US indices registered their second straight day of gains in anticipation of the FOMC policy statement Wednesday afternoon. Essentially, the market is celebrating the Fed doing nothing, so the adage, "no news is good news" is applicable to this market.
The Fed governors, as is their wont, will have a teleconference tomorrow and proudly announce that the economy is in good shape, nothing to see here, all's well, and traders will go back to doing what they do best, i.e., buying and selling stocks. It's a little like a Samuel Beckett play over three days, but with a lot less drama. Or, put another way, with nothing better to do, investors buy stocks. Would that it were always so easy.
Tuesday's gains were roughly half of Monday's and they were made on fairly modest volume, indicating that there's no big rush to snap up bargains here, as some of the more bullish analysts would have you believe. There's got to be more than a non-movement by the Fed to really incite buyers. At least that's what the charts and market internals are saying.
Dow 12,288.10 +61.93; NASDAQ 2,408.21 +13.80; S&P 500 1,410.94 +8.88; NYSE Composite 9,158.27 +67.27
All of the data lined up today in the bulls' favor. Advancing issues outflanked decliners by an 11-5 margin, and new highs overwhelmed new lows by an overall 247-82. Regarding that last reading, it's going to stay that way until there's another batch of selling and a retest of the 12,050-12,100 level on the Dow.
The correction that's now reached 5 weeks has run out of horror stories and selling scenarios. While the recent news and economic reports haven't been particularly stellar, neither have they been gloomy. Mostly, there's been a general dearth of news, positive or negative, giving most of the investors entertaining worrisome thoughts of closing positions pause.
With the Fed unlikely to do or say anything market-moving, the pause will likely continue, making this third full week of March one of the slowest of the young year.
Helping stocks regain some of their lost footing is the price of oil, which gained a mere 14 cents today, closing at $56.73, a relatively tame number. Another 3 or 4 dollar fall in crude could actually spark a rally, though nobody is basing any hopes on such an occurrence.
Gold gained 4.70 to $659.00 and silver added 0.14 to $13.37, but the precious metals remain stuck in what has become a ten-month old rut. Gold hit a multi-year high of $741 late last April. Since then, it's dropped below $600 briefly a couple of times, has yet to pierce the $700 mark and still isn't close. That's the problem with hedges such as metals. Sometimes there's nothing much to hedge.
Tuesday, March 20, 2007
Monday, March 19, 2007
Another Big Monday for the Dow
After ending last week with modest losses, the Dow and other major US equity indices raged higher on Monday, with blue chips in the lead. The tenor of the trade was eerily similar to last Monday's in which the Dow headed higher before noon, leveled off and sold off slightly into the close.
The only difference was that there was no late afternoon selling. The Dow remained close to its highs for the day from 11:30 onward.
Dow 12,226.17 +115.76; NASDAQ 2,394.41 +21.75; S&P 500 1,402.06 +15.11; NYSE Composite 9,091.00 +107.99
Volume showed a less-than-enthusiastic buying crowd, though advancing issues swamped declining ones by a 5-2 margin. Last week's trend in the new highs-new lows metric has now completely reversed for the third time in four weeks, with new highs posting a 209-96 advantage on the day.
With the Fed set to issue a statement on interest rate policy on Wednesday, today's buyers seemed confident that last week's alarming PPI numbers were muted by the tame CPI reading and that inflation is still not a problem. That said, there's almost nobody on Wall Street who thinks the Fed will either raise or lower rates this week.
The market may have to search for a catalyst as the only other meaningful data out this week (beyond the scores of the NCCA tournament games) are in the housing sector, a market segment that's already seen more than its fair share of battering over the past month.
So, investors will have to do what every good investor must in times like these: wait for signals. The problem is that there may not be many signs being flashed on the exchanges until quarterly earnings begin rolling out in three weeks. It will be interesting to see what traders occupy themselves with, barring any meaningful news or earth-shaking announcements.
In what's possibly been the best news of all for this shaky market, the price of a barrel of crude oil continued to fall on Monday, closing down another 52 cents to $56.59. Gold and silver, the precious metals usually-referred to as the best defense against inflation, posted negligible gains.
If we continue to follow the recent market pattern, today's gain will become rather meaningless by mid-week. Monday's mirthful mood could turn into more frustration by Friday as the correction continues into week 5.
The only difference was that there was no late afternoon selling. The Dow remained close to its highs for the day from 11:30 onward.
Dow 12,226.17 +115.76; NASDAQ 2,394.41 +21.75; S&P 500 1,402.06 +15.11; NYSE Composite 9,091.00 +107.99
Volume showed a less-than-enthusiastic buying crowd, though advancing issues swamped declining ones by a 5-2 margin. Last week's trend in the new highs-new lows metric has now completely reversed for the third time in four weeks, with new highs posting a 209-96 advantage on the day.
With the Fed set to issue a statement on interest rate policy on Wednesday, today's buyers seemed confident that last week's alarming PPI numbers were muted by the tame CPI reading and that inflation is still not a problem. That said, there's almost nobody on Wall Street who thinks the Fed will either raise or lower rates this week.
The market may have to search for a catalyst as the only other meaningful data out this week (beyond the scores of the NCCA tournament games) are in the housing sector, a market segment that's already seen more than its fair share of battering over the past month.
So, investors will have to do what every good investor must in times like these: wait for signals. The problem is that there may not be many signs being flashed on the exchanges until quarterly earnings begin rolling out in three weeks. It will be interesting to see what traders occupy themselves with, barring any meaningful news or earth-shaking announcements.
In what's possibly been the best news of all for this shaky market, the price of a barrel of crude oil continued to fall on Monday, closing down another 52 cents to $56.59. Gold and silver, the precious metals usually-referred to as the best defense against inflation, posted negligible gains.
If we continue to follow the recent market pattern, today's gain will become rather meaningless by mid-week. Monday's mirthful mood could turn into more frustration by Friday as the correction continues into week 5.
Friday, March 16, 2007
Stocks Sag Again at Week's End
US equities lost ground in Friday's session, culminating in the third down week in the last four. Today's losses were contained, with the Dow losing just less than 50 points while the NASDAQ and S&P were only down single digits. The Dow was down 166 points for the week. By contrast, the NASDAQ lost only 16. Blue chips are beginning to feel the pain of a weakening economy. Only 9 of the 30 Dow components showed gains on Friday, the highest being a mere 21 cents by both Wal-Mart and Hewlett-Packard.
Dow 12,110.41 -49.27; NASDAQ 2,372.66 -6.04; S&P 500 1,386.95 -5.33; NYSE Composite 8,982.73 -22.52
Market internals were mixed, as declining issues outpaced advancers by better than a 3-2 margin. New highs stayed ahead of new lows, barely, 145-112.
While sub-prime mortgage lending woes taking the better part of the headlines this week, the undercurrents of inflation, reduced investment flows and upcoming 1st quarter earnings and economic reports are keeping investor sentiment in an extremely cautious posture. With only 2 weeks left in the 1st quarter, if market performance is any gauge, we're in for a rough ride the remainder of the year.
While there are still analysts out there touting stocks and sounding cherry, they're voices are becoming fewer and the commentary increasingly couched in more restrained language. The long running of the bulls is over (officially ended on February 20), and the reality of the correction and the possibility of a protracted bear market is beginning to sink in.
The price of crude continued its week-long slide, losing another 44 cents on Friday to end the week at $57.11. Gold closed at 653.90, +6.80; silver finished the week at 13.22, +0.14. A slowing economy would not augur higher petroleum prices, proving that there indeed is a silver lining inside every dark cloud.
Dow 12,110.41 -49.27; NASDAQ 2,372.66 -6.04; S&P 500 1,386.95 -5.33; NYSE Composite 8,982.73 -22.52
Market internals were mixed, as declining issues outpaced advancers by better than a 3-2 margin. New highs stayed ahead of new lows, barely, 145-112.
While sub-prime mortgage lending woes taking the better part of the headlines this week, the undercurrents of inflation, reduced investment flows and upcoming 1st quarter earnings and economic reports are keeping investor sentiment in an extremely cautious posture. With only 2 weeks left in the 1st quarter, if market performance is any gauge, we're in for a rough ride the remainder of the year.
While there are still analysts out there touting stocks and sounding cherry, they're voices are becoming fewer and the commentary increasingly couched in more restrained language. The long running of the bulls is over (officially ended on February 20), and the reality of the correction and the possibility of a protracted bear market is beginning to sink in.
The price of crude continued its week-long slide, losing another 44 cents on Friday to end the week at $57.11. Gold closed at 653.90, +6.80; silver finished the week at 13.22, +0.14. A slowing economy would not augur higher petroleum prices, proving that there indeed is a silver lining inside every dark cloud.
Thursday, March 15, 2007
Climbing the Worry Wall
US indices groped higher on Thursday, the 7th winning session of the last 17, dating back to the Dow's all-time closing high of 12,786.64 on February 20. And therein lies the story. Though the markets have not lately shown a preponderance of down days, the average is lower by more than 600 points in just over three weeks.
Today's slight gains were indicative of an unsure market.
Dow 12,159.68 +26.28; NASDAQ 2,378.70 +6.96; S&P 500 1,392.28 +5.11; NYSE Composite 9,005.25 +46.64
The Producer Price Index (PPI) for February increased by 1.3%, well beyond the market estimate of 0.5%. Food costs showed their largest monthly increase in more than three years. Core PPI rose 0.4 percent. The Labor Department's CPI will be released tomorrow. The reading raised more inflation concerns and speculation of a possible Fed rate increase. The FOMC of the Federal Reserve Board meets next week to decide on interest rates, though consensus opinion says the committee will keep the federal funds rate steady at 5.25% - the rate member banks pay on overnight loans from the Federal Reserve.
The FOMC last raised rates - to their current level - in June of 2006. In their five meetings since, they have made no change to the federal funds rate.
Despite the scary inflation news, investors bid up stocks, though not with great enthusiasm. With residential real estate now in a prolonged decline, capital inflows may be affected as middle to upper income investors express caution with other investments. The expected volatility tied to quadruple options expirations on Friday failed to materialize, seemingly having played itself out during Wednesday's wild ride.
Advancing issues outdid decliners by better than 2-1, and the measure of new highs to new lows flipped back to the positive, 154-88.
Crude oil continued to lose value, dipping 61 cents to $57.55. Gold and silver both notched gains; gold was up $4.60, silver added 25 cents.
Today's slight gains were indicative of an unsure market.
Dow 12,159.68 +26.28; NASDAQ 2,378.70 +6.96; S&P 500 1,392.28 +5.11; NYSE Composite 9,005.25 +46.64
The Producer Price Index (PPI) for February increased by 1.3%, well beyond the market estimate of 0.5%. Food costs showed their largest monthly increase in more than three years. Core PPI rose 0.4 percent. The Labor Department's CPI will be released tomorrow. The reading raised more inflation concerns and speculation of a possible Fed rate increase. The FOMC of the Federal Reserve Board meets next week to decide on interest rates, though consensus opinion says the committee will keep the federal funds rate steady at 5.25% - the rate member banks pay on overnight loans from the Federal Reserve.
The FOMC last raised rates - to their current level - in June of 2006. In their five meetings since, they have made no change to the federal funds rate.
Despite the scary inflation news, investors bid up stocks, though not with great enthusiasm. With residential real estate now in a prolonged decline, capital inflows may be affected as middle to upper income investors express caution with other investments. The expected volatility tied to quadruple options expirations on Friday failed to materialize, seemingly having played itself out during Wednesday's wild ride.
Advancing issues outdid decliners by better than 2-1, and the measure of new highs to new lows flipped back to the positive, 154-88.
Crude oil continued to lose value, dipping 61 cents to $57.55. Gold and silver both notched gains; gold was up $4.60, silver added 25 cents.
Wednesday, March 14, 2007
Not-So-High Noon Sparks Rally
US markets, following the lead of markets in Asia and Europe, were battered during the lunch hour - usually a relatively quiet time for Wall Street - but staged a remarkable rally to close higher. The Dow, which had been vacillating around the no change line all morning, suddenly fell a full 50 points between 12:00 and 12:15 pm Eastern, with the other indices manifesting similar patterns.
The Dow would soon afterwards drop 130 points into the red, but around 1:00 began on a steady, miracle march higher which appeared out of nowhere, on no news, without reason. The rally led the indices into positive territory, though hardly enough to erase yesterday's battering or economic concerns.
Dow 12,133.40 +57.44; NASDAQ 2,371.74 +21.17; S&P 500 1,387.17 +9.22; NYSE Composite 8,958.60 +31.72
While overall breadth was positive, it was hardly so, with advancing issues beating decliners by about a 5-4 margin. What makes skeptics of analysts are days like today with numbers like this: New highs: 95; new lows: 266. That particular metric, which rolled over into the negative yesterday, is shouting out the direction of this market. Today's suspect rally notwithstanding, the market continues to drift lower as the housing market dries up and the US economy heads into a slow-growth (at best) period.
The sub-prime contagion has spread now into stocks beyond financials. Both H&R Block (HRB) and General Motors (GM) were beaten down early in the day by investors due to exposure concerns. Block, the nation's largest preparer of tax returns, also makes short-term, high-interest loans based on tax refunds while GM announced that they would spend up to $1 billion to cover losses by their part-owned GMAC lending arm.
H&R Block was down more than 1.5 points (>7%), but rallied sharply to end in the green. GM was down 91 cents before recovering to close -.26.
Much of today's trade was based on spin and speculation over the depth of the sub-prime problem, but moreso in anticipation of Friday's quadruple witching day, when index options, stock options, index futures, and single stock futures are set to expire. There was a higher than usual interest in arbitrage of stocks and futures today. Many were caught in a bear trap at midday as stocks sunk, then quickly rallied on short covering. It was a day-trader's day, for sure.
Some traders hunted and bagged what they consider bargains, though coming days may prove they were in the market prematurely. The Dow slipped below 12,000 briefly and that downdraft will no doubt be retested.
Oil bounced around all day, eventually closing up 23 cents to $58.16. Gold lost another 6.90, to end up at 642.50. Silver lost .13 to 12.83. Both precious metals are headed for bargain territory. Silver is just about at its interim support level, and a fall through $12.75 could spark further selling into the $10-12 level; gold may have further to fall, with support in the $600-625 range.
After today's spectacular trading range of nearly 200 points (almost 400 over the last three sessions), just about anything could happen on Thursday and Friday. Stay close to that trade button.
The Dow would soon afterwards drop 130 points into the red, but around 1:00 began on a steady, miracle march higher which appeared out of nowhere, on no news, without reason. The rally led the indices into positive territory, though hardly enough to erase yesterday's battering or economic concerns.
Dow 12,133.40 +57.44; NASDAQ 2,371.74 +21.17; S&P 500 1,387.17 +9.22; NYSE Composite 8,958.60 +31.72
While overall breadth was positive, it was hardly so, with advancing issues beating decliners by about a 5-4 margin. What makes skeptics of analysts are days like today with numbers like this: New highs: 95; new lows: 266. That particular metric, which rolled over into the negative yesterday, is shouting out the direction of this market. Today's suspect rally notwithstanding, the market continues to drift lower as the housing market dries up and the US economy heads into a slow-growth (at best) period.
The sub-prime contagion has spread now into stocks beyond financials. Both H&R Block (HRB) and General Motors (GM) were beaten down early in the day by investors due to exposure concerns. Block, the nation's largest preparer of tax returns, also makes short-term, high-interest loans based on tax refunds while GM announced that they would spend up to $1 billion to cover losses by their part-owned GMAC lending arm.
H&R Block was down more than 1.5 points (>7%), but rallied sharply to end in the green. GM was down 91 cents before recovering to close -.26.
Much of today's trade was based on spin and speculation over the depth of the sub-prime problem, but moreso in anticipation of Friday's quadruple witching day, when index options, stock options, index futures, and single stock futures are set to expire. There was a higher than usual interest in arbitrage of stocks and futures today. Many were caught in a bear trap at midday as stocks sunk, then quickly rallied on short covering. It was a day-trader's day, for sure.
Some traders hunted and bagged what they consider bargains, though coming days may prove they were in the market prematurely. The Dow slipped below 12,000 briefly and that downdraft will no doubt be retested.
Oil bounced around all day, eventually closing up 23 cents to $58.16. Gold lost another 6.90, to end up at 642.50. Silver lost .13 to 12.83. Both precious metals are headed for bargain territory. Silver is just about at its interim support level, and a fall through $12.75 could spark further selling into the $10-12 level; gold may have further to fall, with support in the $600-625 range.
After today's spectacular trading range of nearly 200 points (almost 400 over the last three sessions), just about anything could happen on Thursday and Friday. Stay close to that trade button.
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