Despite the ramp job at the close (Dow gained 85 points in the final 40 minutes of trading today, stocks still looked pretty weak this week.
In answer to our headline, we call upon our best sarah Palin voice, for a You Betcha! moment. Thursday's wicked "buy the rumor" advance was followed Friday by a "sell the news" decline, of equally wicked proportions, despite very positive numbers from the BLS regardin February employment.
According to the new Ministry of Truth, the US economy created 192,000 net new jobs in February, with 222,000 of those coming from the private sector, as state and municipal governments shed precisely 30,000 employees. These numbers are difficult to believe, especially when the BLS engages in numerous revisions, approximations and their notorious birth/death modeling, by which we are supposed to believe that new businesses created something on the order of 119,000 of those new jobs.
Were that the case - which I assure you it is not, because nobody is taking risks these days, especially when it comes to hiring new employees or starting new business endeavors - the we should expect similar numbers for the remainder of the year, with the caveat that the vast bulk of these new hires by new businesses will be gone within a year.
Small business failure rates over time suggest that 50% fail within the first year, so we should have a double dip of small business failures and antecedent job losses a year from now and continuing through 2012. Joy, joy, joy!
What was probably more important to investors, traders, scammers, scalpers and thieves were developments in the Middle East, where reports suggesting that troops loyal to Lybian president Muammar Khaddafy had set ablaze a large oil production facility. Also, word has leaked out that all is not well in the kingdom of Saudi Arabia, which is the real McCoy when it comes to big players in the oil business.
Not only does Saudi Arabia export 10 million barrels of the liquid goo a day, they maintain extra production facilities for another two millions should the world require more oil.
Those scary scenarios sent prices for crude skyrocketing on all exchanges, with WTI breaking through resistance at $103/barrel. For otherwise more common concerns, American motorists are becoming quite annoyed at the constant rise in the price of fuel at the pump. Unleaded regular has shot to an average of over $3.50 per gallon nationally. It's cheapest in Montana and Utah, at about $3.18 per gallon, and most expensive in California, where prices under $3.78 cannot be found state-wide.
All of this oil-related shock tended to make traders a bit nervous heading into the weekend, save for those short-covering maniacs who boosted the close and shaved roughly half off the session's losses.
Dow 12,169.88, -88.32 (0.72%)
NASDAQ 2,784.67, -14.07 (0.50%)
S&P 500 1,321.15, -9.82 (0.74%)
NYSE Composite 8,413.05, -52.40 (0.62%)
The late-day rally did little to assuage the internals, however, as decliners trumped advancing issues, 4175-2315. On the NASDAQ, there were 110 new highs and 23 new lows. The NYSE saw 152 stocks make new highs on the day, while only 14 registered new lows. Volume was still rather moderate, considering all the ground covered during the session.
NASDAQ Volume 1,941,966,250
NYSE Volume 4,839,070,500
Commodities had a banner day. Crude oil futures on the front end NYMEX contract were up $2.51, to $104.42, the highest finish since 2008. Gold ramped another $12.20, approaching the fresh highs of earlier this week, closing at $1,428.60. Silver gained an even dollar, closing out the week at $35.33 per ounce in New York.
In the long view, the good-but-not-great jobs number was outflanked by pressure from oil and once again the main beneficiaries were holders of physical gold and silver.
After all the flailing about, the major indices barely budged on a week-to-week basis, but commodities finished strongly higher.
Sometimes, it's better to just sit back and enjoy the show, as that was the case this week for owners of precious metals. A good deal of energy was spent pushing equity prices hither and fro, to little avail, though Tuesday's key reversal looks like it will produce a real correction of 10-15% some time soon.
Friday, March 4, 2011
Taking a Stab at the NFP Number
There's about an hour to go before the release of the BLS Non-Farm Payroll data for February, and, since listening to ex-chairman Greenspan dodder on CNBC is causing severe intellectual pain and suffering, I've decided to take a stab at what the number will be.
With government work contracting generally over the past 3-6 months, we're likely looking at a reduction in public sector jobs of somewhere between 15,000 and 30,000. That implies that to reach the number some have projected, 175-200,000, the private sector would have to had created upwards of 200,000 jobs, and that seems highly unlikely.
My best guess - and it's nothing more than a guess because I'm not taking into account the arcane and muddy BLS birth-death models and other smoothing mechanisms they employ - is that the private sector created no more than a net 160,000 new jobs, and even that might be a stretch.
Let's put the number at +135,000, below consensus estimates, but, considering how bad January was, this number could - and maybe should - be considered a vast improvement.
Not that anybody should be happy with this number, since the amount of stimulus by government and the Fed has been enormous and we should, at this point in the "recovery," be creating 300-350,000 net new jobs, anything above 125,000 should be almost satisfactory, or, a "D" for underachievement for the Fed.
So, that's it: +135,000. I can live with that, and, even if I'm wrong, I'll be no further off than the majority of the experts out there.
With government work contracting generally over the past 3-6 months, we're likely looking at a reduction in public sector jobs of somewhere between 15,000 and 30,000. That implies that to reach the number some have projected, 175-200,000, the private sector would have to had created upwards of 200,000 jobs, and that seems highly unlikely.
My best guess - and it's nothing more than a guess because I'm not taking into account the arcane and muddy BLS birth-death models and other smoothing mechanisms they employ - is that the private sector created no more than a net 160,000 new jobs, and even that might be a stretch.
Let's put the number at +135,000, below consensus estimates, but, considering how bad January was, this number could - and maybe should - be considered a vast improvement.
Not that anybody should be happy with this number, since the amount of stimulus by government and the Fed has been enormous and we should, at this point in the "recovery," be creating 300-350,000 net new jobs, anything above 125,000 should be almost satisfactory, or, a "D" for underachievement for the Fed.
So, that's it: +135,000. I can live with that, and, even if I'm wrong, I'll be no further off than the majority of the experts out there.
Thursday, March 3, 2011
Big Rebound for Stocks on Low Volume
Today's jump in equities, led by Industrials, Financials and Health Care, was mostly based upon the usually shaded numbers from the BLS on initial unemployment claims, which came in at a three-year low of 368,000.
A good number, without a doubt, but market bettors were staking into stocks on the probability that those figures would translate into a much-improved non-farm payroll number on Friday. The current estimates are calling for the US economy to have created between 175,000 and 200,000 net new jobs in the month of February.
Taking into account the massive sums of money pumped into the economy through various stimuli, tax credits, bailouts, low tax regime and the Fed's QE, QE2 and ZIRP policies, it's about time for companies to begin hiring, and with gusto. Should the number tomorrow fall short of expectations, it would provide more fodder for those who believe the great Keynesian experiments of Ben Bernanke and the oligarchical banker subsidies have been for naught.
Those on the "recovery" side of that argument better hope that the BLS has massaged the numbers sufficiently to manage the message.
While today's gains were awesome to behold - the best for the S&P since December 1 and the biggest percentage gain for the NASDAQ since February 1 - the major indices are still 1-1 1/2% below the recent (Feb. 18) highs. events are still very much in flux, oil is still abnormally high-priced and we're still guessing that unemployment is beginning to come down, and worse yet, that guess is based upon a very faulty - and often revised - series of numbers supplied by a dodgy government agency, the BLS.
Not to poke holes in the recovery argument, for that's becoming a cause for being labeled un-American, but the stock market is such a wild, wide-open casino these days, that a big upside move is nothing upon which to hang one's investment hat. Additionally, it should be pointed out that the huge two-year rally off the March 9, 2009 lows has been upwards of 95% on the major indices and it is nothing more than a cyclical bull rally inside a secular bear market, one which the Western world entered in August of 2007.
Then there's still the question of what will happen when the Fed pulls the plug on QE, come June, or whether they will have the nerve and economic data to allow them to do so. That's when things get really dicey, as the underpinnings of the market are pulled out and interest rates make a natural rise, causing all that glorious government debt to be ever-more expensive to pay back.
And, if the Fed decides to pull the veritable plug of buying all US Treasury issuance, how soon will be see failed auctions? A scenario like that would make 2008 look like a stroll through the amusement park.
Enjoy it while you have it, perma-bulls. It may not last very long, especially in the face of what's gone on in gold and silver, the two behemoths scaring the living daylights out of central bankers everywhere.
Dow 12,258.20, +191.40 (1.59%)
NASDAQ 2,798.74, +50.67 (1.84%)
S&P 500 1,330.97, +22.53 (1.72%)
NYSE Composite 8,465.45, +126.69 (1.52%)
Matching the headline numbers, advancing issues galloped ahead of decliners, 5126-1431. NASDAQ new highs: 160; new lows: 22. NYSE new highs: 228; new lows: 4. Volume was down in the doldrums again, though not as badly as other, weaker days. With all the profits generated over the past two years, one would expect to see much higher volume on big trading days like this, but the bulk of the gain was done by noon, after which markets just marked time ahead of the key job announcement tomorrow morning.
There's also the small technical matter of the key, double-engulfing day on Tuesday, a symptom and a signal for a course correction, that is still in play. Today's high on the Dow was still 20 points shy of the opening high on Tuesday.
NASDAQ Volume 2,005,997,000
NYSE Volume 4,926,878,500
Oil took a bit of a breather, as events in Lybia and the Middle East were downplayed. NYMEX crude dipped 32 cents, but stabilizing over $100 - today's close was $101.91 - per barrel isn't anything anybody should be bullish about, unless one owns a well or three. Higher oil prices precede recessions, every time, and unless the situation in the Middle East isn't quieted soon, that high price is going to remain in place and possibly go higher. Moods change on the turn f a dime these days, and today's price - as well as today's stock gains - could be ancient history in a matter of hours or days.
Precious metals took a well-deserved day of profit-taking, and are consolidating at elevated levels. The next move higher should commence whenever conditions warrant, that being any time there's a flare-up in the Middle East, or, like Jean Claude Trichet mumbled today, interest rates should rise in Europe in order to stave off inflation.
Gold dropped $21.30, to $1,416.40; silver was down 51 cents, to $34.33. Both of those levels are close to historic, recent (yesterday) highs.
The future of the markets hinge upon tomorrow morning's key employment number, though one should not get too tied to this particular measure. There are more forces at work besides employment figures, though traders seem to want to hang their collective hats on this one.
A good number, without a doubt, but market bettors were staking into stocks on the probability that those figures would translate into a much-improved non-farm payroll number on Friday. The current estimates are calling for the US economy to have created between 175,000 and 200,000 net new jobs in the month of February.
Taking into account the massive sums of money pumped into the economy through various stimuli, tax credits, bailouts, low tax regime and the Fed's QE, QE2 and ZIRP policies, it's about time for companies to begin hiring, and with gusto. Should the number tomorrow fall short of expectations, it would provide more fodder for those who believe the great Keynesian experiments of Ben Bernanke and the oligarchical banker subsidies have been for naught.
Those on the "recovery" side of that argument better hope that the BLS has massaged the numbers sufficiently to manage the message.
While today's gains were awesome to behold - the best for the S&P since December 1 and the biggest percentage gain for the NASDAQ since February 1 - the major indices are still 1-1 1/2% below the recent (Feb. 18) highs. events are still very much in flux, oil is still abnormally high-priced and we're still guessing that unemployment is beginning to come down, and worse yet, that guess is based upon a very faulty - and often revised - series of numbers supplied by a dodgy government agency, the BLS.
Not to poke holes in the recovery argument, for that's becoming a cause for being labeled un-American, but the stock market is such a wild, wide-open casino these days, that a big upside move is nothing upon which to hang one's investment hat. Additionally, it should be pointed out that the huge two-year rally off the March 9, 2009 lows has been upwards of 95% on the major indices and it is nothing more than a cyclical bull rally inside a secular bear market, one which the Western world entered in August of 2007.
Then there's still the question of what will happen when the Fed pulls the plug on QE, come June, or whether they will have the nerve and economic data to allow them to do so. That's when things get really dicey, as the underpinnings of the market are pulled out and interest rates make a natural rise, causing all that glorious government debt to be ever-more expensive to pay back.
And, if the Fed decides to pull the veritable plug of buying all US Treasury issuance, how soon will be see failed auctions? A scenario like that would make 2008 look like a stroll through the amusement park.
Enjoy it while you have it, perma-bulls. It may not last very long, especially in the face of what's gone on in gold and silver, the two behemoths scaring the living daylights out of central bankers everywhere.
Dow 12,258.20, +191.40 (1.59%)
NASDAQ 2,798.74, +50.67 (1.84%)
S&P 500 1,330.97, +22.53 (1.72%)
NYSE Composite 8,465.45, +126.69 (1.52%)
Matching the headline numbers, advancing issues galloped ahead of decliners, 5126-1431. NASDAQ new highs: 160; new lows: 22. NYSE new highs: 228; new lows: 4. Volume was down in the doldrums again, though not as badly as other, weaker days. With all the profits generated over the past two years, one would expect to see much higher volume on big trading days like this, but the bulk of the gain was done by noon, after which markets just marked time ahead of the key job announcement tomorrow morning.
There's also the small technical matter of the key, double-engulfing day on Tuesday, a symptom and a signal for a course correction, that is still in play. Today's high on the Dow was still 20 points shy of the opening high on Tuesday.
NASDAQ Volume 2,005,997,000
NYSE Volume 4,926,878,500
Oil took a bit of a breather, as events in Lybia and the Middle East were downplayed. NYMEX crude dipped 32 cents, but stabilizing over $100 - today's close was $101.91 - per barrel isn't anything anybody should be bullish about, unless one owns a well or three. Higher oil prices precede recessions, every time, and unless the situation in the Middle East isn't quieted soon, that high price is going to remain in place and possibly go higher. Moods change on the turn f a dime these days, and today's price - as well as today's stock gains - could be ancient history in a matter of hours or days.
Precious metals took a well-deserved day of profit-taking, and are consolidating at elevated levels. The next move higher should commence whenever conditions warrant, that being any time there's a flare-up in the Middle East, or, like Jean Claude Trichet mumbled today, interest rates should rise in Europe in order to stave off inflation.
Gold dropped $21.30, to $1,416.40; silver was down 51 cents, to $34.33. Both of those levels are close to historic, recent (yesterday) highs.
The future of the markets hinge upon tomorrow morning's key employment number, though one should not get too tied to this particular measure. There are more forces at work besides employment figures, though traders seem to want to hang their collective hats on this one.
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