6-year low in 2009, led by huge declines in lodging, retail and office building. While not attempting to argue with the facts, private construction spending can actually get worse in 2010, as there are still no signs that the flagging economy is doing anything other than simply bumping along the bottom.

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