Investors just have to put their money to work somewhere and most of them opted for US equities again today. With volume on the moderate to light side - as it has been during most of this recent upturn - all major indices recorded happy gains to close out the week.
Dow 12,612.13 +59.17; NASDAQ 2,491.94 +11.62; S&P 500 1,452.85 +5.05; NYSE Composite 9,522.86 +45.10
The joy wasn't spread broadly, however, as Merck was the standout on the Dow, leaping 3.85 - a gain of more than 8% - on positive news regarding Vioxx lawsuits and improved first quarter and full year outlooks. Merck's move accounted for more than 26 of the Dow's 59-point gain.
Late Thursday, Merck released guidance, saying that first quarter earnings would come in around 84 cents per share. Analysts had been widely expecting 64 cents. The company's full year guidance was also boosted by about 20 cents per share.
In New Jersey, a federal court judge threw out an investor class action lawsuit on statute of limitations grounds while the Wall St. Journal reported that a Texas judge was about to throw out a key Vioxx case. Such a move would defang another 1000 cases in the state which Merck is appealing.
All in all, Merck could not have asked for better news as Goldman Sachs analyst James Kelly upgraded the company to Neutral from Sell.
Elsewhere, good news from GE and Cisco boosted techs and blue chips alike, with the NASDAQ rising off the flatline late in the day on Cisco's suggestion that the 1st quarter would come in at the high end of estimates.
Company news overshadowed a 1% rise in the Producer Price Index (PPI), though core PPI, excluding food and energy, was tame, increasing only 0.4%. Even though the PPI number may not have been alarming to most, some speculated how hard the figures would impact Fed policy and that kept buying volumes somewhat restrained. Indeed, if energy and food accounted for a rise of 0.6% in just one month, that translates to an increase in those "non-core" (shouldn't they actually be "core"?) elements of 7.2% over the course of the year. That would be cause for concern, and there's plenty of evidence - as noted in yesterday's posting - that food prices may be headed higher. As for energy costs, they're already too high.
Advancing issues outpaced decliners by nearly a 5-3 margin and new highs surged to 411 against just 56 new lows, again indicative of a possible breakout. These figures continue to jump around without providing solid indications.
Crude slipped 22 cents to $63.63, but gold and silver, reflecting the resumption of inflationary pressures, responded with sizable gains. Gold was boosted 10.20 to close at $689.90, while silver approached recent high territory, adding 24 cents to $14.09 per ounce.
With earnings dominating the news, inflation fears may be shoved aside for the next few weeks, at the peril of many unseasoned investors. The Fed doesn't meet until May 9, which may already be too late to forestall the effects of higher inflation. Look for choppy trade until then, as the possibility of a Fed rate hike becomes a serious consideration.
Friday, April 13, 2007
Market Rebounds; Inflation Signs Obvious
Thursday began with a continuation of Wednesday's pull-back, with the Dow lower by nearly 50 points in the opening half hour. But, as has been the case for many a day that looked to be headed towards disaster, the market suddenly and without cause pivoted and moved higher, stabilized in the positive and closed with healthy gains.
Dow 12,552.96 +68.34; NASDAQ 2,480.32 +21.01; S&P 500 1,447.80 +8.93; NYSE Composite 9,477.76 +64.13
The general news was counter-trend, as new unemployment claims were sharply higher as was the price of crude.
Advancing issues outnumbered declining ones by nearly a 2-1 margin.
New Highs: 280; New Lows: 86. Despite the headline numbers from the indices, new highs remained muted, still signaling a continuation of the downtrend.
Oil shot skywards once again, up 1.84 to $63.85. Gold is getting close to a breakout position, adding another 5.60 to $685.30. Silver refused to follow along, losing 4 cents to $13.86. The move in gold may be somewhat of a reaction to increasingly alarming inflation news and Friday's PPI numbers could augur more increases in gold.
On the inflation front - the one the Fed promised to fight but hasn't - there's a lot of anecdotal evidence that food prices are going to spike wildly this Spring (if it ever arrives) and Summer. The key driver is corn, which is being more widely planted and grown for alternative energy use, primarily to be converted to ethanol.
The upshot is, so far, higher prices for corn and less arable land devoted to other crops, especially wheat, which some predict will cause a tightening supply and higher prices for the most staple of staples, bread.
Adding to the food woes, corn is used as a primary ingredient in farm animal feed, the price of which has nearly doubled in a year, so all meat products should see price increases over the next six months.
On top of that, as if that weren't enough, there's been widespread damage to orange groves in California and peach orchards in Georgia, and then there's the mysterious bee colony collapse disorder which is literally killing off millions of bees, important for pollination of all forms of fruits and vegetables.
If the Fed is looking for core core inflation, the two biggest components being food and energy, it's staring them straight in the face. Still, they refuse to do anything substantive - like raise interest rates - over fear that their glorious stock market might decline.
Sadly, the Fed cannot even read bold print, so expect inflation to remain untamed for some time.
Dow 12,552.96 +68.34; NASDAQ 2,480.32 +21.01; S&P 500 1,447.80 +8.93; NYSE Composite 9,477.76 +64.13
The general news was counter-trend, as new unemployment claims were sharply higher as was the price of crude.
Advancing issues outnumbered declining ones by nearly a 2-1 margin.
New Highs: 280; New Lows: 86. Despite the headline numbers from the indices, new highs remained muted, still signaling a continuation of the downtrend.
Oil shot skywards once again, up 1.84 to $63.85. Gold is getting close to a breakout position, adding another 5.60 to $685.30. Silver refused to follow along, losing 4 cents to $13.86. The move in gold may be somewhat of a reaction to increasingly alarming inflation news and Friday's PPI numbers could augur more increases in gold.
On the inflation front - the one the Fed promised to fight but hasn't - there's a lot of anecdotal evidence that food prices are going to spike wildly this Spring (if it ever arrives) and Summer. The key driver is corn, which is being more widely planted and grown for alternative energy use, primarily to be converted to ethanol.
The upshot is, so far, higher prices for corn and less arable land devoted to other crops, especially wheat, which some predict will cause a tightening supply and higher prices for the most staple of staples, bread.
Adding to the food woes, corn is used as a primary ingredient in farm animal feed, the price of which has nearly doubled in a year, so all meat products should see price increases over the next six months.
On top of that, as if that weren't enough, there's been widespread damage to orange groves in California and peach orchards in Georgia, and then there's the mysterious bee colony collapse disorder which is literally killing off millions of bees, important for pollination of all forms of fruits and vegetables.
If the Fed is looking for core core inflation, the two biggest components being food and energy, it's staring them straight in the face. Still, they refuse to do anything substantive - like raise interest rates - over fear that their glorious stock market might decline.
Sadly, the Fed cannot even read bold print, so expect inflation to remain untamed for some time.
Wednesday, April 11, 2007
Earnings Season Off on Wrong Foot
As mentioned yesterday, today was going to provide some fireworks and the indices took little time falling into the red right out of the gate. Most of the news of the day was on the negative side, especially Citigroup's announced restructuring, in which the company will shelve more than 17,000 employees worldwide. A rise in the price of crude (up 12 cents to $62.01) was probably more of an annoyance than a catalyst.
Dow 12,484.62 -89.23; NASDAQ 2,459.31 -18.30; S&P 500 1,438.87 -9.52; NYSE Composite 9,413.63 -55.07
The real blow came just after 2:00, when the minutes from the most recent Fed meeting showed that the FOMC governors were far from favoring a rate cut in the near future, something for which many ill-advised speculators had been hoping.
It's difficult to comprehend how people who are paid to be in touch with such things could be so far removed from reality. Inflationary pressures are everywhere, but some analysts still held to the belief that the Fed would cut rates within the next three to six months. With a fed funds rate at an historically moderate level of 5.25%, what exactly were they thinking? Was it all just a set-up by short-sellers in the know?
Upon release of the Fed's minutes the markets sank like they were loaded down with lead weights. False hope apparently dies hard.
Declining issues carried the day by a 2-1 margin over advancers.
New Highs: 290; New Lows: 101. This is the first session in at least the last 7 that there were less than 300 new highs, which is our benchmark. Expect the market to continue a downward trend until this is reversed.
After gaining for 8 consecutive sessions on relatively weak volume, the markets took a sudden, but hardly unexpected turn today, unofficially the first day of earnings season. Today's decline lopped off nearly a third of the gains made over that 8-day run. Since the indices never reached the previous highs, we are still technically in a downtrend.
Dow 12,484.62 -89.23; NASDAQ 2,459.31 -18.30; S&P 500 1,438.87 -9.52; NYSE Composite 9,413.63 -55.07
The real blow came just after 2:00, when the minutes from the most recent Fed meeting showed that the FOMC governors were far from favoring a rate cut in the near future, something for which many ill-advised speculators had been hoping.
It's difficult to comprehend how people who are paid to be in touch with such things could be so far removed from reality. Inflationary pressures are everywhere, but some analysts still held to the belief that the Fed would cut rates within the next three to six months. With a fed funds rate at an historically moderate level of 5.25%, what exactly were they thinking? Was it all just a set-up by short-sellers in the know?
Upon release of the Fed's minutes the markets sank like they were loaded down with lead weights. False hope apparently dies hard.
Declining issues carried the day by a 2-1 margin over advancers.
New Highs: 290; New Lows: 101. This is the first session in at least the last 7 that there were less than 300 new highs, which is our benchmark. Expect the market to continue a downward trend until this is reversed.
After gaining for 8 consecutive sessions on relatively weak volume, the markets took a sudden, but hardly unexpected turn today, unofficially the first day of earnings season. Today's decline lopped off nearly a third of the gains made over that 8-day run. Since the indices never reached the previous highs, we are still technically in a downtrend.
Tuesday, April 10, 2007
Eight Straight, But How High Is Up?
The Dow managed to close in the green again on Tuesday, but just barely, with the other indices following the lead. It brings up the question of whether this is really a rally, or just normal bounded in-range trading prior to some future market event during the great earnings deluge to come.
Dow 12,573.85 +4.71; NASDAQ 2,477.61 +8.43; S&P 500 1,448.39 +3.78; NYSE Composite 9,468.70 +39.49
Over the course of the last eight session the Dow has gained 273 points, or, an average of 34 points per day. If that doesn't sound like much, it's because it isn't. One just one day, April 3rd, the index was up 129 points, meaning the other seven days combined accounted for only 144 points, or just over 20 points per day on average.
Today's gain was less than 4 points. Yesterday's was less than 9. On March 30, the Dow was up 5.60 points. Three days, less than 20 points. The Dow could, and does, do that in a matter of minutes under normal conditions. In percentage terms, these last 8 days of gains amounted to less than 2.5%. 8 straight up days and the average still is 200 points shy of the February 20 record close. What's really going on here?
From a volume perspective, no single day has cracked the 3 billion mark. For purposes of comparison, on the black day of February 27, when the Dow dropped more than 400 points, over 4 billion shares changed hands. If anything can be said of this rally, it's that not everyone is participating, and, while gains are always good, these have not been very much so.
Today's performance was among the weakest, with 2.5 billion shares traded, even though advancing issues on the NYSE outpaced declining issues by a 5-3 margin, on the NASDAQ the margin was more on the order of 8-7.
Once again, it was a phenomenal day for new highs, with 408 issues making tops, and only 71 new lows. Those numbers haven't changed much for about a week, and considering the Dow's feeble close, this mini-rally seems to be at an end. What will propel the market over the next 3-4 weeks - in either direction - will be quarterly earnings, and all of that starts tomorrow.
Oil gained 38 cents to close at $61.89; gold gained 4.60 to $681.50; silver was up 12 cents to $13.93.
The real action starts tomorrow. Don't miss it.
Dow 12,573.85 +4.71; NASDAQ 2,477.61 +8.43; S&P 500 1,448.39 +3.78; NYSE Composite 9,468.70 +39.49
Over the course of the last eight session the Dow has gained 273 points, or, an average of 34 points per day. If that doesn't sound like much, it's because it isn't. One just one day, April 3rd, the index was up 129 points, meaning the other seven days combined accounted for only 144 points, or just over 20 points per day on average.
Today's gain was less than 4 points. Yesterday's was less than 9. On March 30, the Dow was up 5.60 points. Three days, less than 20 points. The Dow could, and does, do that in a matter of minutes under normal conditions. In percentage terms, these last 8 days of gains amounted to less than 2.5%. 8 straight up days and the average still is 200 points shy of the February 20 record close. What's really going on here?
From a volume perspective, no single day has cracked the 3 billion mark. For purposes of comparison, on the black day of February 27, when the Dow dropped more than 400 points, over 4 billion shares changed hands. If anything can be said of this rally, it's that not everyone is participating, and, while gains are always good, these have not been very much so.
Today's performance was among the weakest, with 2.5 billion shares traded, even though advancing issues on the NYSE outpaced declining issues by a 5-3 margin, on the NASDAQ the margin was more on the order of 8-7.
Once again, it was a phenomenal day for new highs, with 408 issues making tops, and only 71 new lows. Those numbers haven't changed much for about a week, and considering the Dow's feeble close, this mini-rally seems to be at an end. What will propel the market over the next 3-4 weeks - in either direction - will be quarterly earnings, and all of that starts tomorrow.
Oil gained 38 cents to close at $61.89; gold gained 4.60 to $681.50; silver was up 12 cents to $13.93.
The real action starts tomorrow. Don't miss it.
Monday, April 9, 2007
Back to Work: Dow Goes Seven for Seven
The Dow Jones Industrials got back to work on Monday after a three-day hiatus and quickly moved to the positive at the opening bell. The Dow remained in the plus column almost all day and finished higher by nearly 9 points. Stocks on the NASDAQ hovered around the flatline much of the day, and closed with a small loss.
Dow 12,569.14 +8.94; NASDAQ 2,469.18 -2.16; S&P 500 1,444.61 +0.85; NYSE Composite 9,421.29 +2.64
The session was one of the more lackluster in a series of similarly quiet trading days, but the Dow managed to eke out a minor gain even though advancers were beaten by declining issues by about a 12-10 spread. There were 463 new highs to 84 new lows, so little change there.
The best news for investors was actually released last Friday when the markets were closed. The Labor Department reported the economy created an additional 180,000 jobs last month, well beyond the market expectation of 135,000. Many of the new jobs were in construction, which was a little more of a surprise, since the housing industry had shown significant signs of slowing recently.
The rather tepid response was probably due to some level of disbelief in the Labor Dept. figures - which also showed unemployment declining to 4.4% from 4.6% - and anticipation of 1st quarter reports, most of which aren't due out until later this week and then for the two weeks thereafter.
Another damper on the market continues to be oil, or, to put it more succinctly, the price of a gallon of gas, which has risen for ten straight weeks. Traders actually may have gotten the message, or there was a subtle reduction in tension over Iran (rumors were widely circulated that the US would launch an attack on Iran over the Easter weekend, and that failed to materialize), as the price of crude for May delivery fell $2.77, closing the day at $61.51.
A few more days like today on the oil bourses should send the Dow and other indices skyward once again. Despite some concern over higher food prices, due in part to some food crops - particularly corn - being used to produce fuel instead, the price of oil and gas are still of primary importance.
Gold was slightly lower, but silver gained 7 cents to close at $13.81 per troy ounce.
Dow 12,569.14 +8.94; NASDAQ 2,469.18 -2.16; S&P 500 1,444.61 +0.85; NYSE Composite 9,421.29 +2.64
The session was one of the more lackluster in a series of similarly quiet trading days, but the Dow managed to eke out a minor gain even though advancers were beaten by declining issues by about a 12-10 spread. There were 463 new highs to 84 new lows, so little change there.
The best news for investors was actually released last Friday when the markets were closed. The Labor Department reported the economy created an additional 180,000 jobs last month, well beyond the market expectation of 135,000. Many of the new jobs were in construction, which was a little more of a surprise, since the housing industry had shown significant signs of slowing recently.
The rather tepid response was probably due to some level of disbelief in the Labor Dept. figures - which also showed unemployment declining to 4.4% from 4.6% - and anticipation of 1st quarter reports, most of which aren't due out until later this week and then for the two weeks thereafter.
Another damper on the market continues to be oil, or, to put it more succinctly, the price of a gallon of gas, which has risen for ten straight weeks. Traders actually may have gotten the message, or there was a subtle reduction in tension over Iran (rumors were widely circulated that the US would launch an attack on Iran over the Easter weekend, and that failed to materialize), as the price of crude for May delivery fell $2.77, closing the day at $61.51.
A few more days like today on the oil bourses should send the Dow and other indices skyward once again. Despite some concern over higher food prices, due in part to some food crops - particularly corn - being used to produce fuel instead, the price of oil and gas are still of primary importance.
Gold was slightly lower, but silver gained 7 cents to close at $13.81 per troy ounce.
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