Traders Shrug, Stocks Rip Higher

Bear market in Emerging Markets? No problem.

Upcoming Fed rate hike? Why worry?

Trade war with China? Nah.

The general attitude on Tuesday - following a somewhat dismal start to the week - seemed to be the old "buy the dip" mantra that boosted stocks high for most of the last ten years in the extended bull market.

As long as nothing major appears to disrupt the global money flow, traders in New York seem to be content buying stocks at just about any price, any multiple, any day, any time.

Tuesday's trading was a textbook example of momentum trading on the absence of news, good, bad, or otherwise. Stocks got off to a solid start and added to their gains throughout the session, with the markets in lockstep for a change.

The Dow was led higher by a wide swatch of companies, from Boeing (BA) to Nike (NKE), to Pfizer (PFE), Intel (INTC), and Home Depot (HD), all of which gained more than one percent on the day. 25 of 30 Dow components were winners, with just five losing ground.

Blue chips closed at their best level since the end of January, eclipsing the losses incurred in February and March, which are now fading into the deep recesses of trading memory. The Dow Jones Industrial Average is less than 400 points from making a new all-time high. Such a move would negate the Dow Theory bear market signal issued in April, as the Dow Transportation Index has already broken above its previous high.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14

At the Close, Tuesday, September 18, 2018:
Dow Jones Industrial Average: 26,246.96, +184.84 (+0.71%)
NASDAQ: 7,956.11, +60.32 (+0.76%)
S&P 500: 2,904.31, +15.51 (+0.54%)
NYSE Composite: 13,091.98, +60.07 (+0.46%)

Dow Lower, NASDAQ Higher; Which One Is Right?

There's been an interesting dynamic to the market over not just the past few days, but for the past six months, though it has become somewhat pronounced recently, and that is the divergence between the staid, centered 30 stocks that comprise the Dow Jones Industrial Average and the thousands which populate the NASDAQ composite exchange.

Whenever the Dow is up, it's almost certain that the NASDAQ will produce gains as well, but, when the Dow is lower, the NASDAQ is often higher, which means there are not only some major differences of opinion on which stocks to own, but also on the general nature and direction of the economy.

It appears that those invested primarily in Dow stocks are probably more conservative in their investment approach, primarily due to the collective pre-eminence of the Dow components and the fact that all stocks in the Dow pay dividends.

The NASDAQ has always been more of a speculator's paradise, where some of the best new technology, finance, energy, and medical stocks reside. It's also home to many smaller firms with limited histories and even more limited earnings records. In fact, many stocks listed on the NASDAQ don't have any earnings at all. Those are fledgling enterprises operating at a loss, a not unusual circumstance, but one of which many funds and investment advisors steer clear.

To say that stocks traded on the NASDAQ are possibly of lower quality long term and risk-sensitive would be an understatement. Consider the leading percentage gainers in today's big move to yet another all-time high.

Destination Maternity (DEST), Etsy (ETSY), Nightstar Therapeutics ADR (NITE), iQIYI ADR (IQ), and Dropbox (DBX) were the five biggest gainers.

Of those, maybe you've heard of Etsy and Dropbox. The others? Probably not. That's where the speculators are playing.

Not only is the NASDAQ home to new ideas and new companies, many of the big tech names are listed there. The top 20 most actives today included the likes of Intel, Cisco, Comcast, 21st Century Fox, Apple, Netflix, Microsoft, Facebook, and Zynga, a pretty good sampling of large, established entertainment and media companies.

Apparently, the NASDAQ is where the action is, as it has outperformed the Dow quite handily this year.

The Dow still carries the weight of the world, though, and it's been sluggish.

Which one is on the correct path? Absolutely, time will tell.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47

At the Close, Thursday, June 14, 2018:
Dow Jones Industrial Average: 25,175.31, -25.89 (-0.10%)
NASDAQ: 7,761.04, +65.34 (+0.85%)
S&P 500: 2,782.49, +6.86 (+0.25%)
NYSE Composite: 12,773.15, -12.30 (-0.10%)

The Market is a Yo-Yo; Don't Get Strung Out

There are only two directions in which the prices of assets can move: up or down. In it's current state, US stock indices are doing both, a condition which cannot persist for long before the establishment of a definite direction becomes apparent and dominant.

Thus far in the month of February - which has a mere six trading days remaining - there have been eight days of gains and five sessions ending with losses, each swing in either direction being rather magnanimous compared to the prior regime of low volatility and complacency.

On Tuesday, the Dow Jones Industrial Average arrived at the midpoint between the highs and lows for the month. On the 8th, the low reading was a cumulative loss of 2288 points. On Tuesday, the 20th, it closed with a loss of 1184 for the month, roughly a 50% retracing off the lows, ending a string of six straight winning session.

Tumultuous times cry out for straightforward thinking and diligent observation. Direction will soon be determined, and such direction can be employed as a springboard for trading over the upcoming six to 18 months.

At the present, nothing has been determined, but it is clear that stocks are finding a rough road back to all-time highs acquired late in January. Not that all gains are without drawbacks and whipsaws, but the measure will likely be in the breadth of gains and losses in individual stocks.

Tuesday's losses on the Dow were led by Wal-Mart (WMT) which fell by more than 10%, but it was by no means alone. Of the 30 blue chip components, only five gained on the day, and only one - Intel (INTC) - gained more than one percent.

One by one, as fourth quarter 2018 and full year earnings are announced, the Dow stocks are being sold off. Whether this emerges as a buying opportunity or a precursor to more asset shredding is a function of both market sentiment and the continuing narration of the Trump economy.

If the general economy is on the mend, then this episode of doom and gloom will be brushed off as a mere anomaly. On the flip side, should the darlings of Wall Street continue to underperform, more losses lay dead ahead.

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49
2/12/18	24,601.27	+410.37	-1548.12
2/13/18	24,640.45	+39.18	-1508.94
2/14/18	24,893.49	+253.04	-1255.90
2/15/18	25,200.37	+306.88	-949.02
2/16/18	25,219.38	+19.01	-930.01
2/20/18	24,964.75	-254.63	-1184.64

At the Close, Tuesday, February 20, 2018:
Dow Jones Industrial Average: 24,964.75, -254.63 (-1.01%)
NASDAQ: 7,234.31, -5.16 (-0.07%)
S&P 500: 2,716.26, -15.96 (-0.58%)
NYSE Composite: 12,763.34, -111.02 (-0.86%)

Note: Just heard that Reverend Billy Graham has passed away at the age of 99. A good man has gone to meet his maker.

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%)

Stocks Slammed Globally, S&P Under 1900; Dow Drops Below 16,000

Wall Street is, at last, getting the just desserts from seven years of Fed policies that have funneled trillions of dollars into the hands of the wealthiest people in the country.

The kicker is that the American public, the 65-70% that still works for a living, are going to get the worst of it.

Today's carnage in US equity markets was not an isolated event by any means. It began years ago, but, in its most current manifestation, the collapse began in China last night, when the SSE fell nearly 5% in its last session of the week.

The contagious selling fever spilled over into European markets, with the DAX, CAC-40, and FTSE-100 ending the day down by 2.54%, 2.38% and 1.93%, respectively.

Prior to markets opening in the US, however, there was a spate of poor economic data released.

Retail sales for December came in at -0.1. PPI went negative (deflation) in December, at -0.2%. Empire Manufacturing (a gauge for economic activity in the NY Fed district, collapsed from a reading of -6.2 in December, to a ghastly -19.4 in January.

Industrial Production fell 0.4%. Capacity Utilization slumped to 76.5%.

Then came the news from Wal-Mart that they would be closing 269 stores this year, with 154 of them in the United States. The full list of Wal-Mart store closings can be seen here.

By the time markets actually opened at 9:30 am ET, futures were showing the Dow down by more than 350 points and the indices all fell off a cliff at the sound of the opening bell.

By midday, the Dow was down more than 500 points, the NASDAQ had shed close to 150, and the S&P was sporting losses of more than 50 points.

While today's crashing stock indices were certainly bloody, they weren't even close to the 10 worst one-day Dow declines of all time, so all is not lost.

As the session wore on, the signs of a failing economy - both here in the US and globally - were everywhere. The 10-year note fell briefly below 2.00%. With 1/2 hour left to go, declining issues were leading advancers roughly 6:1. Intel (INTC) was down nine percent. Citigroup (C) was posting a 6% loss; Microsoft (MSFT) was clinging to a four percent downside. Bank of America (BAC), which was pushing 17 two weeks ago, sliced through 15 and was trading in the range of 14.40, down 4.0% on the day.

With more companies reporting Q4 and annual earnings next week, the action this week and today might just be an appetizer for what's about to come, and that might be a recession, collapsing corporate earnings, liquidations, bankruptcies and the wholesale destruction of pension funds - heavily invested in equities - nationwide.

For its part, the Fed trotted out William Dudley, president of the NY Fed and vice chairman of the FOMc, who noted that negative rates could be considered in light of the recent market volatility. His tongue-lapping of the markets didn't seem to carry much weight. Investors were only interested in getting out and limiting the damage prior to the long weekend.

The day's closing prices:
S&P 500: 1,880.28, -41.56 (2.16%)
Dow: 15,988.08, -390.97 (2.39%)
NASDAQ: 4,488.42, -126.59 (2.74%)

Crude Oil 29.67 -4.90% Gold 1,088.90 +1.43% EUR/USD 1.0920 +0.53% 10-Yr Bond 2.03 -3.10% Corn 362.50 +1.26% Copper 1.95 -1.57% Silver 13.90 +1.14% Natural Gas 2.10 -1.73% Russell 2000 1,005.44 -1.97% VIX 27.70 +15.66% BATS 1000 20,066.91 -1.99% GBP/USD 1.4255 -1.13% USD/JPY 117.0050 -0.97%

For the week:
S&P: -41.76 (-2.17)
Dow: -358.71 (-2.19)
NASDAQ: -155.21 (-3.34)

Reality Catching Up to Wall Street on Earnings Misses, Fears

Around June, this author told a particularly self-absorbed, furtive individual that there would be a market "event" shortly before the presidential election, designed to offer the impression that the economy, under president Obama, was failing in multitudinous ways, designed to usher in Mitt Romney as the next occupant of the White House.

Until today, that prediction seemed somewhat unreasonable, as stocks have risen sharply during the summer months, but, as third quarter earnings - in addition to various warnings from the likes of the IMF and World Bank - are proving, the US and global economies are far from what anyone would consider healthy.

Today's sharp sell-off was the product of many misses and warnings by huge multi-national companies that either missed earnings and/or revenue estimates or issued warnings for the months ahead.

Among those companies that fell short of Wall Street's lowered estimates after Thursday's close and prior to Friday's open were McDonald's (MCD), Microsoft (MSFT), Google (GOOG), high-flying Chipolte Mexican Grill (CMG), and General Electric (GE). The misses came behind similar poor showings from Intel (hit a 52-week low today) and IBM, earlier in the week and proved quite a few sell-side analysts correct in predicting that this quarter would be very rough from an earnings perspective.

Truth be told, even those companies beating earnings estimates are not beating by much, with some exceptions, and are generally hitting targets that are lower than the previous years numbers, which, as the market is a continuous-discounting mechanism, means stocks are going in reverse, with earnings falling, not growing.

That alone should explain today's deep, across-the-board, declines, but also brings into question the entire philosophy behind central bank easing and money printing on a global scale. Sure enough, easy money has propped up banks and companies and a multitude of stocks and indices, but the end result of funny fiat money always reverts to a point at which currencies become worthless and derivative instruments, such as stocks, and, further out, bonds, lose value and we could be nearing the conclusion of the failed stimulative experiment that's fixed nothing since the crash of 2008.

Speaking of crashes, today's drop pales by comparison to what occurred 25 years ago to the day, the well-known stock market crash of 1987, when the Dow Jones Industrial Average fell by 23%. It was a seminal market event that will probably (hopefully) never be repeated, as there are supposedly more safeguards and triggers - to say nothing of the PPT - to prevent such a disastrous one-day event.

That is not to say that markets, stocks and indices cannot fall hard over periods of time, though it is far too soon to call today's action the beginning of such a a downward spiral. However, with tech stocks and industrials feeling the heat from investors in an earnings season that has been short on enthusiasm and long on fear, the coming weeks, especially with the November elections as a backdrop, could produce some calamities such as have already been seen in individual stocks, many of which were grossly overvalued and highly speculative, Chipolte and Apple come immediately to mind.

Checking the charts, it's useful to point out that the Dow and S&P broke through their 50-day moving averages and closed just about right on them, a position last seen a week ago, before Monday and Tuesday's "savior" rallies pushed equities back to something of a triple top, which has now broken down in a dramatic reversal. Today's declines on the two indices were the worst since mid-June. Shortly thereafter, both indices progressed above their 50-day MA, but have now returned to the roost, setting up a very unsettling weekend and a potential breakdown on Monday or further on during the week.

As for the NASDAQ, today's worst percentage loser, that index has been screaming red for a month, having busted through its 50-day MA eight sessions ago. Any further deterioration in the beloved NAZ could trigger a serious correction, as it is already down 7% in the past month.

Looking ahead to next week, earnings reports are due out on some big names, such as Cattepillar (CAT), Las Vegas Sands (LVS), Yahoo (YHOO) and Texas Instruments (TXN) on Monday; 3M (MMM), Coach (COH), Facebook (FB) and United Parcel Service (UPS) on Tuesday; and, on Wednesday, Boeing (BA), Eli Lilly (LLY), General Dynamics (GD), Lockheed Martin (LMT) and O'Reilly Automotive (ORLY).

Those mentioned above are but a smattering of companies reporting, in what will be the busiest week of earnings season. CNBC and Bloomberg will be looking for rays of hope, while investors may have a more wary eye toward more companies missing on earnings and revenue.

One economic data point worth noting was existing home sales for September, falling 1.7% to an annual run rate of 4.75 million, well below most estimates.

Until then, the long weekend waiting game, and, on Monday night, the final presidential debate, followed on Wednesday another FOMC rate policy decision, which will probably be nothing more than a formality.

Naturally, there will be the usual can-kicking and posturing from Europe, which still cannot come up with plans for either Greece or Spain, which may or may not be part of the plan to hold off the bad news until after our elections. One can hardly wait.

That is all... for now.

Dow 13,343.51, -205.43 (1.52%)
NASDAQ 3,005.62, -67.25 (2.19%)
S&P 500 1,433.19, -24.15 (1.66%)
NYSE Composite 8,324.14, -118.68 (1.41%)
NASDAQ Volume 2,194,602,500.00
NYSE Volume 3,851,036,250
Combined NYSE & NASDAQ Advance - Decline: 1168-4339
Combined NYSE & NASDAQ New highs - New lows: 166-117
WTI crude oil: 90.05, -2.05
Gold: 1,724.00, -20.70
Silver: 32.10, -0.771

Jobless Claims Crush Stocks; Mergers Push Valuations

There's no escaping the obvious. Initial unemployment claims for the most recent week registered at a 10-month high, with half a million Americans filing for unemployment compensation.

That news, coupled with some hard-to-believe figures from the Philadelphia Fed, wiped out all of the week's prior gains and sent stocks reeling to their lowest close in a month. The major averages have been trading below their 200-week moving averages, and cannot seem to gather enough momentum to break out of the current trading range.

Significantly, trading volume reached its highest level in a week, also marking the fourth consecutive Thursday in which stocks have traded to the downside. Despite heavy play in stock options - which expire tomorrow - and some fairly significant attempts at late-day tape-painting (or, banging the close), current momentum in strictly on the side of the bears.

A couple of merger announcements caught the market's attention, specifically, Intel's (INTC) offer of $7.7 billion in cash for internet security firm, McAfee (MFE), which boosted shares of the company to be acquired by 17 points, a 57% gain.

Also on the merger block was First Niagara's (FNFG) offer to buy all of New Alliance Bankshares (NAL), a Connecticut-based regional bank, in an all-stock deal.

Both deals pushed valuations of the acquired companies to ratios of roughly 18-20 times earnings, which, by most standards might seem reasonable, though in today's liquidity-squeezed environment seem a bit on the overpriced side of the equation.

Valuation, more than ever, is going to have meaning once again for publicly-traded firms, though it's doubtful that the rich P-E ratios of the Fortune 500 companies and Dow 30 can remain in place for long, many of them trading at 20 times current earnings or higher. In a fast-paced environment, those valuations may be appropriate, but today, when all indications are for modest growth, if any at all, valuations would be more prudently placed in the 8-12 times earnings range. Should the economy continue to worsen, even those figures would seem rich.

Valuation and price discovery, the tools of any astute investor, have been shunned for years, with Wall Street assuming that 12 to 15 times earnings is the benchmark for a stable company. In the current environment, both investors and companies seeking to purchase rivals or valued additions, had better sharpen their pencils.

One other potential acquisition, that of Potash (POT), the Canadian-based fertilizer manufacturer, by Aussie giant BHP Billiton (BHP) for $130 per share - all cash - was rejected by the company to be acquired, calling the bid "woefully inadequate," though shares of Potash have zoomed up 36 points, or about 30% since the hostile offer was tendered on Tuesday.

The whole deal sounds cockeyed on the surface, and even if BHP is desperate, should not produce any tangible combination. with earnings in the previous four quarters of $4.64, even trading at $112 per share (prior to the offer), Potash was sporting a PE of 24, well into nose-bleed territory. With the stock up to 148 at last look, valuation has to just under 32 times earnings, meaning BHP will invest enough to generate a total return of capital by the year 2042, if Potash continues to perform as it has the past year.

Considering the global footprint of both companies, the deal would make sense, though Potash may have missed the boat ad says it is seeking other suitors. Obviously, some investors believe the company is worth much more than the $130 per share, though a value investor would normally walk away shaking his or her head. In this case, the value investor is running from the mob of momentum junkies crowding the trade. The valuations are ludicrous, even if they were put up in better times.

Outside the merger mania, most stocks were sinking slowly. Not a single stock on the Dow 30 showed a gain, as investors took cash out of just about every equity investment.

Dow 10,271.21, -144.33 (1.39%)
NASDAQ 2,178.95, -36.75 (1.66%)
S&P 500 1,075.63, -18.53 (1.69%)
NYSE Composite 6,855.14, -112.94 (1.62%)

Declining issues pounded advancers by an enormous margin, 5147-1322, though it could have been worse, and likely will be within days or weeks. New highs managed to stay ahead of new lows, but just barely, 275-220. It is worth noting that there was a tremendous run-up in stocks from mid-July through December of last year, so routinely making new 52-week highs is going to be a more difficult task in weeks and months ahead.

NASDAQ Volume 2,104,113,000
NYSE Volume 4,935,496,000

Crude futures continued to slide from their ridiculous levels of earlier in the month, losing 99 cents to close at $74.43, an odd occurrence for mid-summer driving season, though inventory levels continue to indicate slack demand. Gold caught another reasonable bid, up $4.10, to $1,233.80, with $1300 now the preferred price target. Silver slipped seven cents to $18.32. One wonders how long the gold boom - now in its tenth year - can last and whether these current levels indicate a topping pattern. Quadrupling your money by simply holding onto coins or bars over the past decade seems to have been the best of all trades, even though one would not have to as much as lift a finger.

Such is the condition of markets today. Idleness may be the best recipe for preservation of capital as deflation holds prices down and punishes speculation.

Is This the End of the Rally?

Stocks may have gotten a little ahead of earnings schedule, as there was absolutely no lift to the markets, even after Intel's (INTC) blowout quarter, announced last night after the close.

Struggling all day to find any buying interest, Dow and S&P stocks sent the majority of the day trading just below the flat line, with the NASDAQ sporting slim gains.

After the FOMC minutes were released at 2:00 pm, stocks abruptly turned lower, but traders boosted them back to nearly positive by the end of the session, ending with two indices up and two down, though marginally. Overall, the FOMC minutes may have had the most impact, as the opinions expressed revealed that a majority of Fed governors felt that while the economy would not fall into recession again, growth would be moderate and it would take five or six years for the US economy to regain a solid footing.

That kind of sentiment cannot be encouraging to the general sentiment and it showed up immediately in the lackluster trading and rocky internals.

What seems to be most disconcerting to stocks are technical n nature, as the indices are all toying with the space between the 200-day moving average and the 50-day. In each case, the two have crossed, with the 200-day now declining, along with the 50-day. Moving past the 200-day line will take some very positive news, though any gains in such a sloe environment are unlikely to be lasting. It seems as though the entire earnings season has already been wasted on the past six days, in which the indices already gained 7-8%, a big enough move in any environment. Adding to the confusion is options expiration this Friday, which has no doubt contributed in a big way to the sudden upside surge.

Dow 10,366.72, +3.70 (0.04%)
NASDAQ 2,249.84. +7.81 (0.35%)
S&P 500 1,095.17, -0.17 (0.02%)
NYSE Composite 6,903.36, -4.42 (0.06%)

Declining issues led advancers, 3535-2828, though new high remained well beyond the reach of new lows, 176-41. It should be noted that at this time last year, stocks surged powerfully, and that should negate any strengthening of new lows for a considerable period. Volume was just about average.

NASDAQ Volume 2,165,528,750
NYSE Volume 4,653,667,000

Stocks weren't the only assets stuck in neutral. Commodities hugged the unchanged mark most of the day. Oil lost 11 cents, closing at $77.04. Gold dropped $6.50, to $1,206.80, while silver added 4 cents, to $18.27.

Financial stocks are next up on the calendar, along with PPI and CPI on Thursday and Friday, respectively. JP Morgan Chase (JPM) reports prior to the open on Thursday, with Bank of America (BAC) and Citigroup (C) releasing on Friday.

There have been no major surprises, though retail sales were reportedly weak (not surprising) and Intel's earnings - in an ordinary environment - would have ignited a powerful rally in techs, though none was forthcoming.

An air of extreme caution and pessimism about the future seems to have fully enveloped Wall Street.

All Aboard! CSX Prompts 6th Straight Day of Gains

This is what earnings season is all about.

Investors and traders have waited patiently through two months of severe selling for days in which stocks could outshine a slew of negative economic reports, and it appears - for some, at least - that the waiting is finally paying off.

Stocks surged for the 6th straight session after rail operator, CXS reported strong earnings after Monday's close, citing net income gains of 36% in the second quarter, beating analysts' expectations. Revenue grew 22% to just below $2.7 billion.

Despite the strong report, shares of CSX were lower by about 1.5% on Tuesday, but the upbeat sentiment associated with the company, which hauls coal and countless other raw materials, parts and integrated supplies across the United States, gave traders confidence to bid a wide array of stocks higher.

Dow 10,363.02, +146.75 (1.44%)
NASDAQ 2,242.03, +43.67 (1.99%)
S&P 500 1,095.34, +16.59 (1.54%)
NYSE Composite 6,907.78, +113.30 (1.67%)

Gains were solid across all of the indices and internals were in line with the headline numbers. Advancing issues pummeled decliners, 5486-1025 (5:1), and new highs soared past new lows, 179-48. Volume, however, was not particularly strong, as reticence among potential stock purchasers remained high.

NASDAQ Volume 2,140,849,750
NYSE Volume 5,288,201,500

Commodities trended mostly higher on the day. Crude oil, on the August futures contract, rose $2.20, to $77.15. Gold gained $14.80, to $1,213.30, while silver was up 34 cents, to $18.24.

Announcements after the close on Tuesday were forthcoming from two important companies in vastly different sectors: Intel (INTC) and Yum Brands (YUM).

Intel achieved a smashing success in the second quarter, the best ever in the company's 41-year history, with gross revenue of $10.8 billion, 67% gross margins, operating Income of $4.0 billion, net Income of $2.9 billion and EPS at 51 cents.

The results were well ahead of Street estimates, and completely overturned year-over-year results. For instance, the 51 cent EPS was 183% better than the second quarter of 2009. The company also was very positive about the remainder of the year, with growth expected across all business units.

Stock players were impressed, as shares rose more than 5% in after-hours trading.

When YUM Brands (YUM), owners of KFC, Taco Bell and Pizza Hut, reported second quarter results, sentiment turned decidedly negative. The company beat analyst estimates narrowly, posting EPS of 58 cents, 3 cents better than the 55 cents anticipated, but revised its full-year forecast to $2.43 a share, with Wall Street expectations at $2.48.

This sent the stock tumbling more than 3% in after-hours trading.

These two bellwether stocks demonstrate the cross-currents in the markets quite adequately. While general economic reports - especially those concerning housing and employment - remain a drag on the economy, companies insist that they are lean and profitable, as shown by the results from YUM Brands and Intel.

What is a conundrum for many, however, is the multiple, or PE at which specific companies are trading. Across the S&P 500, the current cumulative PE is about 15, historically high. Intel is right on that number, including this quarter, at 14.45. YUM's trailing PE (using the most recent past four quarters) is an astronomical 19.22.

In other words, it would take 19 years to recoup an investment in YUM Brands based on earnings per share, and just shy of 15 to break even in Intel. In an economic environment beset with an overburden of debt still growing (government) and some being worked off in the private sector, investors may not feel comfortable with such high multiples. That will keep sentiment on the negative side until these multiples come down to levels more in line with the reality of a slow-growing economy. Something in the neighborhood of 9-12 might be suitable, perhaps even lower.

In the small business world, which is arguably more risky, companies rarely sell for more than six times earnings. More often than not, companies sell for three to four times annual earnings, as small business owners seek minimization of risk and quickly recoup their capital. The big business world of Wall Street, operating on a far loftier basis, may be overpriced by a wide degree. Small investors will not stay put in longer term equities with questionable outcomes.

A return to more reasonable valuations would send stocks into a tailspin, though, following on the deflationary backdrop which has been the dominant trend for the past two to three years, a severe correction, on a valuation basis, may be forthcoming.

Intel Earnings Spark Big Move

Stocks closed sharply higher on Wednesday after Intel (INTC) released 1t quarter results that handily beat street estimates.

The Dow Jones Industrial average sprinted to its best close in 19 months. The NASDAQ and S&P 500 each cleared psychological hurdles at 2500 and 1200, respectively. Investors were cheered by strong earnings results, a benign reading on inflation and optimistic sentiment ion the trading floor.

The government announced that Consumer prices (CPI) grew at an annualized rate of just 0.1%, with core CPI (excluding food and energy components) flat for March. This spurred speculation that the Fed would keep rates at their absurdly low levels into the third quarter, though deflationists warned that the numbers reflect not a recovery, but a flat-lining in economic growth.

Investors were not dissuaded, however, boosting shares of technology stocks ahead of the broader market.

Dow 11,123.11, +103.69 (0.94%)
NASDAQ 2,504.86, +38.87 (1.58%)
S&P 500 1,210.65, +13.35 (1.12%)
NYSE Composite 7,728.96, +90.61 (1.24%)

Advancing issues blew past decliners, 5014-1459, a margin of better-than 3:1. New highs erupted to 1222, with only 95 stocks making new 52-week lows. Volume was impressive on the NASDAQ, but subdued on the NYSE, an ongoing trend.

NYSE Volume 4,512,912,000
NASDAQ Volume 2,799,845,500

Commodities joined in the rally, with crude oil futures gaining $2.84, to $85.84. Gold was higher by $6.20, to, $1,159.00, while silver added 16 cents, to $18.40.

The Dow is up 12% since the February 8 bottom at 9908. Investors will be keeping a close eye on initial unemployment claims on Thursday, as employment and housing continue to lag the stock market. Any good news from either sector will help keep the rally going.

On Getting What You Want, Part 1

Wall Street and the financial markets are odd and unpredictable. That's why some people win and some lose, and why the individual investor is at a disadvantage compared to those wizened professionals who ply their trade daily in stocks, bonds, et. al..

Because the whims of the market are so unpredictable and can turn on a dime on a news item, a press release, an event - economic, social or political - the average Jane and/or Joe is likely to suffer losses when pros have already gotten out ahead of the pack. The law of the jungle applies, and always has. The fittest get fatter; the weak are thrown to the wolves.

Noting that, the marketeers have finally gotten some news upon which they can act. Reported after the closing bell, Intel (INTC, 21.48) reported a fourth-quarter profit of $2.3 billion, or 40 cents a share, compared with a profit of $234 million, or 4 cents a share, for the year-earlier period. These numbers were well ahead of expectations. In fact the company delivered a 33% earnings surprise, good as gold in anybody's book.

Tomorrow ought to be a red-letter day for tech stocks, as one of the firebrands, Intel, has set some heat under upcoming earnings for the rest of the sector. Trouble is, as great a company as Intel is - and it's definitely top-shelf - the stocks was a loser for the entire 00s decade and seems to be permanently stuck in a range just above its historic lows, because it is already overvalued, by just about any measure.

Intel's price/earnings ratio, using trailing figures, is about 28. Even if the company has quarters equal to this one for the next three running and the stock doesn't go up, it will still be trading at more than 13 times earnings, meaning it would take 13 years of similar profitability just to get your money back. It does carry a dividend of 53 cents per share, but at the current price, that's a yield of less than 3%. It's a great company, all right, and it would be a buy at any price below 15. 12 would be a good starting point, but it will likely never go there. Since Intel isn't going to ever move, tech traders will begin looking elsewhere tomorrow. Don't be surprised if Intel trends lower over the coming weeks. It's a dog and the pros know it, even though it's a part of just about every fund portfolio.

Before that after-the-bell experience, stocks did what they've generally been doing for the past month. They rose slightly.

Dow 10,710.55, +29.78 (0.28%)
NASDAQ 2,316.74, +8.84 (0.38%)
S&P 500 1,148.46, +2.78 (0.24%)
NYSE Composite 7,448.52, +18.38 (0.25%)

Advancing issues were all over decliners, again, 3792-2662. New highs came in at a whopping 554; there were just 53 new lows. Volume remains subdued, which has become acceptable, but the only people trading are funds and pros. It's kind of a closed loop, but as long as nobody sell, stocks will just keep going up. That cannot happen indefinitely, however, and the longer the rise, usually the steeper the fall. The rally is now in its 11th month without a meaningful correction, a great time to SELL.

NYSE Volume 4,470,046,000
NASDAQ Volume 2,301,493,500

Hooray! Oil dipped 30 cents, to $79.35, and natural gas, after a big buildup on CNBC, saw its price shaved by 11 cents, to $5.57. Seems demand for the #1 energy product just hasn't been as great as those speculating for higher prices had hoped. Its already nearly doubled since just 8 months ago, and the US supply is still at 100 years or more. If supply and demand economics were truly in play (they're not, the price is manipulated by big energy firms - you know who they are), natural gas would be selling at wholesale for about $2/1000 btu, and your heating bill would be half of what it is now.

Unfortunately, most Americans who heat with natural gas are stuck with the absurdly high prices charged by local monopoly utilities. Thus, we overpay, and have been for years, especially since deregulation (thanks again, Ronald Reagan).

The stable commodities, the ones you should own, gold and silver, each registered solid gains. Gold added $7.10, to $1,144.00, while silver was up 9 cents, to $18.64. Both are on the verge of major breakouts, especially silver, but Wall Street hates these commodities because they compete with the electrons and protons and pieces of paper they like to peddle, stocks.

Were gold and silver allowed to rise to their actual inflation-adjusted levels, they might be double or triple where they are now. Even if the Wall Street shorts don't cover, they still should return better than stocks for years to come.

Getting What You Want, part 1

One often has to go to extreme measures in order to achieve goals. There are forces working against you, like headwinds keeping a kite grounded or a plane slowed. Sometimes, these headwinds are being blown by your trading partner, or, in layman's terms, your buyer, if you're a seller.

I recently completed a successful negotiation for some items priced about 3 times what I had originally expected to get for them. The negotiations consisted of me asking the prospect for an offer. When he refused and asked me to name my price, I used the first rule of haggling: go high and then add 20%. To my surprise, the prospect was agreeable to my price and terms, but, as I found out, was a chronic payment-delayer, continually adding a day and an excuse for when the transaction would be completed.

This activity continued over the course of 6 days, until I finally took action and laid it out in the simplest of terms, that the deal had to be done, or he should walk. After an abrupt retort, at which point the prospect was willing to walk away, I was forced to detail his abhorrent behavior in quite unsavory terms (in other words, I swore at him up and down, called him names and shamed him). I thought the deal was then kaput, but, to my surprise, the prospect actually was swayed and contacted me, explaining that he thought I was right. A few hours later, the deal was done, even though I called him names and told him I would have had sold to him for less had he made a reasonable offer in the first place, but instead decided to let me set the price (and, by that, the agenda).

So, the moral is that if a deal is breaking down, and you believe that the other party is stalling - for whatever reason, it's not important - put him or her on the spot very aggressively. Be the lion and you'll find many lambs upon which to feast.

That's one way of getting what you want, or, in this case, even more.

Deals, Upgrades Boost Stocks; NASDAQ Breaks Out

Led by news that Sanofi-Aventis (SNY) will buy retail health products firm Chattem (CHTT) for $1.9 billion and upgrades of key Dow components Intel (INTC) and Alcoa (AA) helped stocks kick off the short Christmas week with a bang.

Stocks soared right off the opening bell and held onto most of their gains through a somewhat listless session, though there was plenty of M&A news to keep participants interested. Besides Alcoa surging nearly 8% at the close, merger mania seems to have overtaken the health care sector, as pharma firms flush with cash seek to expand into the consumer market.

With the US senate voting to suspend debate on the health care bill, the major drug companies seem confident they have wrung the very best deal they could out of their congressional puppets. Many firms in the sector have been up sharply in recent days, including Dow components Merck (MRK) and Pfizer (PFE), considering the reform measure to be nothing more than bluster and Democratic party PR, void of substantive change. Thus, big pharma and health care providers will continue their rapacious plundering of the American people well into the next presidential cycle without a hitch.

Since US politics has been and continues to be largely held hostage by Wall Street, the pharmaceutical companies got whatever they wanted from a compliant Congress, meaning no real reform and no tax changes. It all adds up to business as usual for American medicine - the public pays, and if it can't, taxpayers foot the bill.

Dow 10,414.14, +85.25 (0.83%)
Nasdaq 2,237.66, +25.97 (1.17%)
S&P 500 1,114.05, +11.58 (1.05%)
NYSE Composite 7,147.15, +60.96 (0.86%)

Simple indicators affirmed the upside bias, suggesting further price appreciation for equities as advancing issues trumped decliners, 4503-2061, and new highs beat new lows, 499-94. Even though the dollar was higher against foreign currencies, stocks managed healthy gains, with all ten sectors advancing. Volume was slightly lower than normal, due to the closeness of the holidays, but not so poor as to suggest that traders were completely disinterested.

As the Dow and S&P were churning over ground already harvested, the NASDAQ broke out to new highs, as financial services and technology led the index higher. Amazon (AMZN), Google (GOOG) and Apple (AAPL) all posted strong gains.

NYSE Volume 4,531,713,500
Nasdaq Volume 1,837,347,875

The commodity complex was buffeted by the rising greenback. Oil slipped 89 cents, to $72.47. Gold fell dramatically, below the psychological $1100 level, down $15.50, to $1,096.00, in a continuation of the pull-back from all-time highs. Silver responded in like fashion, losing 28 cents, to $17.04.

With just three more days remaining in the shortened week (plus, Thursday will be a half-session), Tuesday's trade is likely to be more tempered as the third and final GDP estimate for the 3rd quarter is released at 8:30 am and existing home sales data for November will be announced at 10:00 am. At the same time on Wednesday, the National Association of Realtors (NAR) will release new home sales figures for November.

Slow Day, But Intel, CSX Movers After Hours

Stocks largely marked time on Tuesday as investors awaited third quarter earnings results from Intel (INTC), the world's largest chip maker, and CSX (CSX), one of the nation's largest freight railway operators.

After something of a disappointment from Johnson & Johnson (JNJ) before the bell, stocks sold off at the open and struggled close to break even throughout the rest of the day. It was apparent that there would be no major movement in the indices until the Intel announcement.

Dow 9,871.06, -14.74 (0.15%)
NASDAQ 2,139.89, +0.75 (0.04%)
S&P 500 1,073.18, -3.01 (0.28%)
NYSE Composite 7,031.87, -19.29 (0.27%)

Decliners beat advancers, though not broadly, 2808-3571. New highs continued to outperform new lows, 312-56. Volume was expectedly moderate.

NYSE Volume 5,026,830,000
NASDAQ Volume 2,052,388,000

Most of the real action that will affect markets for the near term occurred after the closing bell, when CSX reported 3rd quarter earnings results.

Net income from continuing operations was $293 million, or 0.74 cents per share. CSX said revenue in the quarter fell 23 percent to $2.3 billion, in line with analysts' expectations. The earnings beat expectations by .03 cents per share. The stock, which was traded lower by 63 cents during the regular session, was up sharply - +1.24, to $45.52 - in after hours trading.

Just minutes after CSX reported, Intel blew away estimates in all areas, reporting 3rd quarter earnings of $1.9 billion or 33 cents per share, compared with a net profit of $2.01 billion, or 35 cents per share, in the year ago period.

Revenue also beat forecasts handily, at $9.4 billion when expectations were set at $9.06 billion. After being halted pending the release, the stock soared nearly 6% in after hours trading, gaining more than $1.00 per share, pushing the stock above 21.50, a new 52-week-high. Significantly, Intel's earnings boosted a slew of other stocks after the close, including many in the tech and computer sector. Companies like Apple (APPL), Hewlett Packard (HPQ), Google (GOOG) and Cisco (CSCO) all gained in after-hours trading.

Commodities were solid during the session, with oil up 88 cents, to $74.15; gold up to a new record high of $1,065.00 on a gain of $7.50. Silver lagged somewhat, picking up 2 cents, to $17.84.

With real news coming both from the base (CSX) and the top (Intel) of the economy, unless there's some kind of disaster between here and the opening bell on Wednesday (retail sales for September are due out at 8:30 am), stocks should soar at the open, led by technology.

Dow, S-P, NYSE All Hit New 2009 Highs

On the day Americans celebrate the man who discovered our continent - Christopher Columbus - investors were discovering new 2009 highs on three of the four major indices. The Dow Jones Industrials, S&P 500 and NYSE Composite all closed at highs of the year, with the Dow eclipsing an intra-day high with the new mark now 9931.82, just 69 points shy of the enormously psychological 10,000 mark.

Stocks were up sharply in the opening hour, but weakened into the afternoon, and sold off sharply between 2:00 and 2:30 pm, sending the Dow and NASDAQ into negative territory. The Dow recovered to close modestly positive, but the NASDAQ, surprisingly weak on the session, finished fractionally lower. It was the only major index to close in the red. The sudden drop on the indices, though very sharp, was probably due to options expiration this week, as a major trader likely closed a large number of positions. The general market didn't seem to make much of it, as all of the indices recovered nicely with strong buying into the close.

Interestingly, the Dow Jones Transports sported solid gains on the day. The transports have been something of a laggard in recent sessions, but showed remarkable strength into the close, led by Ryder Systems (R) nearly 10% one-day move.

The act that the Transportation Index also closed at a new 2009 high is a bullish signal, inferring that rail and truck transport - the things that move goods across the nation and to the ports - are showing signs of recovery. Those issues are at the bottom of the economy, with shipping of energy - coal, natural gas, oil - and goods of all manner on the rise.

Dow 9,885.80, +20.86 (0.21%)
NASDAQ 2,139.14, -0.14 (0.01%)
S&P 500 1,076.18, +4.69 (0.44%)
NYSE Composite 7,051.16, +35.62 (0.51%)

Market internals were positive, in line with the headline numbers. Advancing issues beat decliners, 3386-3002, though there were quite a few more losers than gainers on the NASDAQ. There were 731 new highs to 67 new lows, a bullish sign. The new high-new low indicator has been the most reliable metric for market movement, though there is some fear that stocks may be getting to an overbought condition as earnings begin rolling out. Companies will have to show top-line growth this quarter in order to keep pace with their high valuations.

Volume was low due to the observance of Columbus Day.

NYSE Volume 4,169,401,250
NASDAQ Volume 1,758,818,250

Commodities were a big story on the day. Oil sipped past the $73.00 mark, gaining $1.50, to close at $73.27. Gold caught a bid higher, by $8.90, to finish at $1,057.50. Silver also gained 13 cents, to $17.82. The resumption of the rally in the precious metals seems to have been re-ignited by oil's gains.

The only notable earnings-related news was from Black & Decker, which pre-announced better-than-expected results. Market direction for Tuesday may be guided by Johnson & Johnson (JNJ), which is supposed to released 3rd quarter earnings prior to the bell. There will be some anticipation concerning Intel (INTC), which reports after the close.

Intel Earnings Report Lifts Stocks

After the bell on Tuesday, chipmaker Intel reported second quarter earnings results far ahead of Wall Street expectations. That was enough to give investors confidence that the economy was continuing to mend - albeit slowly - and that stocks - especially tech companies with strong balance sheets - would weather the storm and produce solid results.

As a result, all the major indices gapped up at the open and continued to tack on impressive gains for the entire session.

There have been conflicting data and no consensus on the economy or the stock market of late, but as earnings roll out, opinions are beginning to shift to more positive tones, and nothing will light up a rally like a strong report from a solid company, such as Intel.

Intel reported a second-quarter loss of 7 cents a share, compared with a profit of $1.6 billion, or 28 cents a share, for the year-earlier period. The loss was attributable to a hefty fine imposed by the European Union. Excluding the charge, Intel posted profits of 18 cents a share, better than analyst's expectations for 8 cents per share.

Dow 8,616.21, +256.72 (3.07%)
NASDAQ 1,862.90, +63.17 (3.51%)
S&P 500 932.68, +26.84 (2.96%)
NYSE Composite 5,993.16, +187.58 (3.23%)

Gainers outnumbered losers by a wide margin, 5583-936. New highs took back the advantage over new lows, 87-70, and, in what was probably the most encouraging sign for market participants, volume was significantly higher than it had been over the past month, a sign that more money was in the market for gains on the day. Whether stocks can build on the momentum of the first three days of the week will be telling. The Dow has rung up gains in each of the three session, while the NASDAQ is on a four-day winning streak.

NYSE Volume 1,374,278,000
NASDAQ Volume 2,577,142,000

Taking their lead from the stock market, commodity traders pushed prices higher in a spasm of buying. Oil gained $2.02, to $61.54; gold picked up $16.60, to close at $939.40, while silver added 35 cents, to $13.21.

On the agenda for tomorrow, second quarter earnings report from JP Morgan, one of the banks which took a roller-coaster ride, price-wise, over the past 12 months. The company is expected to have turned a profit in the current quarter, and earnings are expected in the area of 4 cents per share, which is a number significantly lower than just a month ago, when analysts were looking for 37 cents a share. Depending on the size of the rally and Morgan's results, the snake oil could be flowing come tomorrow. Buyers of this current snort-term rally may get less than what they've bargained for.

Dow Streak Halted Despite Good News

The Dow, higher at midday, lost steam in the afternoon and finished nearly flat, down just over 5 points for the session in moderate to heavy trade.

After three straight record-setting days, the Dow - and the Nasdaq and S&P 500 - simply ran out of gas, especially after the release of the Fed's Beige Book which showed sustained growth in all regions and some indications of wage pressure. That was viewed negatively on Wall Street and the selling ensued in earnest.

Once again, the reverse logic of a surging economy re-igniting inflation fears (and possible resultant interest rate hikes) sent traders into outright selling mode.

On the tech front, Intel's (INTC) continued poor performance (see yesterday's post) led the technology indices lower. The Nasdaq was the worst performer of all the majors, dropping 18.36. Coupled with Intel's disappointing quarter, Cisco Systems (CSCO) was downgraded for the third time in the past two days. Cisco lost 1.06; Intel dropped 1.26.

Earnings and the CPI report will be the major movers tomorrow, as earnings season gets into full swing. Inflation fears are probably overdone right now, as the Fed will likely wait well into any expansion to raise rates. With many economists predicting a slow first half of the year, investors are prone to take a break as January winds into February.

The oil effect was noted today as crude prices firmed. Weather reports are calling for cold days ahead for the Northeast and the price of the slippery stuff grudgingly climbed to close at $52.24.

Just after the close, Apple released earnings that trounced the estimates. The company reported profits of $1.14 per share for their fiscal 1st quarter, well beyond the 78 cents per share analysts predicted. The numbers were a 75% improvement over the 65 cents per share in the year-earlier period.

The company reported quarterly revenue of $7.1 billion, up from $5.75 billion in the same quarter last year. Investors missed the boat completely, as Apple (AAPL) traded down more than $2 prior to the announcement. Play that on your i-Pod. Ouch!