Showing posts with label ISM Services. Show all posts
Showing posts with label ISM Services. Show all posts

Wednesday, January 6, 2016

The End? Stocks Slammed Again; Economic Prospects for 2016 Appear Grim

What should have happened in 2008-09 may be beginning to happen now, in 2016. Investors should take losses, companies should go broke, and government apologists should have a "come to Jesus" moment and admit that they've been lying about the recovery for years.

There is and there has been no recovery. GDP has been stuck between one-and-a-half and two-and-a-half percent since the financial crisis (and that's if you believe government accounting). 2015 will be fortunate to register at two percent growth.

Meanwhile, wages are stagnant and falling, 95 million able-bodied Americans are not officially counted as part of the workforce. The middle class has been hollowed out by Wall Street greed, government over-taxation, and unrealistic government salaries and pensions that suck the life out of local and state budgets.

The jobs that made America great have long gone, shipped overseas to China and elsewhere, and now we are exacerbating our pitiful condition by allowing in more immigrants - legal and illegal - taking away the few jobs left for natural-born citizens.

Baby boomers are retiring, replaced by their dumbed-down progeny. Our national debt of nearly $19 trillion - and growing - is a universal disgrace. Meanwhile the Federal Reserve, in cahoots with the shiftless Treasury Department, debases our currency by print a full 40% of government expenditures.

The federal government wants to grab our guns, the states want to charge us rent - in the form of property taxes - on the property we own, and neither of them can balance their books. The American public is at a breaking point, through with political correctness, suspicious of a government that spies upon us, regulates us, lies to us and sends our kids to die in useless wars which are never won. The controlled mainstream media propagandizes and cajoles anyone who doesn't align properly with the official corporate-government-military line.

Truly, in the short history of our Republic, we are on the cusp of complete breakdown in finance, education, morals, and decency.

And, while the blame can be placed on the people itself, because we voted for the spineless, unaccountable elected officials who have led us to this point, it should fall on the shoulders of those doing the governing, the legislating, the ones who are routinely bribed to pass legislation that favors corporations over people, banks over homeowners, and diminishment of our rights and liberties over common sense.

Our current government is the most corrupt to ever inhabit the halls of congress and the White House, our state houses and our government mansions. Is it any wonder that only half of the people who can vote, do vote?

Wall Street insiders hold all the cards, and they're gradually folding them. The Dow Industrials, S&P 500 and NASDAQ were all lower by massive amounts again today, for the second time in three this year. If this is a portent of what's ahead for the rest of the year, the ride may not be bumpy at all, merely a slide into the mediocrity created by greed, failed, moronic policies of the Federal Reserve, all with the implicit consent of the government, a government that is not worth the support of the people.

The slow collapse of stocks that has been on display the first week of this year has already been gaining steam since prior to last summer. Stocks peaked in late May and are 6-8% lower (depending on which index you choose) from their inflated high points. The Dow is down nearly 500 points in just three days this year and more than 850 points since the Fed decided, in their insipid, desperate desire, to raise interest rates mid-December.

Manufacturing, as measured by the ISM, has shown contraction for two consecutive months. US Services PMI dropped to 54.3 - the lowest since January 2015. ISM Services fell to 55.3, the lowest level since March 2014.

US factory orders for November fell 4.2% year-over-year, the 13th consecutive monthly drop. We are on the verge of a recession, in the middle of a depression. The emperor has no clothes and this time, with federal funds rates straining to hold between 0.25 and 0.50%, there is no place to hide.

If this isn't the end, it's getting pretty close. According to the most widely-accepted charting methods, stocks will enter a correction phase within a month, if not sooner. Corporate profits are falling, as companies cannot concoct any more accounting tricks to show even meager profits. Quarterly results are due out over the next three to four weeks and prospects for corporate earnings are poor. For retailers, energy stocks and consumer goods producers, the results - stemming from missing expectations for the holiday season and an oversupply of crude oil and distillates - might be devastating.

Stores are being shuttered in malls across the country and with them, marginal jobs which will not come back. The only bright spots are that inflation is nil, gasoline is cheap, and the winter, thus far, has been mild, at least in the heavily-populated Northeast.

Somehow, America will survive. However, the America of 2016 is a far cry from what the country was just 30 years ago, and a dim representation of what our Founding Fathers conceived.

S&P 500: 1,990.26, -26.45 (1.31%)
Dow: 16,906.51, -252.15 (1.47%)
NASDAQ: 4,835.76, -55.67 (1.14%)

Wednesday, December 4, 2013

Stocks Plunge, Recover, End Flat on Fed's Beige Book, Data

A raft of economic news hit the street on Wednesday, but, for the most part, all it did was add to the confusion surrounding the Fed's bond-buying scheme and Friday's non-farm payroll release for November.

Leading off the hit parade - prior to the open - was ADP's November private payroll number, gushing at a robust 215,000 new jobs created during the month, which turned futures sour and set a negative tone for the session (remember, good news is bad because the Fed would likely diminish the free money carry trade known as QE).

Then came data on the US trade deficit, which narrowed to $40.6 billion, more good news. New home sales surged 25%, though the median price declined slightly, another positive for the economy.

The mood changed with ISM Services data, showing a slowing from 55.4 in October to 53.9 in November. Overall, the mood on Wall Street turned to fear of an improving economy (sad, but true how twisted the logic is), sending stocks to their lows of the session around midday.

With the Dow off 125 points and the other major indices following suit, the Fed's beige book was released at 2:00 pm ET, and, apparently, enough investors and traders found enough evidence to believe that the Fed was nowhere close to tapering their bond purchases, igniting a rally that sent the Dow into positive territory briefly in the final half hour of trading.

While this is a plausible explanation of the day's roller coaster activity, some did not get the memo or read the tea leaves of the Fed clearly enough, as the rally sizzled, then fizzled into the close, leaving the Dow and S&P modestly lower, the NASDAQ up a couple of points.

At the end of the day, it was a big, fat, nothing=burger, though some adroit day-traders certainly cashed in on the movement and momentum.

With the Dow down for the third time in three December days, it marks the first time that's happened to start a month since September, 2011.

The BLS monthly non-farm payroll report will be released Friday morning, leaving Thursday as a kind of limbo trade. Based on the smashing results of the ADP report, expectations are for a boffo government report, producing, alas, another downdraft on stocks. such is the madness that moves markets in the age of QEternity and ZIRP until the end of time.

Thursday, therefore, would be a good day to relax, take some time off and buy some gold or silver, both of which saw heavy buying after weeks and weeks of relentless selling. A bottom may have been put in on the precious metals, or not. In any case, they're very cheap compared to prices over the past three years. Besides, they're shiny and guaranteed not to rust.

Bonds sold off, with the 10-year note hitting 2.84% yield at the end of the day, a watershed mark and the highest yield since October.

Volume was relatively strong, the advance-decline line continued to post a negative number, and the gap between new highs and new lows narrowed to its lowest point since the government shutdown in October, a key number on which to train one's investment eyes.

DOW 15,889.77, -24.85 (-0.16%)
NASDAQ 4,038.00, +0.80 (+0.02%)
S&P 1,792.81, -2.34 (-0.13%)
10-Yr Note 99.18, -0.03 (-0.03%)
NASDAQ Volume 1.81 Bil
NYSE Volume 3.59 Bil
Combined NYSE & NASDAQ Advance - Decline: 2236-3418
Combined NYSE & NASDAQ New highs - New lows: 150-111
WTI crude oil: 97.20, +1.16
Gold: 1,247.20, +26.40
Silver: 19.83, +0.765
Corn: 436.50, +5.25

Tuesday, November 5, 2013

Stocks Split in Sloppy Session; Bond Yields Rising, Oil Sliding

Stocks slid at the opening bell, with the Dow down by as many as 117 points in the first half hour of trading, but quickly reversed direction at 10:00 am EST and continued a slow but steady gain the rest of the day.

Apparently, what turned stocks around was the October ISM Services reading, which came in at a solid 55.4, a full pint better than last month's data and a huge beat to the expected 54.0.

While questions concerning the veracity of these kinds of reports after the unusually-strong Chicago PMI data a week ago continue to swirl around, the beat on services - which is now the main production engine of the US, since we've hollowed out our manufacturing core and mostly export inflation - was enough for the Wall Street crowd to lift stocks off their lows.

That they were able to keep buying interest maintained for the remainder of the session was likely due to the usual POMO injection by the Fed, allowing for rampant speculation and unusually-high leverage.

While stocks were seeing the light of day - though the NASDAQ never quite made it into positive territory, bonds were getting slammed, up six bips in yield by the end of the day, as the gains following the end of the government shutdown are gradually being eroded. The closing level of 2.66% on the 10-year note was the highest in two-and-a-half weeks.

The big story happens to be in oil, which continues its retreat from $110/barrel highs just two months ago. Another $5.00 drop in the price of WTI will put oil into a bear market, a condition nobody has considered. While low oil prices relate positively to gas at the pump and is a boost for the economy, releasing more purchasing power, the underlying causes may be more nefarious and significant.

There is, at last, a supply-demand condition that is positive for the US, as more and more oil is being produced in North America, at the same time that demand is dwindling, or rather, has been dwindling for the past three to four years. Americans have tightened their collective belts and are much more careful about their driving habits these days, as lowered incomes have left less for transportation expenses. High unemployment also pays a part, as fewer people are driving to work five or six days a week.

So, while a period of lower gas prices is cause for celebration, the party may not be of the epic variety, with fewer participants and an overhang of disappointing economic circumstances.

Key numbers to watch tomorrow will be the MBA Mortgage Index (7:00 am), September Leading Indicators (10:00 am) and crude inventories (10:30 am).

Dow 15,618.22, -20.90 (0.13%)
Nasdaq 3,939.86, +3.27 (0.08%)
S&P 500 1,762.97, -4.96 (0.28%)
10-Yr Bond 2.66%, +0.06
NYSE Volume 3,485,473,500
Nasdaq Volume 1,899,388,750
Combined NYSE & NASDAQ Advance - Decline: 2064-3571
Combined NYSE & NASDAQ New highs - New lows: 248-74
WTI crude oil: 93.37, -1.25
Gold: 1,308.10, -6.60
Silver: 21.64, 0.064
Corn: 425.00, -1.25

Wednesday, June 5, 2013

Stocks Clipped; Maybe Bad News isn't So Good After All

This was a bit of a shakeout. There was no late rally to save the day, nor was there - oddly enough - any talk of tapering by Fed officials.

No, today was just one of those days that the market had a good look in the mirror and didn't like what it was seeing. Smart money is already out of the equity markets, but the dumb money will probably be looking to buy the dip, as has been the modus operandi for the past four-years.

It was mentioned here yesterday that this appeared to be an opportune time to go to cash or go short. That call could not have been more prescient as stocks fell out of bed and continued to roll on the floor, writhing in pain the rest of the session, having the worst two days since mid-April, which, considering where the market has traversed since then, could be only the beginning of a long, deep decline.

Marketeers will blame today's selloff on poor ADP numbers and maybe the ISM Services index, both coming in with disappointing reports, but data has been trending poorly for the past two months (some say four years) and the market is just now beginning to wake up to the reality of the depression being felt across the country and around the world. Business activity has slowed in almost every sector or has not grown at any kind of solid, sustained pace for most of the past six months, all the while equities were going through the roof.

If this is the beginning of a serious correction or the end of the bull and the beginning of a bear market, today and yesterday's action was just a warm-up.

Wall Street may be blind to poor economic data for a long time, but when the selling starts and there's real money to be lost, the traders all act like herd animals, rushing for the quickest way out.

Even though volume was not magnificent, the declines speak for themselves. The Dow Jones Industrials took a 1 1/2 percent hit today and are now three percent from the top, made on May 28.

The A-D line continues to deteriorate, with today's coming in a 4-1 for the losers; new lows exceeded new highs for the first time in months. Keep an eye on that metric for more clues to where this is going.

A June swoon or a hungry bear?

Dow 14,960.59, -216.95 (1.43%)
NASDAQ 3,401.48, -43.78 (1.27%)
S&P 500 1,608.90, -22.48 (1.38%)
NYSE Composite 9,189.21, -130.88 (1.40%)
NASDAQ Volume 1,728,689,625
NYSE Volume 3,620,423,750
Combined NYSE & NASDAQ Advance - Decline: 1369-5151
Combined NYSE & NASDAQ New highs - New lows: 69-108
WTI crude oil: 93.74, +0.43
Gold: 1,398.50, +1.30
Silver: 22.47, +0.063

Friday, April 5, 2013

March Payrolls Huge Miss; Economy a Pack of Lies, Rolling Over

Let's just get one thing straight: there are lies, statistics and more lies in their interpretation, and even worse prevarication when it comes to market response.

When today's March Non-Farm Payroll data was rolled out at 8:30 am EDT - an hour prior to the opening bell - the response in the futures was automatic and immediate.

On expectations that the recovering US economy was to have produced 197,000 new jobs during the month, the actual number - 88,000 - was a miss of such enormous magnitude that it begs for perspective.

The miss was the worst since December 2009, when the economy was still taking baby steps toward said recovery and it was the lowest number of new jobs since June of last year. Incredibly, the unemployment rate fell to 7.6%, though this was due to 663,000 individuals dropping out of the labor force, sending the labor participation rate to 63.3%, the lowest level since 1979, with a record 90 million Americans (aged 16 and up) out of the labor force.

Surely with numbers like these, the United States is on a sustainable path... to complete disintegration, anarchy and poverty. There simply is no way to get around how poorly the economy is performing, a full five years and three months after it entered recession in December 2007, and four years after it supposedly exited that recession (June 2009).

Whether or not one believes we ever exited the Great Recession (or, as some call it, the Greater Depression) is merely a matter of semantics, the truth is that the economy has been and is going nowhere fast. Growth is a chimera, more statistical noise boosted by inflation; jobs have been hard to come by and those that are available are mostly of the entry-level, burger-flipping variety. Meanwhile, the Federal Reserve continues to pump $85 billion into the banking system each and every month, and still, nothing.

The talking heads on CNBC and Bloomberg tried to blame it on everything from the weather to the sequester to the tax increase imposed in January to, probably, the phase of the moon, but the reality is that we have structural issues that are generational, worldwide and widely the cause of the gross inequalities between rich and poor, with the crony capitalists - in cahoots with cheap, shiftless politicians - pushing more and more debt onto a system already overburdened with it.

Anyone who purports to tell you that the economy is improving, ask them how and why, and wait for the usual non-answers that housing is improving (it's not), that there are more jobs (marginally, there are, but not enough to keep up with population growth) or, the usual, "this is America, and we are great," complete failure response.

The stock market took a huge dive at the open, the Dow losing as many as 172 points, the S&P off by 21 and the NASDAQ down a whopping 58 points before the riggers came in and bid up the whole complex - especially ramping it in the final half hour - to close down with losses erased by roughly two-thirds.

We are in a sad, sorry state of affairs, when what used to be the most efficient, dynamic markets in the world are now nothing more than a crooked casino, run by oligarchs, bankers and unseen hands that are both out of control and above the law.

Significantly, gold and silver were both up sharply on the day, as the flight to safety finally made an appearance.

This economy is rolling over, like a sick patient who hasn't received the correct treatment. We're about to go into a tailspin that will make 2008 look like a casual stroll along the beach. The bankers, politicians and the media continues to spin the happy "recovery" meme, when all data shows the economy going in reverse. Data-wise, the US was a woeful 0-for-6 the past eight days, with the Chicago PMI missing the mark, along with the ISM index, the ISM services index, the ADP employment report, initial unemployment claims and finally, today's non-farm payrolls.

How many misses and bad data points will it take for the politicians to admit their policies are failures, the media to admit they are blind and the bankers admit they've been robbing common people blind since time immemorial?

Nobody should be holding their breath waiting, that's for sure.

Dow 14,565.25, -40.86 (0.28%)
NASDAQ 3,203.86, -21.12 (0.65%)
S&P 500 1,553.28, -6.70 (0.43%)
NYSE Composite 9,000.24, -27.59 (0.31%)
NASDAQ Volume 1,608,289,875
NYSE Volume 3,788,675,500
Combined NYSE & NASDAQ Advance - Decline: 2866-3582
Combined NYSE & NASDAQ New highs - New lows: 118-81
WTI crude oil: 92.70, -0.56
Gold: 1,575.90, +23.50
Silver: 27.22, +0.453

Thursday, September 6, 2012

Draghi Delivers Win-Win for Europe, Stocks

ECB president Mario Draghi pleased just about everyone when he unveiled the latest bond-purchasing scheme by the European Central Bank at a news conference early this morning. Stocks rose across Europe and the Americas with the NASDAQ reaching 11 1/2 year highs.

Portions of the new ECB bond purchase program, which is designed to purchase sovereign bonds with maturities of 1, 2, and 3 years, were purposely leaked to the press in the days and weeks prior to the official announcement, which came after the ECB's rate policy meeting (kept the official bank lending rate at 0.75%), during afternoon trading on European bourses and prior to the open of trading in New York.

The plan, called by Draghi, Outright Monetary Transactions (OMT) rests on five main pillars: 1) Strict conditionality will be applied to bond purchases 2) There will be unlimited purchases of bonds with a maturity of one to three years 3) The ECB will not have seniority 4) All transactions will be 'sterilized' 5) Purchases will be reported monthly.

Countries wishing to participate (notably Spain and Italy) will have to make a formal application and adhere to conditions, mostly in the form of austerity measures, something at which many governments have balked.

While the stock markets advanced broadly, the S&P reaching a four-year high there are some land-mines over which the ECB will have to traverse in order to make the program a success.

First, there is the matter of legality, upon which the German high court will rule on Wednesday, September 12. The court is reviewing previous bond-buying programs by the ECB, such as the ESM, to determine if such plans comply the rigors of the German constitution. If the court decides against such plans, everything in Europe will be thrown into chaos, as Germany is the major funder of bailout programs.

The matter of nations applying for funding is another sticking point. Spain and Italy are in fiscal crises, but the political leaders are wary of conditionality, submitting their government to severe austerity measures, such as the recently-proposed six-day work week for Greeks. Additionally, sticking to the conditions ofthe loans is often difficult if not impossible, though the OMT specifically says that bond purchases will be curtailed if conditions are not met.

with the ECB now in the Fed's arena of massive money printing, what lies ahead for the US and global economies is next week's FOMC meeting, at which it is widely believed Fed chairman Ben Bernanke will unveil some new liquidity program of his own, commonly called QE3, though recent economic data, such as today's August ADP employment report and the ISM Services data would seem to indicate that further easing by the Fed is not warranted nor wise at this juncture.

Thus, positive economic data, a recovering economy and anything outside the stock market viewed as positive to growth will be viewed by Wall Street as an impediment to more easy money, likely causing a sell-off in equities.

Tomorrow's non-farm payroll report for August is the linchpin to Fed action. Anything over 150,000 net new jobs may cause the Fed to hold back from further easing. There's also widespread belief that the Fed will be reluctant to move so close to the US presidential elections, not wishing to be perceived as a political entity.

Next week is shaping up to be epic, one way or the other.

Dow 13,292.00, +244.52 (1.87%)
NASDAQ 3,135.81, +66.54 (2.17%)
S&P 500 1,432.12, +28.68 (2.04%)
NYSE Composite 8,160.40, +168.39 (2.11%)
NASDAQ Volume 1,883,115,000
NYSE Volume 3,919,524,250
Combined NYSE & NASDAQ Advance - Decline: 4360-1203
Combined NYSE & NASDAQ New highs - New lows: 494-39
WTI crude oil: 95.53, +0.17
Gold: 1,705.60, +11.60
Silver: 32.67, +0.35

Tuesday, June 5, 2012

No News Good News to Wall Street; Music for a Depression: Benny Goodman's Sing, Sing, Sing

Running a bit late today and writing in the first person singular, not because this is a critical day or anything like that, but because I'm just happy as a lark to see that financial stocks led today's absolutely nothing advance.

From years of personal experience (especially over the past four) any time our broken down banks lead the market, one can rest assured the move is nothing more than self-aggrandizement by the former "masters of the universe," thus completely meaningless in a macro sense.

The afternoon insider ramp job was notoriously devoid of volume, making the major event of the day nothing more momentous than the May reading on ISM services which leapt an entire 0.2, from 53.5 in April to 53.7 in May. Big whoopie, and not much of a reaction from the street, so hold off, for now, on the champagne. Europe's issues and the big fiat debt fiasco that pervades everything these days still lurks, waiting to pounce upon a suspect market.

Major events in this little corner of the world were the two rabbits frolicking in my back yard. From the looks of things, the planet may soon be blessed with a few more little cottontails soon. Ah, Spring...

The sun is shining again
and birds are singing in the trees,
My heart is open wide my friends,
I've just caught a summer breeze.
-- from the soon-to-be-released Flowers in Your Garden, a love song by Fearless Rick

There was an "urgent" conference call by leaders of the G7, bemoaning the fact that Europe's crisis might just be spinning out of control, unlike the Earth itself, which, last we checked, was still orbiting the sun and rotating smoothly without any help from the Fed, central bankers or any over-indebted sovereign nation.

When the global financial system finally falls completely apart, those of us with good minds, bodies and hearts will know what to do: Make sure our gold and/or silver is safe, our guns well oiled and our crops bathing in sunshine, pour another drink and watch the crooks being harnessed by their own hangman's noose.

It's really just that simple.

Since we're already well into the Greater Depression, I thought it appropriate to post a couple of Youtube videos - actually they're more music than anything else, in hopes that we might all come to understand better how things were during the Great Depression of the 1930s.

My father, who was born in 1924 and passed away in 2009, was a spry lad of five years old when the markets crashed in 1929. He used to tell me that they didn't know they were poor, as just about everybody was in a similar situation. It's somewhat the same today, except that the many of the truly poor and unemployed now receive all kinds of benefits such as food stamps, free rent and free health care, which makes them much better off than many of the working stiffs who grind out a living on wages that have been stagnant or declining since the year 2000.

At the end of this post there are two videos posted. The first (to which you are encouraged to stand up and dance to) is of Benny Goodman's original recording of Louis Prima's (my dad's favorite) Sing, Sing Sing.

The year was 1937, the depth of the Great Depression, but Goodman's big band orchestra really let it rip in this rendition, which helped Goodman earn the reputation as the "King of Swing." The band leader and on clarinet, Goodman was aided by Gene Krupa on drums (amazing, by any standard) and Harry James on trumpet, among others. The piece is an absolute classic, a treasure of Americana, showing that even as hard as times were for millions, the spirit of the day was one of joy, a never-say-die attitude and unbridled musical genius.

While Prima's original version carried lyrics, Goodman's arrangement was purely instrumental. With Krupa's driving beat and Goodman's flawless orchestration and leadership, the tune became an instant hit crossing generations of music fans. The title is a bit misleading; it could easily be re-named "Dance, Dance, Dance."

If you can't get up and dance to this tune, you either have no sense, no rhythm or no business being alive. All you oldies out there, be careful. Don't bust a disk or pull a muscle. This one's a mover. Enjoy.

The second video (again, it's all for the music) is of the same tune at the fabled 1938 concert by Goodman's band at Carnegie Hall in New York. The piece is longer, lasting 12 minutes, and includes some introspective solos by Goodman and notably, pianist Jess Stacy's solo work, which the Wikipedia entry calls, "exceptional, a four-chorus, chromatic impressionistic masterpiece distinct from everything that preceded it." The entire track is marvelous. Turn your speakers up for this one.

As the global depression expands and envelops more and more of the world, music like this may be the best antidote to the craven antics of thieving bankers and incompetent politicians.

Dow 12,127.95, +26.49 (0.22%)
NASDAQ 2,778.11, +18.10 (0.66%)
S&P 500 1,285.50, +7.32 (0.57%)
NYSE Composite 7,338.65, +53.10 (0.73%)
NASDAQ Volume 1,627,906,750
NYSE Volume 3,403,227,500
Combined NYSE & NASDAQ Advance - Decline: 3882-1641
Combined NYSE & NASDAQ New highs - New lows: 54-117
WTI crude oil: 84.29, +0.31
Gold: 1,616.90, +3.00
Silver: 28.40, +0.40

Thursday, May 3, 2012

Stocks Retreat on Employment Fears

Is it possible? Could the programmed trading bots actually be learning? What happens when the computers become self-aware?

Stocks stumbled out of the gate (deft Kentucky Derby reference) at the opening bell and today there was no turning back, as the major indices suffered telling losses, hitting resistance near 3 1/2 - 4-year highs.

More sluggish data and trepidation over Friday's non-farm payroll number had investors (and machines) taking profits and looking for places to hide.

First quarter productivity was lower by 0.5%, though expectations were for a larger decline of -0.8%. The missing and/or exceeding of poor expectations has become something of a sport on Wall Street, with the bullish head-cases believing that anything better than even lousy expectations is a good thing. It's not. Even the burliest New Jersey fixed income book trader should be aware of that.

Unit labor costs rose 2% in the quarter, a stick in the eye of the 1-percenters.

ISM Services was where the big miss occurred, however, breaking down to 53.5 for April on expectations of 55.5 after booking 56.0 in March. After the Poor PMI data earlier in the week and the anomalous ISM manufacturing number that showed modest positive spin, a breakdown in the services sector would be a death knell for the "recovery at all costs" addicts, since service has become mainstream to the US economy.

Meanwhile, it's been eerily quiet on the continent, as Europe slinks into recession. Some economist with a sense of sick humor actually penned an article pointing out how conditions were improving in Greece, of all places, where 80% of businesses in the Athens business district have closed their doors in the past two years and tax receipts are easily outweighed by bribes. The article was so obtuse and fundamentally flawed, it may have been scrubbed from the internet.

The best news of the day was crude oil dropping by $2.68 a barrel, it's biggest one-day decline in over a month, and long overdue, though all commodities were lower, especially gold and silver, a sign of redemption amidst what may be the beginning of a scramble for cash.

Everything hinges on Friday's job number: Obama's re-election bid, general confidence in the economy, and more. Many sleazy banker types around Wall Street are silently praying for a poor number, so that the Fed will continue it Zero Interest Rate policy and maybe drop another round of QE on their best buddies.

My, oh, my, these bankers are a sly lot. Not.

Dow 13,206.59, -61.98 (0.47%)
NASDAQ 3,024.30, -35.55 (1.16%)
S&P 500 1,391.57, -10.74 (0.77%)
NYSE Composite 8,049.74, -74.59 (0.92%)
NASDAQ Volume 1,824,468,000
NYSE Volume 3,966,676,500
Combined NYSE & NASDAQ Advance - Decline: 1566-4050
Combined NYSE & NASDAQ New highs - New lows: 202-104
WTI crude oil: 102.54, -2.68
Gold: 1,634.80, -19.20
Silver: 30.01, -0.64

Monday, March 5, 2012

Troubling Pattern Continues on Mixed Data

For some reason, stocks continue to take on the same daily trading pattern that has persisted for roughly four weeks now. All of the major indices will start sharply to the downside, only to gather momentum throughout the session.

How stocks go up, after being down early, is a matter for some conjecture. It could be simply a function of the HFT computers which account for 70% off all trading action, it could be an algo designed to take profits early in the day and reinvest later, or it could be something sinister, like market manipulation via the PPT (Plunge Protection Team), which, despite scary market conditions and a shaky economy, still wants to give the impression that the US is in the midst of a recovery.

Whatever the case, it's disturbing to see the same or similar patterns, day in and day out, but conclusions cannot be drawn on patterns alone. Suffice it to say that it's out there for everyone to see - like a zombie market rising from the dead - and until there's a positive catalyst or the wheels fall completely off this liquidity-fueled rally (now into its sixth month without even a five percent pullback), there's little anybody can do about it except confirm its existence.

There were plenty of reasons to sell off today, as China lowered its 2012 GDP estimate from 8% to 7.5% (we should be so fortunate). That half percent may be insignificant, though it is largely understandable, as global growth has pretty much stalled for the past two years and China has been the major exporter during that time. As the People's Republic turns its attention more to the domestic side of things, it should be a signal that the export boom that was largely fed by the US and Europe has come to an end.

European PMI fell to 49.3 in February from 50.4 in January, another sign that Europe is careening toward a recession, and that certainly cannot be good news for the US, either. Besides the absurdity of their dragged-out debt crisis, high prices for fuel and food, and the necessity for structural reform, Europe continues to appear as the proverbial straw that will break the back of the global economic camel. All bourses in Europe finished in the red on the day.

Here in the US, the ISM Services Index showed some resilience, gaining to 57.3 after a print of 56.8 in January, leading some commentators to suggest that strong data in the services sector should result in a lower unemployment rate for February when the BLS issues its non-farm payroll data set on Friday.

One of the more reliable indicators, however continues to display weakness. That would be the Dow Jones Transports, which has not followed the rally of late. After peaking on February 3rd, the index has lost close to 5% since, and any Dow Theory analyst worth his salt will tell you that if the Transports don't confirm a move in the blue chip, there's almost certainly trouble ahead.

And again today, trading volume was absolutely dismal.

Then again, the world didn't end in 2008, but the road back has been long and hard. Food for thought.

Dow 12,962.81, -14.76 (0.11%)
NASDAQ 2,950.48, -25.71 (0.86%)
S&P 500 1,364.33, -5.30 (0.39%)
NYSE Composite 8,091.28, -33.90 (0.42%)
NASDAQ Volume 1,677,286,125
NYSE Volume 3,402,625,250
Combined NYSE & NASDAQ Advance - Decline: 2383-3225
Combined NYSE & NASDAQ New highs - New lows: 132-49 (trending toward convergence)
WTI crude oil: 106.72, +0.02
Gold: 1,703.90, -5.90
Silver: 33.70, -0.83

Monday, October 31, 2011

MF Global Bankruptcy, Bank of Japan Send Stocks Reeling

Anyone who assumed that equity markets would behave after last week's Eurofix found out today what a sadly mistaken assumption that is. Stocks fell right from the opening bell, stabilizing about two percent lower, but capitulating in the final minutes of trading to end near session lows.

Part of the catalyst for selling stocks was the widespread appreciation that not all of Europe's problems are solved, but also the trading suspension and subsequent bankruptcy filing by MF Global (MF), a primary dealer run by former Goldman Sachs CEO, former New Jersey governor and regular Bilderberg atterndee, Jon Corzine. (Yes, it's true, the rich do sometimes eat their own.)

The firm was under pressure recently after having made sizable investments in risky European sovereign bonds, many of which have blown up and become worth much less than what MF Global had paid.

A swell fact box from Reuters shows that MF Global is the 7th largest bankruptcy since 1980, though it's probable that any bankruptcies prior to that date are smaller than #15, IndyMac, which went bust for $32.73 billion in 2008. Also worth noting is that 13 of the 15 occurred after 2000, and three of the top four happened in 2008-2009. So, the question of whether MF Global's little $41.05 billion will cause consternation and contagion, and, if so, how much?

The bankruptcy filing showed Corzine's firm listing as its largest unsecured creditors, JP Morgan Chase (JPM) $1.2 billion and Deutsche Bank about $1 billion.

With Europe still unsettled despite the outline of plans being trotted out last week (and the market rallying strongly), there's still plenty of counterparty risk whisking around the toilet bowl of global debt and MF Global, being a primary dealer, had all the advantages one could dream of and still went up in flames.

Adding to Monday's melodrama was the poor report from the Chicago PMI, which came in at 58.4 for October after a 60.4 reading in September, yet another sign that the US economy may not be doing as well as some might imagine.

The Bank of Japan intervened in its own currency, selling yen and buying US dollars. This sent the dollar soaring and the yen plummeting, in a move the Japanese central bank hopes would improve conditions for the nation's exporters. The follow-on was a crashing Euro, which confounded forex traders after the Euro had risen dramatically against the dollar over the past three weeks. Along with US stocks, commodity prices were mostly lower.

While the kick-off of the week was a rapid reversal of fortune after the extended bull rally of the past four to five weeks, there is certain to be more fireworks ahead. The Federal Reserve begins a two-day meeting on Tuesday, with a rate policy announcement due Wednesday. Hints that the Fed may embark on another round of QE have been circulating, though Fed members have not been forthcoming with details. There is also a bevy of economic data releases scheduled, with October Private Payroll data from ADP and crude inventories on Wednesday, unemployment claims, third quarter productivity, October factory orders and ISM Services on Thursday, prior to the Friday announcement from the Labor Department on non-farm payrolls for October.

With this kind of beginning, the markets will need some stroong economic data to stave off another batch of selling into perceived strength.

Dow 11,955.01 276.10 (2.26%)
NASDAQ 2,684.41 52.74 (1.93%)
S&P 500 1,253.30 31.79 (2.47%)
NYSE Compos 7,563.38 240.56 (3.08%)
NASDAQ Volume 1,788,364,125.00
NYSE Volume 4,310,269,000
Combined NYSE & NASDAQ Advance - Decline: 1125-4532
Combined NYSE & NASDAQ New highs - New lows: 59-39
WTI crude oil: 93.19, -0.13
Gold: 1,725.20, -22.00
Silver: 34.35, -0.93

Wednesday, October 5, 2011

Quiet Day as Stocks Ramp Up Further in Advance on NFP Data

It was a very quiet, lackluster session for US stocks after yesterday's flash rally in the final hour had the desired effect of cooling off the shorts and the sellers, at least for a day. There was scarcely a peep coming out of Europe, the main culprit for increased volatility in US markets, and the upside play was enhanced when ADP released its September Employment Change report, showing job gains of 91,000 over the past month, though the number was 89,000 prior to that and the official US Labor Dept. non-farm payroll survey came up with a big, fat zero, so hope for significant job gains this month will depend on how drastically federal, state and local government jobs were slashed in September. The non-farm payroll report comes out before the markets open on Friday and estimates are in a range of gains of just 30,000 to 90,000.

Another boost to confidence was applied when the ISM Services Index fell less than expected, from 53.3 in August, to an even 53 in September. Of course even though the employment picture for private employers may be exhibiting signs of renewed hope that the US economy may avoid a recession by a hair, the report from Challenger, Gray and Christmas painted a different picture, with an increase of 211.5% in mass layoffs over last year. The planned job cuts of 115,000 were the highest reported since April 2009, at the depth of the latest recession and were 126% higher than those reported in August.

Regardless, stocks marched higher throughout the day, on strong volume. This two-day rally has to be put into perspective, however, as it began as a desperate bounce off new lows, was more than likely the work of a number of insiders and scared short sellers back into hiding, though a few more days of gains might just bring them out once again.

Everything seems to be heading for the non farm payroll report on Friday, but Thursday's weekly reading of initial unemployment claims, if they continue heading lower, as they did last week, should give stocks more lift.

The oddly-quiet nature of today's trade, when combined with the incidence of solid volume sets up an interesting trading regimen for the remainder of the week. Of course, that could all be scuttled by more negative news out of Europe, which has developed the nasty habit of showing up just in time to kill numerous rallies over the past two months.

With market reactions to every bit of news, trading stocks have become about as reliable as an old fashioned craps shoot on a Bowery back alley. Real money has retreated into cash, gold, treasuries or other hard assets, where merely holding onto what one's got has become the mantra of a new, risk-averse generation of money mavens.

This current rally is nothing but flux and fluff and, like so many before it, will probably end up in tatters before long. Deflation has reared its ugly head and won't back down until Bernanke gives in and goes for another round of quantitative easing, the worst of all possible solutions.

Dow 10,939.95, +131.24 (1.21%)
NASDAQ 2,460.51, +55.69 (2.32%)
S&P 500 1,144.04, +20.09 (1.79%)
NYSE Composite 6,843.41, +120.43 (1.79%)
NASDAQ Volume 2,457,121,250
NYSE Volume 5,855,495,000
Combined NYSE & NASDAQ Advance - Decline: 4664-1866
Combined NYSE & NASDAQ New highs - New lows: 18-138
WTI crude oil: 79.68, +4.01
Gold: 1640.70, +16.50
Silver: 30.43, +0.20

Friday, September 3, 2010

August Jobs -54,000; Stocks Soar. Can Anything Be Trusted?

Total Nonfarm Birth/Death Adjustment +115

Why is that the most important number in this month's Non-farm Payroll Report issued by the Bureau of Labor Statistics (BLS)?

It's because the Birth/Death adjustmentis employed by the BLS to estimate the number of business openings (births) and the number of business failures (deaths) and is imputed into their formulas to come up with their monthly estimate of total US employment, better known as the monthly Non-Farm Payroll report.

Accordingly, when the BLS believes that there are more businesses opening than closing, the number is positive, boosting the overall employment picture, and the opposite when more businesses are failing.

From the charts provided by the BLS themselves, the birth/death model is accounting for a rapidly-expanding number of new businesses in the US (predominantly small businesses) as compared to businesses closing their doors. Should we be inclined to believe this fantasy, we would think the US economy, specifically small business, is booming and hiring new workers, though we know this is not even remotely the case.

We can make some comparisons and use other data to demystify the claims of the BLS. Specifically, we can look at the number of businesses filing for bankruptcy in 2010, and magically, we find a WSJ report that gives us a glowing headline - in support of the BLS birth-death model - though the devil, as usual, lies in the details.

The article states that while Chapter 11 reorganizations were down 17% in the first half of 2010 as compared to 2009, but Chapter 7 filings remained flat. So, what does this really tell us? Since Chapter 11 keeps a business's doors open, while probably reducing to some extent either wages or workers or both, that's positive, since fewer businesses are jumping through the Chapter 11 hoops and thus laying off fewer workers. But, when it comes to Chapter 7, which is liquidation, and was flat as compared to 2009, we should evidence no upside benefit to the birth-death model.

Now, let's check on new business startups, which is the "birth" part of the equation.

Here's an article which postulates that the average new business is hiring fewer employees now than in the past, which makes sense, as regulations and required filings have increased the small business burden while technology has allowed workers to be more productive. Add in the quest for outsourcing and you get the perfect scenario for new businesses not putting on as many employees as they used to, so when the BLS imputes the data for business births, they should consider that any new business will likely add fewer jobs than previously encountered.

On the positive side, the Ewing Marion Kaufmann Foundation reports that 2009 was a banner year for entrepreneurship, making the claim that, on average, 558,000 new businesses were started EACH MONTH in the year.

That is a monumental claim, postulating that 6,669,000 new businesses were formed in he year. Were that number even close to being true, the gains from new businesses should have almost completely eclipsed the losses from 2007-2008.

In contrast to the claims made by Kaufmann, which uses BLS data for baseline methodology, the WSJ posits that the number of new businesses fell by 24% in 2009, and 2008, though reportedly strong, was no banner year.

Outplacement firm Challenger, Gray and Christmas find that new business creation has fallen precipitously in the first half of 2010:
CHICAGO, July 19, 2010 – A new survey shows that start- up activity plummeted in the first half of 2010 as would-be entrepreneurs were either scooped up by employers or scared off by fragile economic conditions, a tight lending market and uncertainty over the sustainability of the recovery.

The Challenger study puts the figure at 3.7% of surveyed job-seekers, the lowest two-quarter average on record. The firm began collecting data in 1986.

The World Bank chimes in with a study of their own, stating:
We find that firm births contribute substantially to gross and net job creation. New firms tend to be small and thus the finding of a systematic inverse relationship between firm size and net growth rates is entirely attributable to most new firms being classified in small size classes.

Going back to the BLS birth/death charts, we note that in 2009, when business births were supposedly on the upswing, the BLS shows the model producing sizable gains in March, April and May, but then becoming pretty static for the remainder of the year. In 2010, the model number falls off a cliff in January, at -427,000, but then rebounds and posts gains in each proceeding month, eliminating and overshadowing the January losses.

In conclusion, there are simply too many numbers being thrown around in opposing directions for all of them to be right or to draw any conclusion except that the BLS birth/death model is structurally inconsistent, at times in opposition to competing data and more than likely employed to massage or move the overall non-farm payroll data month to month in whatever direction is politically palatable at the given moment.

Simply put, the birth/death model, on top of or imputed into raw estimates and seasonal adjustments, shrouds the entire non-farm payroll data in layers of stealthy and obscure adjustments.

Finally, here's a 2009 story from Bloomberg that screams, U.S. Job Losses May Be Even Larger, Model Breaks Down. That is about as close as one can come to saying that the government figures are useless and probably should not be trusted without actually saying it.

With the joyous news that August non-farm payrolls decreased by only 54,000 - beating expectations - stocks were off to the races, gapping once more at the open to lock in as many short sellers as possible. The markets maintained their positive bias throughout the remainder of the session, finishing close to their highs.

Investors looked past a terrible ISM Services index reading of 51.5 in August after showing 54.3 in July. Not surprisingly, bank stocks were among the leaders.

Dow 10,447.93, +127.83 (1.24%)
NASDAQ 2,233.75, +33.74 (1.53%)
S&P 500 1,104.51, +14.41 (1.32%)
NYSE Composite 7,055.03, +88.78 (1.27%)

Advancers clobbered declining issues, 4934-1488. New highs overwhelmed new lows, 415-49. Volume was non-existent, yet another signal that the rally is made on nothing but desire to trade, and is probably being directed by a small number of insiders.

NASDAQ Volume 1,512,487,250
NYSE Volume 4,127,134,500

Of the commodities we track, silver was the only winner, cementing a lengthy rally with a 28 cent gain, closing at 19.92. Gold slipped $2.30, to $1,249.20, while crude oil fell 42 cents, to $74.60.

It was quite a remarkable week for stocks. The Dow, which closed at 9985 just last Thursday, has managed a gain of 462 points in the last six sessions. There is likely more upside, though it may be limited in size and duration, as resistance begins around 10,600 on the Dow and 1125-35 on the S7P 500.

Enjoy the Labor Day holiday by not laboring. Get out and have some fun. Life is too short not to.

Tuesday, July 6, 2010

The Rally That Wasn't

Nothing like a three-day weekend to revitalize the spirits of bullish investors, thus, the markets opened in the US on a strongly positive note the day after Independence Day festivities expired.

The Dow rocketed ahead 172 points in early going, but the high of the day was reached just moments after ISM services were reported lower for June, down to 53.8, after a reading of 55.4 for May. The market's reaction to the economic data was the opposite of what one would have expected, but it was fleeting, with the markets beginning a serious day-long downturn less than an hour into the session.

By 2:00 pm all the of indices had given up their gains, with the NASDAQ trading in the red the rest of the way into the close. Stocks finished mixed, which, along with the strong open and sloppy finish, are tell-tale chart patterns of bear markets. Only a final push - likely the result of short-covering - kept the markets from ending the session fully in the red.

With nearly all of the economic data over the past three to four weeks being on the weak side, there's an abundance of anxiety over upcoming corporate earning reports, which are expected to be strong enough to pull stocks out of their prolonged slump, which has persisted since the start of May.

Alcoa (AA) will officially kick things off on Monday, July 12, but investors aren't currently inclined to play much of a waiting game. The consistent mood has been, "sell now, ask questions later," as stocks have been beset by doubt and uncertainty in global markets.

Dow 9,743.62, +57.14 (0.59%)
NASDAQ 2,093.88, +2.09 (0.10%)
S&P 500 1,028.06, +5.48 (0.54%)
NYSE Composite 6,486.12, +51.31 (0.80%)

While today's headline numbers look good on the surface, a peek beneath the hood reveals the extent of the damage. Declining issues outpaced advancers once again, 3626-2884. New lows continued to dominate new highs, 304-122. Volume was average.

NASDAQ Volume 2,170,274,250
NYSE Volume 5,480,022,000

Surely, some will take comfort in the fact that the string of seven consecutive days on the downside has been broken, though many more will point to the manner in which the streak was ended as being servile and cynical.

Commodities also evidenced signs of strain. Oil dipped to $71.98, down 16 cents, while gold fell another $12.60, at $1,194.80. Silver, perhaps as people appreciate how undervalued it has become in terms of gold, gained smartly, up 14 cents, to $17.83.

It's a short week for trading, but an important one, to see whether traders can hold it together until earnings reports come riding to the rescue. Even that's a dodgy proposition, with so much uncertainty in so many corners.