While stocks have zigzagged and gone nowhere the first three days of the week, oil has been more consistent in direction, with WTI crude dropping by two dollars a barrel on Wednesday under $46, a nine-month low.
There's been a glut of oil on world markets for some time now, but it's been especially painful to producers since the market riggers lost control in 2015, sending the price from imaginary levels - forced upon the planet by the myth of "peak oil" - around $100 per barrel to where it stands today.
Oil's recent swoon brings up a good question. With all the oil sloshing around and a myriad of factors leading to lessened use of the "fossil fuel," what exactly is fair value for crude?
There are many arguments with which to weigh the answer, whatever that may be, but one element that is undeniable about the current condition, is that producing nations aren't exactly in love with what they're being paid for a barrel of the slippery stuff. That's because many of the producers - OPEC and Middle East nations, primarily - had budgeted for steady sales around the high-water mark of $100/barrel.
Since that price turned out to be completely unsustainable, these countries have had to adjust their spending and programs, leading to some degree of discontent among their citizens. Americans, who benefitted from fracking and shale drilling, have been the biggest beneficiaries, seeing the price of a gallon of gas fall from an average near four dollars to today's prices in the low two dollar range.
One of the largest factors contributing to the glut is purely demographic. Many established economies - Japan, US, Europe - are aging, and older people simply don't drive as much. Add to that the improvements in fuel economy, plus alternatives such as cars which run on natural gas or electricity and he trend becomes more pronounced.
As the price of crude continues under pressure, alternative fuels, such as increased use of coal, solar, and wind in the United States, will only exacerbate the condition.
Back in the good old days of the 70s and 80s, oil used to be under $20 per barrel. Then along came the "peak oil" sham, which sent the price through the roof and consumers to the poorhouse. The true price may or may not be found in the current regime of futures prices, a system that has and probably continues to be gamed, but the real price, taking into account the massive amounts of oil on and off the market, the stagnation of the global economy, and emerging alternatives, is likely to be found at levels well below what it is pinned at today.
Try thinking of oil at about $32-36 per barrel and gasoline at $1.60 and you're probably on the right track.
At the Close, 6/7/17:
Dow: 21,173.69, +37.46 (0.18%)
NASDAQ 6,297.38, +22.32 (0.36%)
S&P 500 2,433.14, +3.81 (0.16%)
NYSE Composite: 11,667.73, -3.73 (-0.03%)
Showing posts with label OPEC. Show all posts
Showing posts with label OPEC. Show all posts
Thursday, June 8, 2017
Wednesday, October 10, 2012
Dow Tanks, Takes Other Averages with It as Global Slowdown Concerns Mount
There was no last hour rally for stocks on wednesday, no reprise of the late-day rallies that typified behavior through the summer and into the early days of fall.
Investors were taking profits and worried about the future after Alcoa (AA) kicked off 3rd quarter earnings season after the close Tuesday with a downbeat outlook, calling for reduced demand for aluminum in a worldwide slowdown.
The leading global producer of aluminum reported a third quarter net loss of $143 million, or -13 cents per share, compared with a profit of $172 million, or 15 cents per share, in the year-ago period. Excluding one-time items, adjusted profit was 3 cents per share, which beat consensus estimates which were calling for a roughly break-even quarter.
The company lowered its 2012 growth forecast for aluminum from seven percent to six, saying weak demand from China was the leading cause for the revision.
The Dow led the indices into the red, dragging the S&P and NASDAQ lower throughout a session which witnessed slow deterioration in share prices from the open into the close as an IMF report released on Tuesday, calling for lower 2013 growth worldwide, continued to weigh on markets.
Adding to the chorus calling for slowing growth, OPEC said that current production levels were ample heading into 2013 as demand continues to wane. That sent oil prices tumbling from early-day gains to a loss at the close of floor trading.
It was the third straight negative day on the Dow, the fourth for the S&P and NASDAQ and the first triple-digit loss on the Dow since July 23-24.
Stocks have been moving lower this week after reaching an interim high of 13,610.15 on the 5th of October, the day the non-farm payroll data was released. Since then, stocks have moved markedly lower, with the Dow down two percent in the first three days of this week, closing today just above the 50-day moving average.
The NASDAQ, the worst performer of the major indices this week, broke through its 50-day moving average on Tuesday and failed to recover today, spending only a few brief moments this morning on the plus side before deteriorating through the session.
Also hovering dangerously close to its 50-day MA, the S&P 500 has been down since making a double top on the 5th of October.
The two most robust indicators, the advance-decline line and the new highs - new lows metric continued to deteriorate, with the NASDAQ showing more new lows than highs for the second straight session, 32-53, and new highs holding a very slim edge - 42-33 - on the NYSE. Cumulatively, new lows outpaced new highs 86-74.
All this occurred without any assistance from Europe, where stocks were lower in nearly all Eurozone nations. Meetings scheduled for next week to hammer out bailout details for various countries and banking systems are seen to be troublesome and also weighing on sentiment, which has recently turned negative.
Dow 13,344.97, -128.56 (0.95%)
NASDAQ 3,051.78, -13.24 (0.43%)
S&P 500 1,432.56, -8.92 (0.62%)
NYSE Composite 8,220.62, -58.48 (0.71%)
NASDAQ Volume 1,763,862,625
NYSE Volume 2,927,658,250
Combined NYSE & NASDAQ Advance - Decline: 2271-3218
Combined NYSE & NASDAQ New highs - New lows: 74-86
WTI crude oil: 91.25, -1.14
Gold: 1,765.10, +0.10
Silver: 34.11, +0.124
Investors were taking profits and worried about the future after Alcoa (AA) kicked off 3rd quarter earnings season after the close Tuesday with a downbeat outlook, calling for reduced demand for aluminum in a worldwide slowdown.
The leading global producer of aluminum reported a third quarter net loss of $143 million, or -13 cents per share, compared with a profit of $172 million, or 15 cents per share, in the year-ago period. Excluding one-time items, adjusted profit was 3 cents per share, which beat consensus estimates which were calling for a roughly break-even quarter.
The company lowered its 2012 growth forecast for aluminum from seven percent to six, saying weak demand from China was the leading cause for the revision.
The Dow led the indices into the red, dragging the S&P and NASDAQ lower throughout a session which witnessed slow deterioration in share prices from the open into the close as an IMF report released on Tuesday, calling for lower 2013 growth worldwide, continued to weigh on markets.
Adding to the chorus calling for slowing growth, OPEC said that current production levels were ample heading into 2013 as demand continues to wane. That sent oil prices tumbling from early-day gains to a loss at the close of floor trading.
It was the third straight negative day on the Dow, the fourth for the S&P and NASDAQ and the first triple-digit loss on the Dow since July 23-24.
Stocks have been moving lower this week after reaching an interim high of 13,610.15 on the 5th of October, the day the non-farm payroll data was released. Since then, stocks have moved markedly lower, with the Dow down two percent in the first three days of this week, closing today just above the 50-day moving average.
The NASDAQ, the worst performer of the major indices this week, broke through its 50-day moving average on Tuesday and failed to recover today, spending only a few brief moments this morning on the plus side before deteriorating through the session.
Also hovering dangerously close to its 50-day MA, the S&P 500 has been down since making a double top on the 5th of October.
The two most robust indicators, the advance-decline line and the new highs - new lows metric continued to deteriorate, with the NASDAQ showing more new lows than highs for the second straight session, 32-53, and new highs holding a very slim edge - 42-33 - on the NYSE. Cumulatively, new lows outpaced new highs 86-74.
All this occurred without any assistance from Europe, where stocks were lower in nearly all Eurozone nations. Meetings scheduled for next week to hammer out bailout details for various countries and banking systems are seen to be troublesome and also weighing on sentiment, which has recently turned negative.
Dow 13,344.97, -128.56 (0.95%)
NASDAQ 3,051.78, -13.24 (0.43%)
S&P 500 1,432.56, -8.92 (0.62%)
NYSE Composite 8,220.62, -58.48 (0.71%)
NASDAQ Volume 1,763,862,625
NYSE Volume 2,927,658,250
Combined NYSE & NASDAQ Advance - Decline: 2271-3218
Combined NYSE & NASDAQ New highs - New lows: 74-86
WTI crude oil: 91.25, -1.14
Gold: 1,765.10, +0.10
Silver: 34.11, +0.124
Thursday, December 15, 2011
Despite Positive Data, Market Rally Fizzles; Something About Ties Is Untrustworthy
You might as well call this a down day for the US markets.
Stocks were up at the open on some positive economic data, but, thanks to Christine Legarde, head of the IMF, the fear of Europe sent traders scurrying for the sell buttons.
Hop-scotching the Headlines (trust, this will all tie together):
Initial unemployment claims reached a level not seen in 3 1/2 years, falling to 366,000, though, as expressed in a post a few days back, government numbers may not be the most trustworthy. Unadjusted figures totaled 433,287 in the week ending December 10, a decrease of 95,506 from the previous week, which implies that last week's numbers may have been abnormally LOW. Some people are paying attention to the unadjusted, non-politicized data.
PPI for November was up 0.3%. Core PPI was up 0.1%. No surprises there.
The NYS Manufacturing Index came in at 9.53 for December, a dramatic rise from November's reading of 0.61. Similarly, the Philadelphia Fed's index read at 10.3, a majestic rise from November's 3.60. Those were somewhat of a surprise, though the data is supplied by the Federal Reserve. Trust them? Maybe. Maybe not.
Industrial Production: -0.2%; Capacity Utilization was 77.8%. Both of those figures were fairly static.
So, the markets opened with healthy gains until Lagarde, on her megaphone from Europe, said that no country was immune from Europe's crisis and that the outlook for the world economy was "quite gloomy." Her words. She's not very funny, which, being French, partially explains why French people think Jerry Lewis is a comic genius.
(In a conversation with a postal employee today, I joked that maybe I was getting so many orders from Europe lately because they want to spend their Euros before they become worthless. I may be on to something.)
No matter what, Lagarde's comments put the markets into a tailspin, from which they did not recover. Stocks ended the day down about 60% from their highs. It was not pretty, nor exciting. Volume was, using CNBC's Bob Pisani's word, "anemic."
Morgan Stanley plans on cutting 1600 jobs, which is about 3% of their workforce. That's limited in comparison to other cuts in the finance business. Globally, more than 200,000 wheeler-dealers are going to be slashed, downsized and dumped.
Freddie Mac (the firm which paid Newt Gingrich over a million dollar in consulting fees) says that mortgage rates have hit all-time lows, with 30-year fixed loans at 3.94 and 15-year fixed at 3.21, but, nobody's buying.
Really, nobody. The National Association of Realtors is going to revise existing home sales for the past five years, dating back to 2007 (incidentally, when the real estate boom went bust) on Hanukkah, which is December 21. If that's just bad timing on their part, well, Happy Hanukkah! But, but, but, maybe we can't trust numbers supplied by realtors, either. Add them to bankers, accountants, government officials, meteorologists (yes, the National Hurricane Center said recently that their last 20 years of forecasting seasonal hurricanes was rubbish. Look it up. ON BING.), judges and lawyers. Oddly enough, all of these types wear ties when they're working. As far as can be told, none of them sleep naked, either. Very strange.
In a grossly under-reported story, OPEC ministers set a production ceiling of 30 million barrels a day, which begs the question about oil prices in the $90+ per barrel range. There's enough and demand is slack. It should be cheaper and it got cheaper today.
And just in case anyone hasn't noticed, tomorrow is December options expiry, which usually implies a massive ramp up in prices for stocks leading into it, but, but, but, stocks have been getting beaten down mercilessly for the past week. Is that bullish? Probably not.
Oh, and the CME group wants to know where that missing money from MF Global (Does the MF really stand for that vulgar ghetto slang term? Probably.) is. Top executives of the firm are suing Jon Corzine and other top executives of MF Global for undisclosed amounts and damages. They are seeking class action status. According to Business Insider, the brainchild of former Wall Street analyst Henry Blodget (who wears a tie, but can probably be trusted since he is barred from all Wall Street trading and "official" analysis and probably sleeps naked on occasion) the suit was filed a week ago, on December 8, and nobody noticed until today.
So, that's what moved US markets today, except that the level of fear on Wall Street is probably at a point so high that Charlie Sheen, even on his finest cocaine-and-liquor float, couldn't get up there.
Psst, wanna buy some stocks?
Dow 11,868.81, +45.33 (0.38%)
NASDAQ 2,541.01, +1.70 (0.07%)
S&P 500 1,215.75, +3.93 (0.32%)
NYSE Composite 7,217.12, +32.37 (0.45%)
NASDAQ Volume 1,750,499,375
NYSE Volume 3,767,349,000
Combined NYSE & NASDAQ Advance - Decline: 3399-2200
Combined NYSE & NASDAQ New highs - New lows: 72-179
WTI crude oil: 93.87, -1.08
Gold: 1,577.20, -9.70
Silver: 29.27, +0.34
Stocks were up at the open on some positive economic data, but, thanks to Christine Legarde, head of the IMF, the fear of Europe sent traders scurrying for the sell buttons.
Hop-scotching the Headlines (trust, this will all tie together):
Initial unemployment claims reached a level not seen in 3 1/2 years, falling to 366,000, though, as expressed in a post a few days back, government numbers may not be the most trustworthy. Unadjusted figures totaled 433,287 in the week ending December 10, a decrease of 95,506 from the previous week, which implies that last week's numbers may have been abnormally LOW. Some people are paying attention to the unadjusted, non-politicized data.
PPI for November was up 0.3%. Core PPI was up 0.1%. No surprises there.
The NYS Manufacturing Index came in at 9.53 for December, a dramatic rise from November's reading of 0.61. Similarly, the Philadelphia Fed's index read at 10.3, a majestic rise from November's 3.60. Those were somewhat of a surprise, though the data is supplied by the Federal Reserve. Trust them? Maybe. Maybe not.
Industrial Production: -0.2%; Capacity Utilization was 77.8%. Both of those figures were fairly static.
So, the markets opened with healthy gains until Lagarde, on her megaphone from Europe, said that no country was immune from Europe's crisis and that the outlook for the world economy was "quite gloomy." Her words. She's not very funny, which, being French, partially explains why French people think Jerry Lewis is a comic genius.
(In a conversation with a postal employee today, I joked that maybe I was getting so many orders from Europe lately because they want to spend their Euros before they become worthless. I may be on to something.)
No matter what, Lagarde's comments put the markets into a tailspin, from which they did not recover. Stocks ended the day down about 60% from their highs. It was not pretty, nor exciting. Volume was, using CNBC's Bob Pisani's word, "anemic."
Morgan Stanley plans on cutting 1600 jobs, which is about 3% of their workforce. That's limited in comparison to other cuts in the finance business. Globally, more than 200,000 wheeler-dealers are going to be slashed, downsized and dumped.
Freddie Mac (the firm which paid Newt Gingrich over a million dollar in consulting fees) says that mortgage rates have hit all-time lows, with 30-year fixed loans at 3.94 and 15-year fixed at 3.21, but, nobody's buying.
Really, nobody. The National Association of Realtors is going to revise existing home sales for the past five years, dating back to 2007 (incidentally, when the real estate boom went bust) on Hanukkah, which is December 21. If that's just bad timing on their part, well, Happy Hanukkah! But, but, but, maybe we can't trust numbers supplied by realtors, either. Add them to bankers, accountants, government officials, meteorologists (yes, the National Hurricane Center said recently that their last 20 years of forecasting seasonal hurricanes was rubbish. Look it up. ON BING.), judges and lawyers. Oddly enough, all of these types wear ties when they're working. As far as can be told, none of them sleep naked, either. Very strange.
In a grossly under-reported story, OPEC ministers set a production ceiling of 30 million barrels a day, which begs the question about oil prices in the $90+ per barrel range. There's enough and demand is slack. It should be cheaper and it got cheaper today.
And just in case anyone hasn't noticed, tomorrow is December options expiry, which usually implies a massive ramp up in prices for stocks leading into it, but, but, but, stocks have been getting beaten down mercilessly for the past week. Is that bullish? Probably not.
Oh, and the CME group wants to know where that missing money from MF Global (Does the MF really stand for that vulgar ghetto slang term? Probably.) is. Top executives of the firm are suing Jon Corzine and other top executives of MF Global for undisclosed amounts and damages. They are seeking class action status. According to Business Insider, the brainchild of former Wall Street analyst Henry Blodget (who wears a tie, but can probably be trusted since he is barred from all Wall Street trading and "official" analysis and probably sleeps naked on occasion) the suit was filed a week ago, on December 8, and nobody noticed until today.
So, that's what moved US markets today, except that the level of fear on Wall Street is probably at a point so high that Charlie Sheen, even on his finest cocaine-and-liquor float, couldn't get up there.
Psst, wanna buy some stocks?
Dow 11,868.81, +45.33 (0.38%)
NASDAQ 2,541.01, +1.70 (0.07%)
S&P 500 1,215.75, +3.93 (0.32%)
NYSE Composite 7,217.12, +32.37 (0.45%)
NASDAQ Volume 1,750,499,375
NYSE Volume 3,767,349,000
Combined NYSE & NASDAQ Advance - Decline: 3399-2200
Combined NYSE & NASDAQ New highs - New lows: 72-179
WTI crude oil: 93.87, -1.08
Gold: 1,577.20, -9.70
Silver: 29.27, +0.34
Monday, July 23, 2007
Dwindling Gains and Is OPEC Friendly?
After barely surpassing the magical 14,000 mark last week, the Dow Jones Industrials struggled to get close again on Money Monday, but close was all they could do. The blue chip index got as close as 27 points from the mark, but that was all, and the index closed some 30 points below that level.
Dow 13,943.42 +92.34; NASDAQ 2,690.58 +2.98; S&P 500 1,545.90 +11.80; NYSE Composite 10,121.58 +41.65
While the Dow and S&P were up handily, the NASDAQ didn't fare quite so well, rising just less than 3 points on the session.
Earnings were still the driver, with Merck (MRK) and Schering-Plough (SGP) getting off first thing in the morning, prior to the open.
Decliners actually led advancing issues by a narrow ratio of roughly 16-15, while new highs narrowly beat new lows, 327-286. These numbers are in line with our own expectations that this earnings season is not as robust as Wall Street might like. With a preliminary reading on 2nd quarter GDP due out on Friday, this week could determine direction for the remainder of the summer, and it's not looking particularly encouraging.
Who's the best friend of the American motorist? Would you believe OPEC President and UAE Energy Minister Mohammed al-Hamli? How about Hasan Qabazard?
Concerned over high prices, al-Hamli said that the world economy was still expanding, despite the exorbitant price for crude. Analysts saw his comment as indicative that OPEC may announce a supply increase at their September meeting.
Qabazard, head of OPEC's global research division, stated separately that a price of between $60 and $65 per barrel would be advantageous for both producers and consumers.
Light crude settled 90 cents lower at $74.89 a barrel on the New York Mercantile Exchange. Kudos to our friends in the Arabian world! They actually may be more concerned - and effective - about lowering gas prices than our very own Congress or President. Ya gotta have friends...
Meanwhile, the rally in gold and silver was cut short, with both falling marginally on Monday.
With techs showing some weakness today and after-hours and readings on existing and new home sales due Wednesday and Thursday, respectively, Tuesday may be a good time to exit positions if the market doesn't respond well by mid-day.
Tomorrow's earnings calendar is reasonably heavy, with reports due from Amazon.com (AMZN), AT&T (T), DuPont (DD), Eli Lilly (LLY), JetBlue Airways (JBLU), McDonald's (MCD), Occidental Petroleum (OXY), PepsiCo (PEP), UPS (UPS), United States Steel (X), and many, many others.
Dow 13,943.42 +92.34; NASDAQ 2,690.58 +2.98; S&P 500 1,545.90 +11.80; NYSE Composite 10,121.58 +41.65
While the Dow and S&P were up handily, the NASDAQ didn't fare quite so well, rising just less than 3 points on the session.
Earnings were still the driver, with Merck (MRK) and Schering-Plough (SGP) getting off first thing in the morning, prior to the open.
- Merck (MRK) said second-quarter net income rose to $1.68 billion, or 77 cents a share, from $1.5 billion, or 69 cents a share, a year earlier. Excluding restructuring and other charges, official earnings rose to 82 cents a share from 73 cents a share a year ago, exceeding the widely-held forecast of 72 cents per share. Shares of Merck soared on the news, up 3.31 to 52.33.
- Schering-Plough (SGP): Net income climbed to $517 million, or 34 cents per share, after preferred dividends for the quarter ended June 30 from $237 million, or 16 cents per share, a year ago. The stock lost 19 cents, closing the session at 31.30.
- For Dick Cheney lovers (and who doesn't love Dick?), Halliburton (HAL) reported net income of $1.53 billion, or $1.62 a share, up from $591 million, or 55 cents, a year earlier. The most recent quarter's results include a gain of $933 million relating to the KBR split. Analysts were only looking for 56 cents, so the stock made a new 52-week high during the trading session before closing up 1.17 at $37.74.
- After the close, American Express (AXP) reported second quarter net income for the quarter also totaled $1.1 billion, up 12 percent from $945 million a year ago, and 0.88 per share, up 16 percent from 0.76. Analysts were seeking 0.86 and their solid quarter should help stocks on Tuesday.
- Texas Instruments (TXN) reported revenue of $3.42 billion for the second quarter of 2007. Earnings per share (EPS) were $0.42, down from 0.47 in the year-ago period. The results were in line with expectations, but the results will do little to excite tech investors.
Decliners actually led advancing issues by a narrow ratio of roughly 16-15, while new highs narrowly beat new lows, 327-286. These numbers are in line with our own expectations that this earnings season is not as robust as Wall Street might like. With a preliminary reading on 2nd quarter GDP due out on Friday, this week could determine direction for the remainder of the summer, and it's not looking particularly encouraging.
Who's the best friend of the American motorist? Would you believe OPEC President and UAE Energy Minister Mohammed al-Hamli? How about Hasan Qabazard?
Concerned over high prices, al-Hamli said that the world economy was still expanding, despite the exorbitant price for crude. Analysts saw his comment as indicative that OPEC may announce a supply increase at their September meeting.
Qabazard, head of OPEC's global research division, stated separately that a price of between $60 and $65 per barrel would be advantageous for both producers and consumers.
Light crude settled 90 cents lower at $74.89 a barrel on the New York Mercantile Exchange. Kudos to our friends in the Arabian world! They actually may be more concerned - and effective - about lowering gas prices than our very own Congress or President. Ya gotta have friends...
Meanwhile, the rally in gold and silver was cut short, with both falling marginally on Monday.
With techs showing some weakness today and after-hours and readings on existing and new home sales due Wednesday and Thursday, respectively, Tuesday may be a good time to exit positions if the market doesn't respond well by mid-day.
Tomorrow's earnings calendar is reasonably heavy, with reports due from Amazon.com (AMZN), AT&T (T), DuPont (DD), Eli Lilly (LLY), JetBlue Airways (JBLU), McDonald's (MCD), Occidental Petroleum (OXY), PepsiCo (PEP), UPS (UPS), United States Steel (X), and many, many others.
Thursday, January 4, 2007
Markets lift off the new year, stall out
Anxious traders got 2007 off the ground a day later than originally planned due to the death of former president Gerald Ford. The markets were closed on Tuesday, but made up for lost time on Wednesday morning, driving vigorously into the positive in early trade. The Dow reached an intra-day all-time high of 12,630.34, but stocks pulled back through the afternoon, especially after the release of the minutes from the Fed's December meeting. The Dow closed up just over 11 points higher. The Nasdaq was up a nominal amount, while the S&P 500 and NYSE Composite finished slightly lower.
The minutes revealed that certain members of the FOMC were concerned that the economy was still expanding at a pace that might induce inflation and traders saw this as a sign that the Fed may still be pondering rate increases.
This kind of reverse-engineered thinking normally occurs when the markets - and the economy - are at pivot points and questioning future direction. If stronger growth is actually on the horizon, that should be good for stocks, but the consensus opinion seems to think that rate increases would be a worse outcome, so it's back to head-scratching and crystal ball gazing.
The biggest news of the day and the stories that really moved stocks early were the forced resignation of Home Depot (HD) CEO Robert Nardelli and a sizable drop in the price of crude oil, which fell below $60/bbl. to end the day at $58.32.
While Nardelli will retire with a handsome severance package worth more than $210 million, the price of oil may not have such a rosy future. Despite repeated and continuing efforts to convince the public that crude supplies are extremely tight, production cuts by OPEC (1.2 million barrels per day announced in November and another 500,000 cut planned for February) and the warm winter in the US Northeast are pushing prices closer to 3-year lows.
With more than they usually need to consider, investors are facing a slow-growth economy (retail for December was not as good as expected), lower oil prices and a Fed concerned with inflation. Two of those three are good, and it can be argued that a cooling off period for the economy is not only welcome but overdue.
The real issue is valuation, which is at somewhat ridiculous levels for entire classes of stocks. Corporate profits have been exceptional during the long bull market and it would be foolish for investors not to take some of their gains off the table soon in hopes of getting back in later in the year.
From the looks of things, being out of this market in the first half of the year may be the wisest investment decision of all.
The minutes revealed that certain members of the FOMC were concerned that the economy was still expanding at a pace that might induce inflation and traders saw this as a sign that the Fed may still be pondering rate increases.
This kind of reverse-engineered thinking normally occurs when the markets - and the economy - are at pivot points and questioning future direction. If stronger growth is actually on the horizon, that should be good for stocks, but the consensus opinion seems to think that rate increases would be a worse outcome, so it's back to head-scratching and crystal ball gazing.
The biggest news of the day and the stories that really moved stocks early were the forced resignation of Home Depot (HD) CEO Robert Nardelli and a sizable drop in the price of crude oil, which fell below $60/bbl. to end the day at $58.32.
While Nardelli will retire with a handsome severance package worth more than $210 million, the price of oil may not have such a rosy future. Despite repeated and continuing efforts to convince the public that crude supplies are extremely tight, production cuts by OPEC (1.2 million barrels per day announced in November and another 500,000 cut planned for February) and the warm winter in the US Northeast are pushing prices closer to 3-year lows.
With more than they usually need to consider, investors are facing a slow-growth economy (retail for December was not as good as expected), lower oil prices and a Fed concerned with inflation. Two of those three are good, and it can be argued that a cooling off period for the economy is not only welcome but overdue.
The real issue is valuation, which is at somewhat ridiculous levels for entire classes of stocks. Corporate profits have been exceptional during the long bull market and it would be foolish for investors not to take some of their gains off the table soon in hopes of getting back in later in the year.
From the looks of things, being out of this market in the first half of the year may be the wisest investment decision of all.
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