US indices spent most of Friday trading in the negative, but the Dow got just enough of late activity to boost it to another closing high - the third in a row.
DJIA: 12,767.57 Up 2.56; Nasdaq: 2,496.31 Down 0.79; S&P 500 1,455.54 Down 1.27.
On a day that was altogether lethargic, the averages managed to just barely hold their own. News from the housing market was the only notable piece, with a 14.1% decline in January housing the headline.
Despite what some experts may be saying, the long, slow decline in housing starts, median prices and overall prices and the antecedent rise in mortgage delinquencies is only gathering momentum. Housing prices over the last 10 years had grown out of the reach of most Americans and a readjustment is necessary. There's going to be much more pain down the road to suburbia in coming months and years, with massive failure of a lender or two the culmination.
An environment wherein a two-earner family with a gross income of $90,000 thinks seriously about trading up to a $500,000 home simply cannot sustain itself. Sooner or later, prices cool, speculators back out, deals are undersubscribed and the whole thing goes bust. That's exactly what's occurring in South Florida especially and elsewhere to a lesser extent. Markets in Las Vegas, parts of California and the Northeast corridor have already been cooling down for the last six months to a year. The trend will spread, the herd will thin and all of a sudden - over a period of 2-3 years - you've got a buyer's market. That's where we're headed.
A bust in the housing market isn't going to affect the investor class much, however, unless people begin cashing in 401k's to make the mortgage payments. A more likely occurrence is that municipalities will face the untidy prospect of seeing tax revenues truncated under the auspices of the highly-popular-but-fiscally-unsupportable market value assessments. It's a nightmare for tax districts large and small, and it's coming fast.
Another good week for stocks ends with this cheery note: crude oil rose $1.40 on Friday to close at $59.39. $60/bbl. still looks like a short term top. Pitchers and catchers reported for Spring training this week. Spring is just around the corner.
Friday, February 16, 2007
Thursday, February 15, 2007
Dow Rockets 100+ in 2 days; Nasdaq Flirts with 2500
After gaining 87 points on Wednesday and reaching another all-time high, the Dow Jones Industrial Average tacked on 23 more Thursday to close at 12, 765.01. Fueled by positive comments from Fed Chairman Ben Bernanke, stabilizing oil prices and benign economic news, investors poured into blue chips, techs and small caps, extending the bull run begun in October 2002.
The Nasdaq flirted with 2,500 once again on Thursday, closing on the upside by 8.72 at 2,497.10. The junior exchange has not closed above 2,500 in six years and the number it is approaching is an important psychological level.
The National Association of Realtors announced today that overall home prices fell 2.7% in the 4th quarter - a record - while median home prices lost 3.4%. Vacation markets in Florida, Sarasota-Bradenton-Venice and Palm Bay-Melbourne-Titusville, were especially hard hit.
Life may be rosy on Wall Street but not everyone is sharing the joy.
The Nasdaq flirted with 2,500 once again on Thursday, closing on the upside by 8.72 at 2,497.10. The junior exchange has not closed above 2,500 in six years and the number it is approaching is an important psychological level.
The National Association of Realtors announced today that overall home prices fell 2.7% in the 4th quarter - a record - while median home prices lost 3.4%. Vacation markets in Florida, Sarasota-Bradenton-Venice and Palm Bay-Melbourne-Titusville, were especially hard hit.
Life may be rosy on Wall Street but not everyone is sharing the joy.
Tuesday, February 13, 2007
Alcoa Rumors Propels Dow 102 Higher
There are days that bring one to wonder where investors get their ideas and then there are days like this.
Amid speculation that a pair of Australian mining companies - BHP Billiton Ltd. and Rio Tinto PLC - each plan to offer as much as $40 billion to purchase American aluminum giant Alcoa (AA), the Dow Jones Industrials leapt out of the gate at the opening bell and never looked back.
The story, attributed to the London Times, citing unnamed sources, set the Dow ablaze in New York.
By the end of the day (after the market closed), the Washington Post was reporting that "few analysts believed the U.S. aluminum giant was about to be gobbled up."
My theory: These kinds of things are dreamt up and ginned up by sharpies inside the brokerages to make a quick killing in an overnight options trade and have little, if any, basis in reality. They're especially attractive during slow news periods.
Alcoa closed just a shade under 33 on Monday, but opened above 35 on Tuesday, peaking at 36.05 within the first hour of trading. It ended at the day at 35. February options expire on Friday.
While there's nothing ostensibly illegal about planting a story (though it's a thin line), it does create an uneven playing field for those in the know. Getting Alcoa to move 2 points on the open is no mean feat. The stock has ranged between 23 and 38 for nearly the past 4 years. It's not one of the more volatile stocks in the game. In fact, it's rather a dull trading vehicle.
The moral of this particular story is that market manipulation comes in all shapes and sizes. And, while no one is immune, a fraud can usually be spotted relatively easily.
If traders are this desperate to make a buck, we could be witness to the final snorts of this 52-month long bull market. Only the most hopeful would count on a continuation of this surge through the rest of the week.
Others will view today with a healthy dose of skepticism.
The Dow gained 102.30, the S&P added 10.89, but the Nasdaq lagged, gaining only 9.50, roughly half the gain, in percentage terms, of the other indices.
Oil changed course on Tuesday, gaining $1.25 to close at $59.06 though the price is largely being held aloft by continuing cold weather in the US Northeast. With Spring's warming just around the corner, and oil prices failing to overtop $60, the good news for drivers and homeowners is due shortly.
Amid speculation that a pair of Australian mining companies - BHP Billiton Ltd. and Rio Tinto PLC - each plan to offer as much as $40 billion to purchase American aluminum giant Alcoa (AA), the Dow Jones Industrials leapt out of the gate at the opening bell and never looked back.
The story, attributed to the London Times, citing unnamed sources, set the Dow ablaze in New York.
By the end of the day (after the market closed), the Washington Post was reporting that "few analysts believed the U.S. aluminum giant was about to be gobbled up."
My theory: These kinds of things are dreamt up and ginned up by sharpies inside the brokerages to make a quick killing in an overnight options trade and have little, if any, basis in reality. They're especially attractive during slow news periods.
Alcoa closed just a shade under 33 on Monday, but opened above 35 on Tuesday, peaking at 36.05 within the first hour of trading. It ended at the day at 35. February options expire on Friday.
While there's nothing ostensibly illegal about planting a story (though it's a thin line), it does create an uneven playing field for those in the know. Getting Alcoa to move 2 points on the open is no mean feat. The stock has ranged between 23 and 38 for nearly the past 4 years. It's not one of the more volatile stocks in the game. In fact, it's rather a dull trading vehicle.
The moral of this particular story is that market manipulation comes in all shapes and sizes. And, while no one is immune, a fraud can usually be spotted relatively easily.
If traders are this desperate to make a buck, we could be witness to the final snorts of this 52-month long bull market. Only the most hopeful would count on a continuation of this surge through the rest of the week.
Others will view today with a healthy dose of skepticism.
The Dow gained 102.30, the S&P added 10.89, but the Nasdaq lagged, gaining only 9.50, roughly half the gain, in percentage terms, of the other indices.
Oil changed course on Tuesday, gaining $1.25 to close at $59.06 though the price is largely being held aloft by continuing cold weather in the US Northeast. With Spring's warming just around the corner, and oil prices failing to overtop $60, the good news for drivers and homeowners is due shortly.
Monday, February 12, 2007
Stocks off again; Nasdaq loses bid for London Exchange
The downward trend begun late last week spilled over into Monday's market. Once again, there was nary a rationale for either buying or selling, stocks drifted gradually lower, ending down on the three major indices in sluggish trading.
The Dow lost 28.28, the NASDAQ -9.44, S&P 500 -4.69.
Most notable on the day was the Nasdaq failing to get shareholder approval for its hostile takeover of the London Stock Exchange. The on-again, off-again attempts have been jarring to investors and speculators on both sides of the Atlantic. Nasdaq owns a 28.75% stake in the LSE, which has been involved in takeover attempts by Deutsche Boerse, Paris-based exchange Euronext and Australian bank Macquarie over the past two years. Nasdaq will be unable to launch another hostile takeover for the next 12 months.
The LSE will look for protection by strengthening alliances with friendlier exchanges such as the Tokyo Stock Exchange while the Nasdaq investors decide whether to pursue the takeover further or sell off their interests.
Oil dropped to $57.81 at the close, partially retracing recent gains while the precious metals remained rangebound.
The Dow lost 28.28, the NASDAQ -9.44, S&P 500 -4.69.
Most notable on the day was the Nasdaq failing to get shareholder approval for its hostile takeover of the London Stock Exchange. The on-again, off-again attempts have been jarring to investors and speculators on both sides of the Atlantic. Nasdaq owns a 28.75% stake in the LSE, which has been involved in takeover attempts by Deutsche Boerse, Paris-based exchange Euronext and Australian bank Macquarie over the past two years. Nasdaq will be unable to launch another hostile takeover for the next 12 months.
The LSE will look for protection by strengthening alliances with friendlier exchanges such as the Tokyo Stock Exchange while the Nasdaq investors decide whether to pursue the takeover further or sell off their interests.
Oil dropped to $57.81 at the close, partially retracing recent gains while the precious metals remained rangebound.
Saturday, February 10, 2007
Drop in the Bucket
Stocks closed out the week on a decidedly sour note Friday, as buyers made an early exit and profit takers moved in earnestly. Volume on the major indices was on the high side, though not overwhelmingly. The drops on the Dow, S&P and NASDAQ were more of a reality check than indicative of a trend, so there's no need to get out the shovels.
On the day, the Dow lost 56.80 to close at 12.580.83. The NASDAQ failed to breach the 2,500 mark, falling 28.85 to 2,459.82 and the S&P 500 lost 10.25, closing at 1438.06.
What moved the market from inertia was the continued cold weather in the Northeast, prompting crude prices over $60/bbl. during the session. Oil ended the day at $59.89 after hitting a high of $61.00.
Coupled with oil shock fear was the continuing saga of interest rate phobia. A couple of speeches by Fed governors were interpreted as signals for continued tightening and that helped fuel the dour mood after mid-day.
In the final analysis, the market is suffering more from a lack of news than a preponderance of bad news and earnings reports. While the latter - earnings - has been lackluster in most sectors, the economy continues to percolate. It's a double-edged sword at present. Solid growth may induce the Fed to raise rates, so the good must be taken with the bad, and the bad may not be severe.
Today's pullback must be taken in the perspective of an overall long term upward trend. There's going to be a correction - there always is - but it's more likely to be short and not very serious - more along the lines of 7-10% than a 15-25% drop. The best strategy right now is to do what traders did on Friday: take some of the money off the table and see how the following weeks develop.
There's no need to get greedy here. Stocks are still pricey, but many will look a lot more like bargains in months ahead.
On the day, the Dow lost 56.80 to close at 12.580.83. The NASDAQ failed to breach the 2,500 mark, falling 28.85 to 2,459.82 and the S&P 500 lost 10.25, closing at 1438.06.
What moved the market from inertia was the continued cold weather in the Northeast, prompting crude prices over $60/bbl. during the session. Oil ended the day at $59.89 after hitting a high of $61.00.
Coupled with oil shock fear was the continuing saga of interest rate phobia. A couple of speeches by Fed governors were interpreted as signals for continued tightening and that helped fuel the dour mood after mid-day.
In the final analysis, the market is suffering more from a lack of news than a preponderance of bad news and earnings reports. While the latter - earnings - has been lackluster in most sectors, the economy continues to percolate. It's a double-edged sword at present. Solid growth may induce the Fed to raise rates, so the good must be taken with the bad, and the bad may not be severe.
Today's pullback must be taken in the perspective of an overall long term upward trend. There's going to be a correction - there always is - but it's more likely to be short and not very serious - more along the lines of 7-10% than a 15-25% drop. The best strategy right now is to do what traders did on Friday: take some of the money off the table and see how the following weeks develop.
There's no need to get greedy here. Stocks are still pricey, but many will look a lot more like bargains in months ahead.
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