With little movement in the major indices - or individual stocks, for that matter - it is evident to anyone watching or participating in equity and bond markets that the financial world anxiously awaits the policy statement from the FOMC tomorrow at 2:00 pm ET, in which the Fed may or may not announce the tapering of its bond purchasing program.
Currently stuck at monthly figures of $45 billion in treasury purchases and another $40 billion in MBS (mortgage-backed securities), signs that the Fed may have enough reliable data to begin scaling the program back are still ambiguous. There have been hints, predictions and all manner of speculation on what the Fed will announce via their final policy meeting of the year, but one thing remains certain: the Fed must begin to curtail this program soon, not only because it has been ineffective, but that it could also do (and may have already) damage to the fragile economy.
On Wall Street, there's widespread belief that a cut-back in bond purchases by the Federal Reserve would cause a dip in the equity indices, being that there would be less of the free champagne money flowing to the TBTF banks, but a growing suspicion that the extent of these bond purchases, with money going to the connected and already-well-heeled, may be causing a rift of considerable proportions between the monied interests of the financiers and the rest of the planet.
Income disparity, already at an extraordinarily-high rate preceding the crisis of 2008-09, has been exacerbated by the easy money put into the hands of the rich, a trend which may be leading to suspicion, distrust and eventually, class enmity.
So, with less than 24 hours before what may be a significant announcement, traders have chosen to sit upon their collective hands, leaving volume at some of the lowest levels of the year.
Wednesday's FOMC announcement should provide some pre-holiday fireworks. If not, markets could just as easily rally from relief as sell off from disappointment. Whatever the Fed has planned for tomorrow should affect everything from stock prices to mortgage rates.
DOW 15,875.26, -9.31 (-0.06%)
NASDAQ 4,023.68, -5.84 (-0.14%)
S&P 1,781.00, -5.54 (-0.31%)
10-Yr Note 99.05, +0.77 (+0.79%) Yield: 2.86%
NASDAQ Volume 1.59 Bil
NYSE Volume 2.82 Bil
Combined NYSE & NASDAQ Advance - Decline: 2593-2889
Combined NYSE & NASDAQ New highs - New lows: 154-117
WTI crude oil: 97.22, -0.26
Gold: 1,230.10, -14.30
Silver: 19.84, -0.261
Corn: 426.75, +3.50
Showing posts with label tapering. Show all posts
Showing posts with label tapering. Show all posts
Tuesday, December 17, 2013
Wednesday, December 11, 2013
Stocks Suffer Heavy Losses in Biggest Two-Day Selloff in Two Months
Not since the uncertainty surrounding the government shutdown in October have stocks suffered through a two-day period such as the one ended Wednesday afternoon.
Stocks were lower at the open and never gained positive ground for the entirety of the session.
Besides the usual fears of Federal Reserve tapering in December (or soon thereafter, as everybody knows it's coming), the latest buzz comes from the far East, where talk of China's overcapacity in an enormous number of industries is fueling speculation of a slowdown in the growth rate of the world's most populous nation.
Another way of expressing overcapacity concerns is slack demand in consumer countries from the USA to the various Eurozone nations and Great Britain. All taken together, a slowdown could be coming at exactly the wrong time for the resident intellectuals at the Fed, who may see their hand forced to curtail - at least to some extent - their bond purchases.
The three-headed monster of slowing industrial growth, slack consumer demand and a pullback of stimulus appears ready to launch an attack on wary equity investors who have been mostly riding a liquidity gravy train for nearly the past five years.
While the two-day selling event may portend even more selling heading through December - usually one of the strongest months for stocks - the fact that the major averages have been down seven of the last nine sessions, belies the false move presented last Friday on November's blowout non-farm jobs data when the Dow was up nearly 200 points. Monday's five-point gain on the Dow was nothing more than a rounding error. Today and yesterday's losses have nearly given all of last Friday's gains back. The Dow is just 22 points above last Thursday's close, setting up this Thursday (tomorrow) as a potential mini-correction if the Dow closes below 15,821.51.
Technical damage has been done recently, both to blue chips and more speculative issues. The NASDAQ suffered the brunt of the selling today, losing nearly 1 1/2 percent on the day. Declining issues outnumbered advancers by more than a four to one margin.
Another concern is volume, which picked up in today's downside trading. Making matters even more bearish were the new lows, which completely subsumed today's new highs, 208-104, a key indicator for direction, and, if it holds, a sure signal for a market correction or outright bear market, something which is probably long overdue.
Happy Holidays? Depends upon which side of the trade you're on.
DOW 15,843.53, -129.60 (-0.81%)
NASDAQ 4,003.81, -56.68, (-1.40%)
S&P 1,782.22, -20.40 (-1.13%)
10-Yr Note 99.46 +0.30 (+0.30%) Yield 2.84%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.46 Bil
Combined NYSE & NASDAQ Advance - Decline: 1096-4603
Combined NYSE & NASDAQ New highs - New lows: 104-208
WTI crude oil: 97.44, -1.07
Gold: 1,257.20, -3.90
Silver: 20.36, +0.041
Corn: 439.25, +3.25
Stocks were lower at the open and never gained positive ground for the entirety of the session.
Besides the usual fears of Federal Reserve tapering in December (or soon thereafter, as everybody knows it's coming), the latest buzz comes from the far East, where talk of China's overcapacity in an enormous number of industries is fueling speculation of a slowdown in the growth rate of the world's most populous nation.
Another way of expressing overcapacity concerns is slack demand in consumer countries from the USA to the various Eurozone nations and Great Britain. All taken together, a slowdown could be coming at exactly the wrong time for the resident intellectuals at the Fed, who may see their hand forced to curtail - at least to some extent - their bond purchases.
The three-headed monster of slowing industrial growth, slack consumer demand and a pullback of stimulus appears ready to launch an attack on wary equity investors who have been mostly riding a liquidity gravy train for nearly the past five years.
While the two-day selling event may portend even more selling heading through December - usually one of the strongest months for stocks - the fact that the major averages have been down seven of the last nine sessions, belies the false move presented last Friday on November's blowout non-farm jobs data when the Dow was up nearly 200 points. Monday's five-point gain on the Dow was nothing more than a rounding error. Today and yesterday's losses have nearly given all of last Friday's gains back. The Dow is just 22 points above last Thursday's close, setting up this Thursday (tomorrow) as a potential mini-correction if the Dow closes below 15,821.51.
Technical damage has been done recently, both to blue chips and more speculative issues. The NASDAQ suffered the brunt of the selling today, losing nearly 1 1/2 percent on the day. Declining issues outnumbered advancers by more than a four to one margin.
Another concern is volume, which picked up in today's downside trading. Making matters even more bearish were the new lows, which completely subsumed today's new highs, 208-104, a key indicator for direction, and, if it holds, a sure signal for a market correction or outright bear market, something which is probably long overdue.
Happy Holidays? Depends upon which side of the trade you're on.
DOW 15,843.53, -129.60 (-0.81%)
NASDAQ 4,003.81, -56.68, (-1.40%)
S&P 1,782.22, -20.40 (-1.13%)
10-Yr Note 99.46 +0.30 (+0.30%) Yield 2.84%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.46 Bil
Combined NYSE & NASDAQ Advance - Decline: 1096-4603
Combined NYSE & NASDAQ New highs - New lows: 104-208
WTI crude oil: 97.44, -1.07
Gold: 1,257.20, -3.90
Silver: 20.36, +0.041
Corn: 439.25, +3.25
Tuesday, December 10, 2013
Another Dismal Day in the Dumps for Stock Owners
Certainly, nobody is going to feel sorry for the Wall Street lemmings, vultures and whales for another losing day on stocks. After all, the major averages are up more than 25% on the year and a good number of individual issues are up much more than that, many having doubled in price over the past 48 weeks.
So, excuse us if we cry crocodile tears for well-heeled investors and speculators.
There is, however, a little bit of a problem in the markets, and it is completely and everlastingly tied to the Federal reserve and their Zero Interest Rate Policy (ZIRP) and continuing quantitative easing (QE), about which there is much debate, constrnation and confusion.
The final meeting of the year for the FOMC is slated for next Tuesday and Wednesday, and, while nobody in their right mind expects this august body to announce any rate policy changes, there is the small matter of decreasing the amount of securities the Fed is buying every month (QE) from the current $85 billion to something less than that, otherwise known as "tapering."
CNBCs Steve Liesman, who has a pipeline directly to and from the Fed, announced today that tapering would be announced at the December meeting. That news, and the final acceptance and future implementation of the Volker Rule, sent stocks backpedaling from the outset. The Volker Rule, in essence, disallows banks from engaging in speculative trading with depositors' money, something the various agencies feel was responsible for at least a part of the financial crisis of the past five years.
The rule puts severe restrictions on what banks can and can't do in terms of proprietary trading (i.e., speculating), but it is dense, long, deep, and riddled with potential loopholes for crafty lawyers and bankers to slither all kinds of nefarious doings through. The Volker Rule document - three years and 585 pages in the making - is, in reality, nothing more than a full-employment bill for litigation attorneys. Bully for them.
QE, and, more specifically, the tapering of QE, is another animal altogether. The Fed has been jawboning about the possibility of scaling back their bond purchases - $45 billion in treasuries and $40 billion in MBS - since May, with varying degrees of success. Wall Street banks, being the main beneficiaries of the program, would like the policy to extend to infinity and beyond, though they know in their dark heart of hearts that it must come to some kind of conclusion. The US economy cannot be force-fed money by the central bank forever.
Besides the program being excessively beneficial to banks and somewhat harmful to small businesses, consumers and emerging market nations, there is another problem that the Fed may never have considered. Due to their monopolizing of the MBS and treasury markets, the available bond issuance is dwindling, so much so, that the Fed may have no choice but to wind down such programs.
The other side of the equation is such that the Fed has so far crowded out potential bidders that there may not be many who actually want to participate. Thus, many in the bond world see even a slight decrease of buying by the Fed as a potential for higher interest rates, including interest on government debt itself, which is already a large portion of the Federal budget but could grow into a behemoth should the federal government have to begin paying back interest at higher and higher rates.
These are the unforeseen, though somewhat predictable, ramifications of the Fed's actions, actions that forestalled an implosion of the financial system and the insolvency of many of the world's largest financial institutions, dating back to the halcyon days of 2008 and $800 billion in TARP money and then-Fed Chairman Hank Paulson holding a gun to the economy's head.
So, Liesman may be bluffing at the behest of the Fed, or he could have just issued the warning shot to the markets that the plundering of assets with free money is about to come to an end.
The signs that the policy has run its course are profligate: record art and collectible car auctions, record high-end real estate prices, record stock prices.
Enough is enough. The party is about to come to a crashing, cataclysmic conclusion, and as cataclysms usually are, this one is not likely to be pretty.
Technically speaking, the advance-decline line deteriorated again today, the gap between new highs and new lows continues to show signs of shrinking and potentially flipping, and outside of Friday's massive vapor-rise, stocks have fallen every day since Thanksgiving.
The good news (for some) is that commodity prices took a lift today, with silver and gold leading the way.
DOW 15,973.13, -52.40 (-0.33%)
NASDAQ 4,060.49, -8.26 (-0.20%)
S&P 1,802.62, -5.75, (-0.32%)
10-Yr Note 99.43, +0.37 (+0.37%), Yield: 2.80%
NASDAQ Volume 1.71 Bil
NYSE Volume 3.07 Bil
Combined NYSE & NASDAQ Advance - Decline: 2115-3553
Combined NYSE & NASDAQ New highs - New lows: 206-113
WTI crude oil: 98.51, +1.17
Gold: 1,261.10, +26.90
Silver: 20.32, +0.614
Corn: 436.00, -2.00
So, excuse us if we cry crocodile tears for well-heeled investors and speculators.
There is, however, a little bit of a problem in the markets, and it is completely and everlastingly tied to the Federal reserve and their Zero Interest Rate Policy (ZIRP) and continuing quantitative easing (QE), about which there is much debate, constrnation and confusion.
The final meeting of the year for the FOMC is slated for next Tuesday and Wednesday, and, while nobody in their right mind expects this august body to announce any rate policy changes, there is the small matter of decreasing the amount of securities the Fed is buying every month (QE) from the current $85 billion to something less than that, otherwise known as "tapering."
CNBCs Steve Liesman, who has a pipeline directly to and from the Fed, announced today that tapering would be announced at the December meeting. That news, and the final acceptance and future implementation of the Volker Rule, sent stocks backpedaling from the outset. The Volker Rule, in essence, disallows banks from engaging in speculative trading with depositors' money, something the various agencies feel was responsible for at least a part of the financial crisis of the past five years.
The rule puts severe restrictions on what banks can and can't do in terms of proprietary trading (i.e., speculating), but it is dense, long, deep, and riddled with potential loopholes for crafty lawyers and bankers to slither all kinds of nefarious doings through. The Volker Rule document - three years and 585 pages in the making - is, in reality, nothing more than a full-employment bill for litigation attorneys. Bully for them.
QE, and, more specifically, the tapering of QE, is another animal altogether. The Fed has been jawboning about the possibility of scaling back their bond purchases - $45 billion in treasuries and $40 billion in MBS - since May, with varying degrees of success. Wall Street banks, being the main beneficiaries of the program, would like the policy to extend to infinity and beyond, though they know in their dark heart of hearts that it must come to some kind of conclusion. The US economy cannot be force-fed money by the central bank forever.
Besides the program being excessively beneficial to banks and somewhat harmful to small businesses, consumers and emerging market nations, there is another problem that the Fed may never have considered. Due to their monopolizing of the MBS and treasury markets, the available bond issuance is dwindling, so much so, that the Fed may have no choice but to wind down such programs.
The other side of the equation is such that the Fed has so far crowded out potential bidders that there may not be many who actually want to participate. Thus, many in the bond world see even a slight decrease of buying by the Fed as a potential for higher interest rates, including interest on government debt itself, which is already a large portion of the Federal budget but could grow into a behemoth should the federal government have to begin paying back interest at higher and higher rates.
These are the unforeseen, though somewhat predictable, ramifications of the Fed's actions, actions that forestalled an implosion of the financial system and the insolvency of many of the world's largest financial institutions, dating back to the halcyon days of 2008 and $800 billion in TARP money and then-Fed Chairman Hank Paulson holding a gun to the economy's head.
So, Liesman may be bluffing at the behest of the Fed, or he could have just issued the warning shot to the markets that the plundering of assets with free money is about to come to an end.
The signs that the policy has run its course are profligate: record art and collectible car auctions, record high-end real estate prices, record stock prices.
Enough is enough. The party is about to come to a crashing, cataclysmic conclusion, and as cataclysms usually are, this one is not likely to be pretty.
Technically speaking, the advance-decline line deteriorated again today, the gap between new highs and new lows continues to show signs of shrinking and potentially flipping, and outside of Friday's massive vapor-rise, stocks have fallen every day since Thanksgiving.
The good news (for some) is that commodity prices took a lift today, with silver and gold leading the way.
DOW 15,973.13, -52.40 (-0.33%)
NASDAQ 4,060.49, -8.26 (-0.20%)
S&P 1,802.62, -5.75, (-0.32%)
10-Yr Note 99.43, +0.37 (+0.37%), Yield: 2.80%
NASDAQ Volume 1.71 Bil
NYSE Volume 3.07 Bil
Combined NYSE & NASDAQ Advance - Decline: 2115-3553
Combined NYSE & NASDAQ New highs - New lows: 206-113
WTI crude oil: 98.51, +1.17
Gold: 1,261.10, +26.90
Silver: 20.32, +0.614
Corn: 436.00, -2.00
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