The bidding was frantic on the NYSE, especially on Dow components Johnson & Johnson (JNJ) and Coke (KO) as both companies reported solid earnings for the 1st quarter of '06. Volume on both stocks was nearly triple their average and their contribution to the Dow's gain was obvious, as the other indices were close to the flat line.
Dow 12,773.04 +52.58; NASDAQ 2,516.95 -1.38; S&P 500 1,471.48 +3.01; NYSE Composite 9,631.39 +6.16
Whether the Dow stocks can continue their momentum is open for debate. Solid earnings are providing buying interest, but it seems short-lived. Take for instance, Merck (MRK), which popped nearly 4 points on Friday, but has seemingly run out of steam. It fell 31 cents today. Likewise, Citigroup (C), jumped nearly 1 1/2 points on Monday, but Tuesday saw it end down 40 cents.
The jury is still out on the overall health of the economy, and, particularly, the corporate end of it. The Dow stocks are still safe havens, though the returns are not quite the stuff of dreams, nor are the dividends they spin off, ranging between 2 and 4 percent, hardly keeping pace with inflation.
After the markets closed, IBM reported earnings in line with analyst estimates. The company said it made 1.21 per share, ahead of last years' 1Q 1.08 per share. IBM's picture has been cloudy, though it was one of the top performers during the 2nd half of 2006, in which it ran from the mid 70s to the high 90s, a better-than 30% move.
The computer and technology giant may be somewhat of a proxy for the Dow looking ahead. IBM sees earnings growth of 10-11% for the remainder of 2007. That's OK for a mature companies like Big Blue, but the market will want more.
Peeking under the hood, we see that the trade on Tuesday was not suggestive of further upward momentum. Declining issues actually held a nearly 5-4 edge over advancing ones, though new highs once again popped over 500, at 522, with only 62 issues hitting new lows. That ratio is about as strong as you'll ever see, with close to 8% of all issues trading at new highs. Pretty remarkable, that.
The question is sustainability, though as long as investors can take the continuing slide of the dollar in stride or completely ignore it, this market looks like it's ready to pop to another couple of hundred points. The dollar hit a benchmark against the Pound Sterling today, falling to a value equal to $2 per British Pound, a level last seen in 1992. That's good news for Brits, in a sense, in that their economy was inflating to the point that they're about to raise interest rates. Of course, their American counterparts aren't so circumspect, content to believe that "core" inflation of 2.5% (excluding food and energy - the two elements upon which the entire economy depends) is just fine and dandy.
On that note, the Fed may have some input on May 9, but not any time sooner. Should Bernanke and friends decide to hike rates even a smidgen, the stock markets will tank like so much dead weight. We'll reserve judgment until then.
Oil traders delivered some welcome news, selling off a barrel for 51 cents less than a day ago, closing at $63.10. Gold took some profit taking, dropping $2.00 to $692.50, but still close to 1-year highs. The same for silver, which lost just 6 cents to remain slightly above the $14 mark at $14.02. Both of the precious metals are signaling potential breakouts.
Tuesday, April 17, 2007
Monday, April 16, 2007
Stocks Power Ahead as Dow Approaches Record
The Dow closed to within 66 points of its all-time high of 12,786.64 (Feb 20, 2007) on Monday as investors looked positively at Citigroup's somewhat questionable earnings and focused more on robust consumer spending in March, which showed retail sales improving by 0.7%.
What the market and general public may be missing here - and you know there's a caveat to every economic report - is that PPI was up 1% in March and the retail sales numbers are not adjusted for inflation, so there actually was a falloff in sales and the entire rise fueled solely by one factor - inflation.
Nevertheless, the investor class gobbled up shares like mad, boosting prices for everything under the sun.
Dow 12,720.46 +108.33; NASDAQ 2,518.33 +26.39; S&P 500 1,468.47 +15.62; NYSE Composite 9625.53 +102.67
If there's anything like an inflationary cycle, we're witnessing it in the stock market. Prices have to be higher for a number of reasons, not the least of which is the weakened position of the US Dollar in international markets. If the dollar is down, stocks have to go up, just to stay even. Pity the poor European investors who would get hit with the double whammy - if stocks ever were to go down - of a rising Euro and falling share prices.
It's official, now, that stock market moves don't have to actually have any catalyst, somebody will make one up. It seems that the only bad news could come in the form of a Fed rate increase, and they're loathe to do that. Their Wall Street masters would have their heads.
One bright spot on the day was the relative sluggishness of oil, which actually lost 2 cents to close at $63.61 per barrel. It's still overpriced, but every day it doesn't go higher is a good one.
Meanwhile, gold bugs aren't buying any of it. They see inflation raging and have boosted the yellow stuff back up near $700. Gold gained 4.60 today to move to $694.50, close to a breakout. If it goes over $700, the price could top $800 in a very short time. Sister silver, which has seen a pretty good run of its own recently, held above $14 and ounce, losing just a penny to $14.08.
Monday was a strong day for stocks, albeit for the wrong reasons.
What the market and general public may be missing here - and you know there's a caveat to every economic report - is that PPI was up 1% in March and the retail sales numbers are not adjusted for inflation, so there actually was a falloff in sales and the entire rise fueled solely by one factor - inflation.
Nevertheless, the investor class gobbled up shares like mad, boosting prices for everything under the sun.
Dow 12,720.46 +108.33; NASDAQ 2,518.33 +26.39; S&P 500 1,468.47 +15.62; NYSE Composite 9625.53 +102.67
If there's anything like an inflationary cycle, we're witnessing it in the stock market. Prices have to be higher for a number of reasons, not the least of which is the weakened position of the US Dollar in international markets. If the dollar is down, stocks have to go up, just to stay even. Pity the poor European investors who would get hit with the double whammy - if stocks ever were to go down - of a rising Euro and falling share prices.
It's official, now, that stock market moves don't have to actually have any catalyst, somebody will make one up. It seems that the only bad news could come in the form of a Fed rate increase, and they're loathe to do that. Their Wall Street masters would have their heads.
One bright spot on the day was the relative sluggishness of oil, which actually lost 2 cents to close at $63.61 per barrel. It's still overpriced, but every day it doesn't go higher is a good one.
Meanwhile, gold bugs aren't buying any of it. They see inflation raging and have boosted the yellow stuff back up near $700. Gold gained 4.60 today to move to $694.50, close to a breakout. If it goes over $700, the price could top $800 in a very short time. Sister silver, which has seen a pretty good run of its own recently, held above $14 and ounce, losing just a penny to $14.08.
Monday was a strong day for stocks, albeit for the wrong reasons.
Friday, April 13, 2007
Money's Got to Go Somewhere
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.
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.
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.
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