Showing posts with label ADP. Show all posts
Showing posts with label ADP. Show all posts

Wednesday, July 1, 2020

Credit World May Become A Battlefield If FICO and Square Butt Heads; Silver on the Move; ADP Fairy Tales

A couple of stories from the world of personal credit are noteworthy as the world enters the third quarter of 2020 hoping for improvement but fearing a repeat of the second quarter from the same enemy which ran roughshod over the world economy.

It's not the virus that people fear, but government response to it in terms of restricted mobility, business operations, and general closures of everything from schools and churches to bars and hair salons.

While the planet and government managers struggle with the virus and their chances in the upcoming US elections in November, credit issues are popping up like daffodils in Springtime. Huge numbers of Americans are foregoing rent and mortgage payments, citing unemployment as the main cause for a diminished cash flow, and delinquencies are piling up not only on mortgages (which are vitally important), but on car loans and leases, student debt, credit cards, and personal loans.

It's because of these issues, or perhaps in spite of them, that FICO (Fair Isaac Corporation) wants to rate your resilience and ability to pay back borrowed money in a recession or economic downturn. The company and its affiliate credit scorekeepers - Experian, TransUnion and Equifax - are looking back at credit histories from the GFC in 2007-09 for hints of riskiness in borrowers.

Their findings, which won't be relevant for at least a few more months, could affect how consumers are judged when applying for any kind of credit, from mortgages to car loans. If economic conditions remain below par, many people with poor resilience scores could find themselves out of luck getting credit.

Countering FICO's foray into past performance of borrowers, Chime continues to innovate in the banking and credit space with the launch of the Chime Credit Builder Visa Credit Card.

Actually a debit card that works like a credit card, users can transfer funds from a secure Chime account to a Visa card, and use that money to charge anything, including everyday items like food, gas, clothing or general expenses. The charges are paid by the card automatically, and the results reported to the credit bureaus. The goal is to improve credit scores for mainly younger folks, who favor debit cards over credit, but who need to establish or improve their credit history.

If it sounds like cheating, it very well may be. This is reporting of purchases made with essentially a debit card being reported as a credit card. The credit bureaus are likely to balk at this methodology. A clash between the old standard bureaus and the upstart Chime might make for some interesting developments in how credit and individual risk are measured down the road.

Tuesday's hands-down big winner was silver, which rocketed up by more than two percent in the futures space, vaulting over the psychologically-challenging $18 mark and holding around $18.20. Gold's little sister has a lot of catching up to do and if this price maintains, should signal that a run up to resistance in the $20-21 range is imminent. Correlated closely to the S&P index (for God only knows what reason), if stocks falter and silver holds or goes even higher, that would qualify as a major development. Keep eyes peeled on that space.

Stocks continued their rally from Monday into Tuesday, which was the final day of the month and of the second quarter, an important milestone, since GDP for the quarter - heavily affected by the coronavirus and state-by-state lockdowns and business closures - is expected to check in with a very negative number on a scale likely never seen before. Estimates for second quarter GDP range between -25% to -52%.

Current stock valuations seem to be suggesting that investors are leaning toward the upper end of that range. A decline of 30-35% might actually be seen as a positive for markets because it will be viewed as a one-off event followed by a rapid recovery, though the jury is still out on whether economic recovery will look like a "V", "W", or an "L".

Any view of the stock market indices over the past five months clearly show a "V" shape, with stocks declining and rising at the same frenetic pace. The recovery pattern for stocks can hardly be taken as definitive by any measure of economic activity. Stocks were skyrocketing off their lows as millions of people were losing their jobs, the government and Federal Reserve exercising emergency measures, and the general economy entering a recession.

A "W" pattern goes along with the "second wave" theory of the virus, already being engineered by increased testing and renewed calls for shutdowns, lockdowns, face masks, social distancing and all the assorted recommendations which were successful only in wrecking the Main Street small business economy.

The "L" pattern is the one most despised by money managers, banking executives, and financial central planners because it offers no realistic hope for the immediate future. The "L" concept implies that the economy falls and stays down for an extended period. Like just about everything else the experts at the biggest banks and financial institutions predict, contrarian view has the slow recovery "L" pattern front of mind and it is actually the most likely pattern - not for stocks or any other asset classes - for the general economy in terms of GDP, personal income, and employment.

Finally, queueing the start of the third quarter in the typical doublespeak manner, ADP's June Employment Report showed a gain of 2,369,000 jobs in the non-farm private sector. This follows a decline of 2,760,000 in May, with June just about covering all those job losses. ADP saw 19.5 million people lose their jobs in April, another 2.8 million lost jobs in May (which has now been revised to +3.065mm!). It's almost as if many of those 20 million people filing continuing unemployment claims don't exist, which is fine, since we're all living in bizarro-world now.

At the Close, Tuesday, June 30, 2020:
Dow: 25,812.88, +217.08 (+0.85%)
NASDAQ: 10,058.77, +184.61 (+1.87%)
S&P 500: 3,100.29, +47.05 (+1.54%)
NYSE: 11,893.78, +116.69 (+0.99%)

Wednesday, April 1, 2020

Dow, S&P Mark Worst 1st Quarters Ever; Stocks Poised for Lower Open; Gold, Silver Markets in Turmoil

Closing out the first quarter of 2020 with a whimper, stocks opened to the downside, briefly turned positive, but the minor rally quickly fell apart sending the main indices to a close near the lows of the day. On the session, the NASDAQ was the best performer of the majors, the Dow the worst, followed closely by the S&P 500.

Thanks to the Wuhan Flu, coronavirus, COVID-19 or whatever one wishes to call the pathogen making its way around the planet, stocks really took it on the chin to start off the year. The major averages were all lower, even after making all-time highs in mid-February.

It was the worst quarter for the S&P since 2008 and the poorest quarterly performance for the Dow Jones Industrials since 1987. Both the Dow and S&P suffered through their worst first quarter ever. The Dow lost more than 23% of its value in January through March, as the S&P 500 fell 20% in the quarter. The NASDAQ didn't set any records but lost more than 14% in the first quarter.

With supply chain issues affecting companies in February and the advance of the virus in March, there's a good chance that GDP has been so negatively affected through first quarter, growth figures may have a minus sign in front of them when the first estimate of GDP will be announced on the fourth Friday of April. Mark your calendars for April 24 to see if the US will be half way to a recession or barely hanging onto some remnant of growth, any of it likely having occurred in January and early February. Any positive number would uplift the markets, but that is still a long way off and first up are employment figures for March. Wednesday, ADP reports private payrolls for the month and Friday the BLS reports on non-farm payrolls for March. Friday's number ought to be a market mover considering the massive job losses over the past week which will be figured into the calculations.

Gold got clobbered again, losing $46.30 per ounce on the day, dipping from $1623.40 Monday to $1577.10 Tuesday. Silver lost eight cents, closing out at $13.92. These prices are for paper contracts on the COMEX and other futures markets and are not aligning with current physical market dynamics. Both gold and silver are in short supply and dealers worldwide are charging severe premiums and assigning minimum purchases in some cases. Silver generally can be had for $20 to $25 per ounce. Gold is selling at roughly the $1800 level, though delivery times are delayed with waiting times up to 45 days in some cases.

As the futures prices and physical market prices diverge and decouple, it's only a matter of time before the fraudulent practices of settling contracts in cash rather than metal at the COMEX will become common knowledge and an open scandal as buyers standing for physical delivery are denied their right. As the coronavirus panic and attendant market turmoil extends, expect precious metals to rise dramatically in price as true owners of the metal divorce themselves from the bogus futures market.

The same is already occurring in the oil market with Saudi Arabia offering steep discounts to the published prices. WTI price continues to trend around $20 per barrel with gas prices across the United States, Canada and throughout Europe (using the Brent crude standard) at multi-year lows.

Experiencing more flattening across the curve, the treasury complex saw yields rise at the short and long durations, with the belly (1-year through 7-year) flatlining. As was the case with equities, bonds were little moved on the day.

ADP announces March private payrolls at 8:15 am ET on Wednesday. Futures are nearing limit down heading toward the opening bell.

At the Close, Tuesday, March 31, 2020:
Dow Jones Industrial Average: 21,917.16, -410.32 (-1.84%)
NASDAQ: 7,700.10, -74.05 (-0.95%)
S&P 500: 2,584.59, -42.06 (-1.60%)
NYSE: 10,301.87, -132.88 (-1.27%)

Friday, January 10, 2020

January Effect In Force; US Adds 160,000 Jobs In December

Stocks rallied once again, with the Dow jones Industrials popping for a gain of over 200 points. The Dow closed higher for the fourth time in six 2020 sessions for a total rise of 418 points, or about 1.4%.

The Dow, S&P 500, and NASDAQ set new all-time highs on a closing basis, while the NYSE Composite index finished just shy of a record, ending the session at 13,997.65. The prior high of 14,001.13 was achieved on January 2. Any kind of positive return Friday should push the Composite into record territory.

Investors should get their "Dow 30,000" hats ready, because the world's most-watched stock index is about to surge beyond that number, quite possibly today right at the open after the Bureau of Labor Statistics (BLS) reported an additional 145,000 jobs created in December according to the just-released non-fram payroll report for December, 2019.

Even though there's some seasonality to the figures due to holiday hires and a fall-off after November's gains were boosted by striking GM workers returning to their jobs, the number is another sign of strength in the underlying US economy, now, more than ever, the main driver of global growth. As Europe struggles with deflationary trends, negative interest rates, and high unemployment (especially among youths), and China increasingly seems to be bowing to pressure on tariffs and trade from the US, America's clout has become paramount.

Among developed nations, the United States continues to set the agenda, as President Trump's "America First" strategy has emboldened employers and workers alike to share in the positivism of the current environment. While wage growth is still sluggish, job creation in the private sector continues strong. Wednesday's ADP private payroll report found 202,000 new jobs created in December.

While the 145,000 jobs in the non-farm payroll report did come in below estimates of 160,000, the miss was not significant. October was revised 4,000 lower, to 152,000, and payrolls in November were revised down 10,000 to 256,000.

Unemployment remained steady at 3.5%, as expected. By sector, retail and leisure/hospitality led the gains, with bricks and mortar stores adding 41,000 jobs while restaurants, hotels and such added 40,000. Health care was another gainer, picking up 28,000 jobs in December. Construction trades added 20,000 new positions, but manufacturing and transportation declined, by 12,000 and 10,000, respectively. For all of 2019, manufacturing added 46,000, while transportation gained 57,000.

Those two sectors are offering indications that the expansion may have run its course, or at least is slowing significantly. In 2018, manufacturing added 264,000 jobs, transportation gained 216,000. While those figures may cause some anxiety, they also can be interpreted as a sign that these segments of the economy are still integrating the additional employees and that this period is merely a lull, following a robust hiring round.

Overall, despite the small miss and reductions from prior months, the report still comes in as positive for the US economy. Perhaps not the robust growth expected by the most bullish, but stable hiring is a sign that, in such a mature economy, nothing troubling lies directly ahead.

The jobs report was good enough to keep the rally humming along. The major indices should continue their path through record highs for time being.

At the Close, Thursday, January 9, 2020:
Dow Jones Industrial Average: 28,956.90, +211.81 (+0.74%)
NASDAQ: 9,203.43, +74.18 (+0.81%)
S&P 500: 3,274.70, +21.65 (+0.67%)
NYSE Composite: 13,997.65, +63.21 (+0.45%)

Thursday, December 5, 2019

Stocks Reverse Course, But Do Not Recover Recent Losses; ADP Jobs Misses Target

After three days of losses, stocks bounced back on Wednesday, though they did not recover all of the ground lost.

Since the close Wednesday prior to Thanksgiving, the Dow is down over 500 points, the NASDAQ has shed 140 points, and the S&P 500 is off 40 points. The bounce on Wednesday, December 4, recovered less than half of the recent declines. Though the losses are nothing serious in the larger scheme of things, they are signaling that at least some of the investment community are not convinced the US economy, or US corporations, are in the best of ways. Thus, profits are being taken off the table. Further declines will feed into more year-end profit-taking and further loss prevention.

Recent movement in bonds also suggests that a countertrend is developing, with money shifting from risk assets into the bond market, where returns are low but widely accepted as safer than stocks. When money flows out of dividend-producing equities into treasuries or corporate debt, it's a sure sign that investors are nervous about the future direction. Last December witnessed massive declines, bordering on sending the stock market into bearish conditions, though at decline was stopped short by Treasury Secretary Steven Mnuchin, whose message to the President's Working Group on Financial Markets (AKA the Plunge Protection Team, or PPT) was clearly designed to rescue the stock market from rampant year-end selling.

Actions taken by the Working Group served to stem the tide of sellers and produce robust gains though the better part of 2019. With the year nearing an end, stocks are once again close to all-time highs, though recent data does not support such lofty valuations. From ISM manufacturing coming in below expectations, to Wednesday's ADP private sector jobs report for November, which reported an increase of just 67,000 jobs. The payroll number was well below the expected 150,000, and was the slowest growth since May.

Analysts are warning that the ADP number may be in stark contrast to what the BLS reports in Friday's non-farm payroll data, because the ADP report did not include General Motors workers returning from strike, whereas the BLS data will include those returning workers as "jobs added." The non-farm report for November is expected to show job gains in the range of 180,000 to 187,000 on Friday, up from 128,000 in October.

It makes reading the tea leaves of market sentiment and data just a little more confusing than it already is, given the daily up-and-down movements prompted by the changing signals regarding a US trade deal with China. The trade war has been and will continue to be the main directional driver of the stock market, probably for longer than most people would entertain. The Chinese appear intent on waiting out President Trump until the 2016 election in November, and it also appears that mr. Trump is fine with that.

A non-deal on trade can only cause more consternation for investors wishing to get a real perspective on the macro side of things, though one doesn't have to look far to see that global trade has been and continues to slip and slide away. Overall, global conditions are not suitable to induce a stock market rally, though they are also not severe enough to cause a crash. A slow grind down may be the path of least resistance, with days and weeks of gains and losses speckling the index charts.

At the Close, Wednesday, December 4, 2019:
Dow Jones Industrial Average: 27,649.78, +146.97 (+0.53%)
NASDAQ: 8,566.67, +46.03 (+0.54%)
S&P 500: 3,112.76, +19.56 (+0.63%)
NYSE Composite: 13,457.97, +91.88 (+0.69%)

Thursday, November 1, 2018

October Ends With Gains, But Still Marks Worst Month Of 2018 For Stocks

There was no spooking investors on the last day of October. Instead, stock buyers were treated to steady gains, especially on the beaten-down NASDAQ.

The gains from Tuesday and Wednesday took all the indices away fro the dreaded 10% correction space, though the NASDAQ is still hovering dangerously close, a mere 25 points atop the minus ten percent level (7281.20).

What didn't move much was the Dow Jones Transportation Index, up a mere 15 points and still down 12% from recent highs.

Even with the winnings of the last two sessions, October still turned out to be the worst month of the year for the Dow, which ended down some 1341.55 from the September 28 closing price. That topped the losses from February (-1120.19) and March (-926.09). The October declines left the Dow up just one percent on the year.

With the traditionally bad month of October fading into memory, the market welcomes November and December, two of the better months for stocks. Immediately ahead is the non-farm payroll data for October due out prior to the opening bell on Friday and looking to beat expectations after ADP reported on Wednesday a gain of 227,000 jobs for the month.

Stocks remain under pressure, however, as the recent volatility spread from techs and financials to the rest of the market. There are still questions on valuation and forward guidance that are keeping investors on their toes.

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08
10/4/18 26,627.48 -200.91 +169.17
10/5/18 26,447.05 -180.43 -11.26
10/8/18 26,486.78 +39.73 +28.47
10/9/18 26,430.57 -56.21 -27.74
10/10/18 25,598.74 -831.83 -859.57
10/11/18 25,052.83 -545.91 -1,405.48
10/12/18 25,339.99 +287.16 -1,118.32
10/15/18 25,250.55 -89.44 -1,207.76
10/16/18 25,798.42 +547.87 -659.89
10/17/18 25,706.68 -91.74 -751.63
10/18/18 25,379.45 -327.23 -1,078.86
10/19/18 25,444.34 +64.89 -1,013.97
10/22/18 25,317.41 -126.93 -1,140.90
10/23/18 25,191.43 -125.98 -1,265.88
10/24/18 24,583.42 -608.01 -1,873.89
10/25/18 24,984.55 +401.13 -1,472.76
10/26/18 24,688.31 -296.24 -1,769.00
10/29/18 24,442.92 -245.39 -2,014.39
10/30/18 24,874.64 +431.72 -1582.67
10/31/18 25,115.76 +241.12 -1341.55

At the Close, Wednesday, October 31, 2018:
Dow Jones Industrial Average: 25,115.76, +241.12 (+0.97%)
NASDAQ: 7,305.90, +144.25 (+2.01%)
S&P 500: 2,711.74, +29.11 (+1.09%)
NYSE Composite: 12,208.06, +78.12 (+0.64%)

Wednesday, October 31, 2018

Dip-Buyers Step In, Send Stocks Soaring; ADP, Non-Farm Payrolls On Tap

Nothing says bear market like wild rallies from out of the blue and Tuesday's late afternoon jacking of stocks was right out of the market maker's textbook with buy the dip the mantra of the day.

At 1:30 pm ET, the Dow Industrials were up a mere 40 points, but bargain hunters stepped up their games, frantically buying up shares at reduced prices. The result was a big rise in all of the indices with the Dow leading the way higher.

Even though stocks avoided falling into official correction, at the end of the day the major indices were still well off their all-time highs, with the Dow nearly 2000 points lower than its close on October 3rd (26,828.39).

The day's action was similar to rallies on the 16th and 25th, when the Dow gained 547.87 and 401.13, respectively, only to meet larger declines in the days ahead.

What should buoy markets for the time being are a pair of employment reports, the first by ADP on Wednesday morning tracking private payrolls, followed by Friday's non-farm payroll data from the Bureau of Labor Statistics (BLS). Both are predicted to show job gains approaching 200,000 for October.

Another potential boost to markets could come from resumption of stock buybacks as the blackout period during earnings reports frees up shares to be repurchased by the companies that normally sell them to the public.

Analysts are calling the buybacks the backbone of the bull market, which begs the question of just how high a price are companies willing to pay for their own stock. While many in the investment community believe stock buybacks are good for companies and investors as they reduce the number of shares available and make earnings per share measurements easier to meet or beat, others point out that spending company money on own stock points up a paucity of creativity at the highest levels of corporate America as well as an unwillingness to expand a company's business.

In other words, if companies aren't interested in expansion of existing business or creation of new business units within the corporate structure, they must feel that their market penetration is fully saturated or that economic conditions are not conducive to growth.

Buybacks, in addition to massive injections of liquidity by the Fed has been the fluid of the nine-plus-year expansion. What is concerning to long-term investors is what happens when the well runs dry.

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08
10/4/18 26,627.48 -200.91 +169.17
10/5/18 26,447.05 -180.43 -11.26
10/8/18 26,486.78 +39.73 +28.47
10/9/18 26,430.57 -56.21 -27.74
10/10/18 25,598.74 -831.83 -859.57
10/11/18 25,052.83 -545.91 -1,405.48
10/12/18 25,339.99 +287.16 -1,118.32
10/15/18 25,250.55 -89.44 -1,207.76
10/16/18 25,798.42 +547.87 -659.89
10/17/18 25,706.68 -91.74 -751.63
10/18/18 25,379.45 -327.23 -1,078.86
10/19/18 25,444.34 +64.89 -1,013.97
10/22/18 25,317.41 -126.93 -1,140.90
10/23/18 25,191.43 -125.98 -1,265.88
10/24/18 24,583.42 -608.01 -1,873.89
10/25/18 24,984.55 +401.13 -1,472.76
10/26/18 24,688.31 -296.24 -1,769.00
10/29/18 24,442.92 -245.39 -2,014.39
10/30/18 24,874.64 +431.72 -1,582.67

At the Close, Tuesday, October 30, 2018:
Dow Jones Industrial Average: 24,874.64, +431.72 (+1.77%)
NASDAQ: 7,161.65, +111.36 (+1.58%)
S&P 500: 2,682.63, +41.38 (+1.57%)
NYSE Composite: 12,129.94, +187.42 (+1.57%)

Thursday, May 31, 2018

Going Nowhere Fast: Stock Churning a Wall Street Tool; Buy the Dip, Sell the Rip

Denial is NOT a river in Egypt, but, those who wish to traverse their world wearing blinders, colored glasses or even virtual reality goggles have been observed in the general vicinity of Wall and Broad Streets in lower Manhattan and their numbers are growing.

Stocks staged a strong dead cat bounce rally after three straight days of losses, the largest being Tuesday's nearly 400-point loss on the Dow Industrials that had the world shaking on stories of disunity and anti-EU behavior coming out of Italy.

Of course, in the United States, Italy, despite being the world's ninth largest economy (hard to imagine that) is taken as something of an outlier, as in "not our problem," so stocks were sent skyward by idle speculators, offsetting the mechanical smart money distribution that has been a feature of the markets since late January.

Just in case the recovery narrative is not taken seriously, the stock jockeys still have plenty of equities to alternatively pump, dump or hold, depending on the circumstance of the day. The bulls are attempting to extend the long bull market to ten years when in fact it ended - almost to the day - at nine years and one month, on April 9, 2018.

Since then, the Dow (and largely the other major averages) have travelled in a pretty tight range. On April 9, the Dow closed at 23,979.10, going as low since then to 23,924.98 (May 2) and as high as 25,013.29 (May 21). That 1088 point range (roughly 4%) has persisted for some seven weeks and shows no sign of breaking out anytime soon.

With May looking like a good bet to produce positive returns in the range of 300-650 points (Thursday is the final trading day of the month), the players in this Broadway-stlyed farce should be patting each others backs vigorously for a job well done, the losses of February and March now overshadowed by the plus signs for April and May.

All the bad stuff - like Wednesday's lowered first quarter GDP estimate to 2.2% from 2.3% or the weak ADP payroll report (178,000 May jobs) is, according to the churning crowd, behind us and it's roses and unicorns from here to eternity.

Naturally, anyone with a handful of functioning brain cells knows that the government and media are conspiring to deliver all manner of propaganda - from Russian collusion and election interference to "tight" employment conditions when 93 million Americans do not work for a living - so any mention of good times should probably not be taken too seriously.

The truth is somewhere in between what the government and media spoon-feed and wha tone sees and hears with one's own eyes and ears. The economy isn't great, nor is it about to collapse, though, admittedly, it's been 10 years since the last recession, so "bad times" are pretty much overdue. Unless one is conditioned to a Pavlovian reaction to headlines, such as the algorithms that drive market activity are, seeing the markets bouncing in a tight range should be cause for at least some caution, especially since that range is well below the last market high (26,616.71, Jan. 26).

The last trading day of the month shouldn't be anything notable as far as volatility is concerned, unless May's non-farm payroll numbers (due out Friday, June 1) are not pleasant and leaked. Even then, the rangebound Dow will remain.

And the deniers of a bear market will still be in denial.

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
5/10/18 24,739.53 +196.99 +576.38
5/11/18 24,831.17 +91.64 +668.02
5/14/18 24,899.41 +68.24 +736.26
5/15/18 24,706.41 -193.00 +543.26
5/16/18 24,768.93 +62.52 +605.78
5/17/18 24,713.98 -54.95 +550.73
5/18/18 24,715.09 +1.11 +551.84
5/21/18 25,013.29 +298.20 +850.04
5/22/18 24,834.41 -178.88 +671.16
5/23/18 24,886.81 +52.40 +723.56
5/24/18 24,811.76 -75.05 +648.51
5/25/18 24,753.09 -58.67 +589.84
5/29/18 24,361.45 -391.64 +198.20
5/30/18 24,667.78 +306.33 +504.53

At the Close, Wednesday, May 30, 2018:
Dow Jones Industrial Average: 24,667.78, +306.33 (+1.26%)
NASDAQ: 7,462.45, +65.86 (+0.89%)
S&P 500: 2,724.01, +34.15 (+1.27%)
NYSE Composite: 12,625.87, +183.18 (+1.47%)

Friday, January 5, 2018

Huge Miss on December Non-Farm Payrolls Won't Trigger Sell the News Event

Stocks ripped higher on Thursday on pure hope and fumes, in anticipation of Friday's BLS release of December non-farm payroll data.

As mentioned in yesterday's post, the market has set itself up for a "sell the news" event, having already bought the rumor in the form of an incredible 250,000 December private jobs gain from ADP.

Being a case of which numbers should be trusted, investors will probably accept the BLS, being that it is the "official" number, despite the wild swings, methodology and revisions for which the data set is so famous.

On Friday morning, the BLS announced a gain of a mere 148,000 net new jobs in December, on expectations of 190,000, the lowest print since July 2017. [full release here]

The unemployment rate remained moored at 4.1%, a rather humorous figure, given that the BLS counts part-time jobs and working more than one day a week as a "job."

As of this writing, roughly 15 minutes prior to the market open, stock futures are higher, but well off the levels seen earlier this morning.

The expectation for stocks to sell off throughout the session, given that valuations have been stretched to unsustainable levels, will likely not materialize since prognosis is as much the stuff of smoke and mirrors as the algo-driven market itself.

At the Close, Thursday, January 4, 2018:
Dow: 25,075.13, +152.45 (+0.61%)
NASDAQ: 7,077.91, +12.38 (+0.18%)
S&P 500: 2,723.99, +10.93 (+0.40%)
NYSE Composite: 13,028.46, +71.18 (+0.55%)

Thursday, January 4, 2018

Caution Thrown To (Bitter Cold) Wind, As Investors Ignore Tech and Weather Threats

Across the board gains were the order de jour on the second day of trading in the new year.

As on Tuesday, the NASDAQ outpaced the other major averages, continuing its meteoric rise beyond the 7,000 mark with tech stocks leading the way despite an admission from Intel (INTC) that their chips have a serious flaw, affecting nearly all chips made by the company over the past ten years.

The world's largest chipmaker was not immediately taken to the woodshed and whipped, though shares of the company were down more than three percent and are off another one-and-a-half percent in pre-market trading on Thursday.

Rival chipmaker, Advanced Micro Devices (AMD), was the main beneficiary of the Intel news, its stock advancing more than five percent on the day, though it appeared that AMD chips are also vulnerable, though not to the same extent nor by the same exploits as Intel chips.

While the immediate impact may be slim, the long-term repercussions of this revelation may be significant. The world's major chip manufacturers may be facing a black swan event once hackers devise attacks that could legitimately effect computers and servers worldwide, for years.

Traders were not on the defensive, however, as the lure of early gains overwhelmed any concerns for troubles ahead, such as the massive snowstorm and bitter cold that is expected to affect most of the Northeast in days ahead. The storm - being called a Bomb Cyclone - is primarily focused off the Eastern coast of mainland North America, though New York, New Jersey, and Massachusetts were making preparations for a major winter weather event which has already bettered Southern cities such as Charleston, SC, and Savannah, GA.

The apparent complacency of equity speculators is somewhat confounding, given the potential for severe disruptions from weather and technology in coming days.

On the other end of the asset spectrum, precious metals responded to a slight rise in the dollar index, blunting a strong run for gold and silver over the past three weeks, though the selling seemed to be transitory, with the metals recovering early on Thursday morning as the dollar fell to fresh lows (91.933).

On Thursday morning, prior to the opening bell on Wall Street, ADP private payroll data for December showed a massive 250,000 job gain for the final month of 2017. While the AMD numbers are preliminary and subject to revision, they are sending a strong signal in advance of Friday's BLS non-farm payroll dataset for December.

With caution being thrown largely to the (bitterly cold) wind, Friday and/or Monday could be a day of "selling the news," or, as has been the case for the past nine years, the stock market rally will not be impeded by facts nor insinuations of negativity.

At the Close, Wednesday, January 3, 2018:
Dow: 24,922.68, +98.67 (+0.40%)
NASDAQ: 7,065.53, +58.63 (+0.84%)
S&P 500: 2,713.06, +17.25 (+0.64%)
NYSE Composite: 12,957.28, +54.55 (+0.42%)

Thursday, October 5, 2017

With September Non-Farm Payroll Data On Deck, Stocks Post Record Highs

Even though ADP reported the weakest jobs numbers in 11 months Wednesday, investors shrugged off the data and limped higher, with all major indices closing at fresh all-time highs.

ADP private employment figures for September showed a gain of 135,000 jobs, with the most damage done to firms with less than 20 employees, which registered a loss of 11,000 jobs. The firm, which tracks private payrolls, was quick to point out that hurricanes Harvey and Irma accounted for 50-60,000 fewer jobs created, noting that many mom-and-pop-like outfits were forced to close during and after the disasters that covered much of Florida and the Houston metropolitan area.

Without doing the requisite math, October's figures are likely to be higher by an order of magnitude, unless Mother Nature unleashes more of her wrath on America's southern states.

The data which ADP provides usually presages the Bureau of Labor Statistics (BLS) Non-farm Payroll release, due out on Friday, October 6.

Wall Street will likely remain unfazed with a low NFP number, taking the easy way out by blaming storms and natural disasters for the poor showing.

Life goes on, new jobs or not.

At the Close, Wednesday, October 4, 2017:
Dow: 22,661.64, +19.97 (+0.09%)
NASDAQ: 6,534.63, +2.91 (+0.04%)
S&P 500: 2,537.74, +3.16 (+0.12%)
NYSE Composite: 12,304.67, +1.79 (+0.01%)

Wednesday, August 2, 2017

Dow Set To Rise Over 22,000; ADP Report Shows 178,000 July Jobs

For a change, all of the major indices moved in the same direction on the day. While the Dow set a new closing all-time high, it fell short of the 22,000 milestone, though the NYSE Composite squeaked by the 12,000 mark by a mere 0.02 points.

With earnings news continuing to come out in fairly rosy fashion, the latest from Apple (AAPL), reporting better-than-expected iPhone sales, revenue and earnings per share.

As August rolls along, there appear to be few impediments to further gains in stocks. Earnings reports will begin to slow to a trickle, but there is no FOMC meeting this month, and congress is likely to take at least two weeks off after wasting the first two weeks of the month posturing and posing over health care and/or tax reform.

It's unlikely that congress will accomplish anything of import, as their record of accomplishments since Donald Trump became president is shallow and thin.

Of some significance is Friday's release of July non-farm payroll numbers. Wednesday morning, ADP released their proprietary payroll data for the month, showing 178,000 new private sector jobs created in July. Expectations were for 185,000, after June disappointed with just 158,000 jobs created.

The Bureau of Labor Statistics (BLS) publishes its data on the first Friday of the month, at 8:30 am ET.

Whether the jobs data is good or bad may be immaterial, as the market has a tendency to take either without much pause. Just about everybody knows the economy is stuck in low gear, with the Fed and other central banks' backing and active in the markets.

22,000 on the Dow is a no-brainer. Unless war is launched against North Korea or some other great geo-political development occurs, nothing significant is likely to happen until congress reconvenes in September and attempts to craft a budget and hurdle the debt ceiling.

If there's ever been a time to break out the "all clear" foghorn, this could be it.

Still, it's advisable to keep close stops on positions because surprises routinely occur when complacency is high.

At the Close, 8/1/17:
Dow: 21,963.92, +72.80 (0.33%)
NASDAQ: 6,362.94, +14.81 (0.23%)
S&P 500: 2,476.35, +6.05 (0.24%)
NYSE Composite: 12,000.02, +32.35 (0.27%)

Thursday, March 9, 2017

Stocks Down Third Straight Session As NFP Looms

One would assume that a good jobs number on Friday would be good for stocks, but, as the economy goes, the Fed goes against it, with tightening via a raise in the federal funds rate almost a surety if the NFP number for February comes in strong, as suggested by Wednesday's ADP figure of 298,000 new jobs added in the month.

That's the backwardness of the stock market, fueled almost entirely by cheap credit and share repurchases (buybacks) over the past eight years. In fact, today marks the 8th anniversary of the market bottom in 2009, and its been nothing but accommodation by the Fed and happy talk from the press ever since.

Thus, stocks fell for the third straight session and fourth in five days, with the exception of the NASDAQ, where speculators have still not succumbed to the axe of profit-taking.

In a sign that the narrative may be unraveling, WTI crude oil fell sharply on Wednesday, closing under $50 a barrel for the first time since December after another survey showed massive gluts in crude and distillates. This should transfer into good news for drivers as the spring and summer driving months come into focus with lower prices at the pump.

Oil has experienced a glut of magnificent proportions over the past two years with demand down and supply at or near record levels. The price of +$50 has been fueled largely by speculation, as is everything else in the financial sector. With interest rates set to increase, perhaps the malinvestments and speculative frenzy can abate and true price discovery ensue.

At The Close, 3.8.17:
Dow: 20,855.73, -69.03 (-0.33%)
NASDAQ: 5,837.55, +3.62 (0.06%)
S&P 500: 2,362.98, -5.41 (-0.23%)
NYSE Composite: 11,448.21, -58.11 (-0.51%)

Friday, March 3, 2017

Stock Markets Backtrack In Advance of February NFP Jobs Report

Editor's Note: Sincere apologies to readers for the incorrect posting this morning. February Non-farm payroll data will not be released until March 10, instead of the usual first Friday of the month. Money Daily reported below that the NFP data would be out TODAY, March 3, but that is not the case. We seriously regret the error.

Following Wednesday's massive upturn in markets on the heels of President Trump's speech, Thursday was a bit of a reality check for gamblers in the Wall Street Casino.

Smart one - and there were plenty of them - took their quick profits and are likely sitting in cash ahead of Friday's non-farm payroll report from the tarnished Bureau of Labor Statistics (BLS).

Since February is a short month, expectations for another bump in payrolls may very well be disappointed, to a degree not previously factored.

ADP reported fewer jobs created in the private sector for February than expected. The 139,000 American workers hired to private-sector payrolls in February was below economists' consensus forecast of 155,000. Additionally, ADP revised their January figure to 127,000 from 175,000. That's a mighty big decline which was overshadowed by Wednesday's shock and awe euphoria.

While the NFP does not exactly mirror ADP, it usually tracks pretty well, though the BLS is notorious for using metrics such as the business birth/death model to goose numbers toward the desired result.

Non-farm payroll data will be released Friday morning at 8:30 am ET. There may well be fireworks if the number falls short of the lowered-bar expectations of 157,000 net new jobs.

At The Close, 3.2.17:
Dow: 21,002.97, -112.58 (-0.53%)
NASDAQ: 5,861.22, -42.81 (-0.73%)
S&P 500: 2,381.92, -14.04 (-0.59%)
NYSE Composite: 11,575.91, -85.31 (-0.73%)

Wednesday, May 4, 2016

ADP Jobs Miss; Stocks Lower; Markets Appear Exhausted

The best analyst assumptions on where markets might be heading are probably not going to impress anybody this year. As usual, the best and brightest of Wall Street had rosy calculations heading into the new year and so far none of them are anywhere close to the reality of 2015.

That reality has the Dow and S&P clinging to one to two percent gains for the year, with the NASDAQ roughly six percent underwater.

This morning's miss in the ADP privater jobs report for April set a sullen tone for equities, having already been battered on Tuesday. The middle of the week turned out to be no better, sending stocks further into the red.

ADP's report of 156,00 new jobs in April was well below the average estimate of 193,000, and was the lowest number since March of 2013. The ADP report sets the stage for the BLS April non-farm jobs report, due out Friday.

Stocks have run out of gas, this current bull market having become the second longest in history a few days back, but the central banks haven't run out of money to print out of thin air, a specialty that also is apparently running its course and running the global economy into the ground.

With summer heading its way and the outlook for a Fed tightening looking more and more dubious for June or even July, investors are beginning to take money off the table and head into cash or other, more stable assets, particularly bonds, art, gold, silver and oil.

For the most part, equities are overpriced and volumes have been thin. A serious correction could occur within days or weeks. With nothing but bad news and data hitting the street and foreign markets on a regular basis, the casino is quickly running out of chips as the players cash in and head out of town.

S&P 500: 2,051.12, -12.25 (0.59%)
Dow: 17,651.26, -99.65 (0.56%)
NASDAQ: 4,725.64, -37.58 (0.79%)

Crude Oil 44.05 +0.92% Gold 1,281.60 +0.56% EUR/USD 1.1487 +0.01% 10-Yr Bond 1.78 -0.89% Corn 377.75 -0.53% Copper 2.18 -0.14% Silver 17.42 +0.69% Natural Gas 2.14 +2.83% Russell 2000 1,113.13 -0.77% VIX 16.05 +2.88% BATS 1000 20,677.17 0.00% GBP/USD 1.4501 +0.02% USD/JPY 107.0170 +0.02%

Thursday, March 3, 2016

All Eyes on Non-Farm Payrolls, But ECB and FOMC Hold More Intrigue for Stocks

Following Wednesday's low-volume advances (lowest of the year), stocks followed a similar pattern in Thursday's trading regimen, slumping at the open, only to rise through the day and close modestly green.

While the talking heads on Bloomberg and CNBC are hyperventilating over the February non-farm payroll report due out tomorrow morning, the true market-moving events concern central banks and they don't occur until next week and the following, beginning with the ECB policy announcement on March 10, and the FOMC meeting March 15-16.

After ADP's February private sector number coming in at 214,000 Wednesday morning, the market is expecting something in that range from the BLS, with consensus just a shade below 200,000.

Whatever the number, it should weigh on any rate decision the Fed has planned or is considering. Another 25 basis point hike in the federal funds rate at this meeting has been largely discounted by the market, meaning, that if the Fed stands pat on rates, then it is tacit understanding that their goal of four more hikes by the end of the year is very much being scrapped.

There are simply too many negative forces pulling at the Fed for them to do another rate hike. Everything from the fragile US economy to the cratering Yuan and Chinese GDP growth to the nut-case presidential primaries are under consideration by the most politically-motivated central bank in the known universe.

That is to say nothing of the 1500-point hissy fit thrown by the DJIA after the most recent rate increase, in December of last year.

Stocks continue to keep to the script here, with the S&P within hailing distance of 2000, and the Dow closing in fast on 17,000. Both are admirable short-term goals, but they will hardly prove to be persistent. Stocks are becoming severely overbought and overvalued, and charts show all kinds of evidence that the bull run from 2009 has ended. Besides, there's growing fears of a recession looming, especially after the poor performance not only of the past two quarters, but of the general seven-year-long recovery.

The key level is 17,200 for the Dow, a point at which there is a significant patch of heavily-fortified resistance.

The Bureau of Labor Statistics (BLS) will release the February non-farm payroll report at 8:30 am ET, Friday.

S&P 500: 1,993.40, +6.95 (0.35%)
Dow: 16,943.90, +44.58 (0.26%)
NASDAQ: 4,707.42, +4.00 (0.09%)

Crude Oil 34.60 -0.17% Gold 1,262.10 +1.63% EUR/USD 1.0963 +0.89% 10-Yr Bond 1.83 -0.97% Corn 355.50 -0.21% Copper 2.21 +1.26% Silver 15.23 +1.38% Natural Gas 1.64 -2.09% Russell 2000 1,076.05 +0.97% VIX 16.70 -2.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4178 +0.71% USD/JPY 113.65

Wednesday, March 2, 2016

Market Steady Ahead of NFP; ADP Reports Jobs Creation Strong

The snapback rally in stocks off the January lows cannot be understated, nor can it be stopped. There are simply not enough reasons to not own stocks, being that commodities have been decimated, bonds are beyond the reach or intellect of ordinary investors, and the fact that most of the investment advisors and fund managers of the world are reaching for yield, putting stocks first, to the detriment of everything and anything else.

But, today was a day for repositioning, after ADP got the party started by reporting that private employers added 214,000 jobs in February. [Full report here]

Stocks initially had the blues, trading in the red for most of the morning, until European markets closed, then quickly erasing all losses, hugging the UNCH line for the remainder of the session.

While stocks were lacking in volatility and volume, commodities got a bit of a boost, with oil, gold and silver headed handily higher.

It was a lackluster session due to uncertainty about next week's FOMC meeting, one which the Fed could conceivably raise interest rates, though analysts have largely dismissed that possibility.

The interim rally in stocks has, since the middle of February, clawed back more than two-thirds of the losses incurred during the six-week decline from the start of January to the middle of February. Nothing seems to be able to send stocks back to their 2016 lows, though getting back to all-time highs would be something of a surprise, considering the slow growth rates of economies around the world, and especially in developed nations.

There's a week left before the FOMC meeting, at which point sentiment may take a turn to the negative, though, if the Fed continues to keep rates at their abnormally low rates, the party crowd on Wall Street is likely to break out the champagne, hats, and favors, bidding up equities beyond reasonable valuations (some say they already have).

This is just normal churn, but no time to either stake out new positions nor panic. The markets seem content - like the US economy - to muddle along, delivering unsensational profits in a low-inflation, low-growth environment.

Friday's non-farm payroll report - as meaningless and unprovable as their spurious numbers might be - may provide some idea of sentiment going forward, but, at this point, the Fed is holding the most volatile hand of all the players, and they're not likely to bluff or fold. In typical Fed fashion, they'll be more likely to check, rather than raise the ante or call the hands.

Wednesday's Sleeper:
S&P 500: 1,986.45, +8.10 (0.41%)
DOW: 16,899.32, +34.24 (0.20%)
NASDAQ: 4,703.42, +13.83 (0.29%)

Crude Oil 34.65 +0.73% Gold 1,241.70 +0.89% EUR/USD 1.0867 -0.01% 10-Yr Bond 1.8480 +0.76% Corn 355.75 +0.07% Copper 2.19 +2.21% Silver 15.01 +1.69% Natural Gas 1.67 -4.13% Russell 2000 1,065.67 +1.06% VIX 17.12 -3.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4079 +0.91% USD/JPY 113.38

Tuesday, March 31, 2015

Stocks Erase Most of Monday's Gains; Dow Closes Down for the Quarter, Year

Well, that escalated quickly...

After booming on Monday, Tuesday's players must have had a case of buyer's regret, selling back 2/3rds of what was bid up just a day earlier, very odd, considering that the last trading day of the month usually ends up positive, due to "window dressing" by fund managers.

That did not happen today. In fact, the markets reversed course right at the open, but really accelerated the selling in the final hour of trading.

Reasons? The Fed? Mountains upon mountains of un-payable debt? Iran? Yellen? Bueller?

Tracking the foibles and fantasies of the Wall Street crowd on a daily basis can be a thankless task, especially under the conditions which are currently reigning over the market. Levels of uncertainty are reaching a fever pitch, between various conditions in Europe (Draghi's failing QE, Ukraine, Turkey tuning totalitarian, Greece), the Middle East (ISIS, Syria, Iran) or the troubles bourn at home in the US, ranging from gay upset in Indiana, crumbing infrastructure, fracking drillers facing bankruptcy, insolvency of college grads with high student debt loads (a catastrophe waiting to happen), chronic underemployment or a host of other nagging circumstances which don't add up to recovery after six years of waiting.

The good news is that the credit spigots are wide open, though many individuals, having been burned by financial institutions or failed investments in the past have been wary to expend much energy spending money they don't have on things they don't need. Credit card companies have been unduly generous of late, the number of 0% interest cards offered having swelled in recent months.

Additionally, auto loans and leases are becoming as easy to obtain as water from a faucet, but default rates are also rising as consumers continue to be tapped out on the road.

Gas prices are low, sings of Spring are everywhere, but somehow, the major indices - at least for today - are not feeling the love.

Something is wrong, but we're not going to wait around to find out what it is. Anyone who hasn't divorced his/herself, at least in some part, from the credit-debt-tax-cycle-slave-system is missing the proverbial boat, which may sail off into the horizon at any time.

Americans, especially older ones, are becoming more detached from the system as the system disappoints and disillusions many who have played and paid and are seeing their paltry incomes stagnate and savings threatened by seven years of a low-interest regime engineered by the Federal Reserve.

And, with markets closed on Friday, who exactly will be able to react to the March non-farm payroll data? At least tomorrow, ADP will issue their March jobs report, which mirrors the NFP report to a degree.

Making matters worse, the Dow Industrials closed the quarter lower than at the start of the year, the S&P and NASDAQ posting fractional gains (less than one percent) for the quarter and the year so far.

So much to ponder and so little time. Tax day is April 15. What fun!

Dow 17,776.12, -200.19 (-1.11%)
S&P 500 2,067.89, -18.35 (-0.88%)
NASDAQ 4,900.88, -46.56 (-0.94%)

Wednesday, February 5, 2014

Stocks Flat to Lower After Disappointing ADP Employment Report

Stocks could not extend Tuesday's relief rally after hearing the ADP January Employment Report, which assumed US private sector job growth of 175,000, when estimates were for 185,000.

Note the use of the word "assumes" in the foregoing paragraph, because ADP does not rely upon hard data, but extrapolates and models from sampling, thus their estimates are often far afield from reality, as displayed clearly last month, when the private firm called 238,000 job growth (revised down to 227,000) and two days later, the BLS offered 74,000 in their monthly non-farm payroll data series.

Who's right and who's wrong is not the question. The question is who can be trusted, and clearly, with the goal-sought nature of economic data reports in the "Fed era" of economics in which we currently reside, the answer is, nobody.

Anecdotal and real-life experience may be more instructive than government or private data releases at this juncture, and, by most accounts, in most areas of the United States, there are few hirings and the jobs offered are either part-time or menial or both. The job market is definitely not what one could in any way, shape or form, call robust.

Stocks took a bumpy ride - mostly on the downside - to get to generally unchanged on the day. Being that the ADP numbers have long been deemed untrustworthy, most speculators are attempting to hang in the market until Friday, when the BLS releases January jobs numbers, which, if the weather is any guide, figure to be uninspiring.

The good news came in the form of gold and silver gains on the day, though, as has been noted, cannot be met with much enthusiasm, since the precious metals have been largely range-bound for the past three months and show no signs of breaking out. Still, those investing in hard assets have to be sleeping better than their counterparts in equities, since they can at least claim some degree of stability during the past six weeks of general market declines.

Reporting after the bell was Twitter (TWTR), showing a gain of two cents (ex-items) for the fourth quarter, against estimates of a two cent loss. User growth was around eight million for the quarter, below estimates, which sent the stock down 10-15% in after-hours trading. Regarding Twitter's valuation of 57-58 dollars per share, assuming they make ten cents in all of 2014, puts their price-earnings ration somewhere in the ionosphere, around 570-580. They don't call it speculation for nothing, folks.

Despite the small losses in the headline numbers, internals were rather nasty. The A-D line was nearly 2-1 in favor of losers and new 52-week lows were triple the number of new highs, an indicator which is trending very negatively.

Bonds sold off, sending the 10-year note to 2.67% yield, and the 3-month and 6-month bills matched up at at yield of 0.06, not an encouraging trend either, as, if they invert, history tells us conclusively that recessions follow, and a recession is not anything the economy can withstand right now.

DOW 15,440.23, -5.01 (-0.03%)
NASDAQ 4,011.55, -19.97 (-0.50%)
S&P 1,751.64, -3.56 (-0.20%)
10-Yr Note 100.67, -0.33 (-0.33%) Yield: 2.67
NYSE Volume 3.97 Bil
Combined NYSE & NASDAQ Advance - Decline: 2065-3617
Combined NYSE & NASDAQ New highs - New lows: 51-154
WTI crude oil: 97.38, +0.19
Gold: 1,256.90, +5.70
Silver: 19.80, +0.383
Corn: 443.25, +1.50

Tuesday, February 4, 2014

Markets Pause After Monday's Pummeling; Stocks Bounce Is Feeble

When markets get roiled like they did on Monday, especially following four weeks in January of steady declines, the usual reaction is for investors to nibble at the edges, like rats who have been spooked by sprung traps on their coveted cheese.

The only data drop worth noting on the day was Factory Orders, which fell 1.5% in December, the most since July. Inventories of manufactured durable goods reached an all-time high for the series in December, to $387.9 billion, marking the fastest year-over-year inventory build in 6 months.

That same inventory build has been responsible in part for much of the two past GDP figures, from the third and fourth quarters of 2013, and, unless consumers come out of hiding soon, those inventories are going to sit and eventually be marked down, further stifling the Fed's efforts to re-inflate the economy, which continues to stall out at a moribund inflation rate well below two percent.

While lower costs for manufactured and consumer goods comes as pleasant news for individuals and small business, it works against the Fed's perverse mandate of "stable prices," which, in actuality, is defined in Fedspeak as "stably-increasing prices at a rate of at least two percent and preferably higher, stealing purchasing power from people, everywhere, all the time, while debasing the currency."

Since 2008, the Fed's playbook has been redesigned to include trick plays like ZIRP, QE, reverse-repos, re-hypothecation and other arcane financing stylings, most of which have had limited success. Now, with their implicit desire to end QE this year, the fruits of their laborious injections of trillions of dollars into the global economy are proving impotent as first, emerging markets are crushed, soon to be followed by developed markets, already occurring in Japan, where the Nikkei fell by more than 600 points overnight, and is clearly into "correction" territory.

While today's pause offered some relief for the bulls, the bears seem to be still in charge. Advances in early trading on the major indices were pared back throughout the session, the closing prices barely denting the declines of just Monday, to say nothing of the drops from January.

Everybody is going to get something of a clue Wednesday morning, when ADP releases its January private jobs report, a precursor to Friday's non-farm payroll data for January. Expectations are high that the US created 185,000 jobs in January, which would be a masterstroke of statistical wizardry, after the December reading of 74,000 jobs, sure to be revised higher.

Unless this January was both a statistical marvel and a reality-defying month in which auto sales and retail sales were well below estimates and blamed on the weather, the take-away is that while people were discouraged to brave the elements to shop, the very same weather encouraged job creation and the seeking of employment. The math does not match the reality. The truth is probable that while the weather was poor in some areas of the country, it was fine elsewhere, so the localized Northeast mindset likely has everything calculated improperly.

Whenever weather is blamed for anything - unless it's a localized event like a hurricane, flood or fires - one can be nearly certain the assumption is at least partially false, as will be proven in this case. Therefore, if Friday's jobs report blows the doors off estimates, one can assume the economy, based on auto and retail sales, is much weaker than propagandized, and that the BLS modeling, their birth/death assumptions and general massaging of data is flawed and should be disregarded.

Of course, a good-feeling jobs report will boost stocks, just as a continuation of the trend from December will send them even lower. Along with the weather as a culprit, other terms being bandied about include "correction" (a 10% decline off recent highs) and "bottom" (where stocks stop declining). Most of the analysts are saying the recent action is expected, following the massive gains of 2013, but that it is also temporary and investors should be looking at this as a buying opportunity.

Others have differing opinions, believing the US and global economy are contracting instead of expanding, that inflation is nowhere to be found and all of those corporate stock buybacks from the past three to four years are going to be painful to unwind. With corporations buying back their own stock at high prices, reducing the flow while increasing the price, what happens when they want to sell back into the market, at lower prices? The internal damage done to balance sheets will be dramatic and will only accelerate any downward pressure.

That's what investors have to look forward to in coming months, unless some economic miracle occurs. And, as we all are well aware, miracles don't usually just come along as needed.

Particularly telling, considering today's advance, was the new high-new low metric, which heavily favored new lows, indicating that today's advance was not broad-based nor technically supported. Additionally, late in the day, S&P downgraded Puerto Rico's debt to junk status, a move that was widely expected, but still a huge negative.

A disturbing trend is the slight rise in commodity prices. Corn, soybeans, wheat, crude oil and natural gas have been bid up recently, as money, needing a safe place to rest, may find a home in such staples, artificially raising prices, though the gains may (and probably should) prove to be arbitrary and temporary, a certain sign of naked speculation.

DOW 15,445.24, +72.44 (+0.47%)
NASDAQ 4,031.52, +34.56 (+0.86%)
S&P 1,755.20, +13.31 (+0.76%)
10-Yr Note 101.05, -0.10 (-0.10%) Yield: 2.63%
NASDAQ Volume 2.00 Bil
NYSE Volume 4.05 Bil
Combined NYSE & NASDAQ Advance - Decline: 3738-1977
Combined NYSE & NASDAQ New highs - New lows: 49-111
WTI crude oil: 97.19, +0.76
Gold: 1,251.20, -8.70
Silver: 19.42, +0.013
Corn: 441.75, +6.00

Wednesday, January 8, 2014

Stocks Down Again, Failing at Second 2014 Benchmark

Amid economic cross-currents, the major indices failed at the second benchmark for the year, that being the first five days of trading, which turned out to be negative and indicative of a sub-par performance for stocks throughout 2014. The first benchmark was also negative, as stocks were sharply lower on the first trading day of the new year.

After the banner year that was 2103, in which the indices were ahead by anywhere from 26-30%, a pullback is, however, more likely than not.

Putting numbers to the reality, here's the performance for the first five trading days of 2014:
Dow: -114 points
S&P: -11 points
NASDAQ: -11 points
NYSE: -79 points

While these figures aren't anything dramatic, they are negative, suggesting that investors are taking a very cautious approach to stocks even as financial data appears to point toward a strengthening of the general economy.

ADP reported that 238,000 jobs were created in December, ahead of forecasts and predictive of an equally-strong number from the BLS when they report Friday on December non-farm payrolls.

On the flip side, retail traffic for the just-ended holiday shopping season was down 14%, though sales were still ahead by 2.7%, and, just ater the bell, Macy's (M) reported same-store sales gains in the 3.6% range but announced that they would be laying off 2500 employees and closing five stores. Shares of the company were up sharply on the news in after-hours trading.

Overall, markets were down throughout most of the day, especially the Dow Jones Industrials, which suffered the most. The NASDAQ was higher through most of the session and hit the unchanged mark with just about 20 minutes left in the trading day, but returned to slightly positive territory at the close.

Tomorrow, the first earnings report will be come to the markets as Alcoa (AA), a former Dow component, reports full-year and fourth quarter results.

DOW 16,462.74, -68.20 (-0.41%)
NASDAQ 4,165.61, +12.43 (+0.30%)
S&P 1,837.49, -0.39 (-0.02%)
10-Yr Note 97.94, -0.17 (-0.18%) Yield: 2.99%
NASDAQ Volume 2.20 Bil
NYSE Volume 3.47 Bil
Combined NYSE & NASDAQ Advance - Decline: 2585-3071
Combined NYSE & NASDAQ New highs - New lows: 336-29
WTI crude oil: 92.33, -1.34
Gold: 1,225.50, -4.10
Silver: 19.54 , -0.248
Corn: 417.00, -9.00