Just a day after a strong rally was derailed midday by discouraging housing news, investors shrugged off more bad news from the residential housing sector and galloped higher, with the Dow making another closing high, nearing 13,500.
Dow 13,487.53 +103.69; NASDAQ 2,547.42 +22.13; S&P 500 1,514.14 +12.95; NYSE Composite 9,825.43 +60.70
The S&P, meanwhile made up most of the losses from the previous four sessions' gyrations and closed at its highest level in more than 6 1/2 years, only 13 points away from an all time high of its own.
As has been noted here before, as long as the Fed remains even-keeled in its approach to interest rates and keeps creating new money out of thin air and debt, this bull run could continue longer than anyone suspects. Of course, the naysayers believe that the longer it runs, the worst the final fall will be. Most investors are willing to take that risk right now as corporate profits and merger activity continue unabated.
Adding to the glee chorus on Wednesday was a slight dip in oil prices and word from a possibly dubious source that gasoline prices may not rise much more. According to Guy Caruso of the government's Energy Information Administration: "We do anticipate some improvement in the coming months."
Whether Caruso was expressing improvement for the oil companies or motorists was not clear, though most assume he meant well for US gas consumers. Caruso appeared at a House Judiciary Committee antitrust panel on Capitol Hill that grilled oil execs over the recent and continued price hikes at the pump.
The price of crude oil fell 62 cents to close at $62.55, which seems to be the desired price level of the moment. At the $62-64 level almost everybody - oil companies, OPEC and consumers - is happy, though the argument is that OPEC and Big Oil are more happy than the average Janes and Joes filling their vehicles.
Gold and silver were off sharply. Gold lost $13.00 to $661.50, while silver fell 39 cents to $12.93.
Advancing stocks beat decliners by better than 3-2, and there were 286 new highs to 152 new lows.
Wednesday, May 16, 2007
Tuesday, May 15, 2007
Not As Good As It Could Have Been
A rather somber tone fell over Wall Street Tuesday afternoon as traders digested disheartening news from the housing sector. A report released by the National Association of Home Builders confirmed that home builders don't see a recovery in the housing market until 2008, plus, a confidence survey fell 3 points to 30 in May, equaling the low hit last September.
It was not the kind of news for which the markets were prepared. After the CPI report prior to the opening showed a rather tame increase of 0.4% for April - and 0.2 for core CPI (excluding food and energy) - traders responded with enthusiastic buying, though their buoyant mood was tempered later in the day.
The Dow, which had been up nearly 135 points early, slipped into the close with a marginal gain, though still closing at a new record high. The NASDAQ, S&P and NYSE Comp. all closed lower for the second straight day.
Dow 13,383.84 +37.06; NASDAQ 2,525.29 -21.15; S&P 500 1,501.19 -1.96; NYSE Composite 9,764.73 -0.65
Advancers were swamped by declining issues, especially on the NASDAQ, with the overall margin favoring losers by a 2-1 margin.
New highs remained somewhat steadfast, with 347 issues making new tops, though new lows continued to mount, claiming 161 on the day, the highest total in weeks.
A pullback is more likely than ever, though chances are good that the persistent problems in the housing sector are likely to spill over enough into the equities economy to cause serious problems. Any downturn is likely to be short-lived without more evidence of failing corporate profits, which have remained solid.
Oil jumped 71 cents to $63.17, and the metals also caught some of the commodity updraft. Gold gained $4.40; silver was ahead by 8 cents.
With gas prices at all-time highs at US service stations, unemployment remains historically low and the American economy, from a comparative point of view, still seems as safe and stable as ever. The myriad of problems in the general economy continue to appear manageable and pose little threat to US stocks, especially, as it seems, those of the blue chip variety.
It was not the kind of news for which the markets were prepared. After the CPI report prior to the opening showed a rather tame increase of 0.4% for April - and 0.2 for core CPI (excluding food and energy) - traders responded with enthusiastic buying, though their buoyant mood was tempered later in the day.
The Dow, which had been up nearly 135 points early, slipped into the close with a marginal gain, though still closing at a new record high. The NASDAQ, S&P and NYSE Comp. all closed lower for the second straight day.
Dow 13,383.84 +37.06; NASDAQ 2,525.29 -21.15; S&P 500 1,501.19 -1.96; NYSE Composite 9,764.73 -0.65
Advancers were swamped by declining issues, especially on the NASDAQ, with the overall margin favoring losers by a 2-1 margin.
New highs remained somewhat steadfast, with 347 issues making new tops, though new lows continued to mount, claiming 161 on the day, the highest total in weeks.
A pullback is more likely than ever, though chances are good that the persistent problems in the housing sector are likely to spill over enough into the equities economy to cause serious problems. Any downturn is likely to be short-lived without more evidence of failing corporate profits, which have remained solid.
Oil jumped 71 cents to $63.17, and the metals also caught some of the commodity updraft. Gold gained $4.40; silver was ahead by 8 cents.
With gas prices at all-time highs at US service stations, unemployment remains historically low and the American economy, from a comparative point of view, still seems as safe and stable as ever. The myriad of problems in the general economy continue to appear manageable and pose little threat to US stocks, especially, as it seems, those of the blue chip variety.
Monday, May 14, 2007
New Top for Dow, Other Indices Fall Late; Gas at Record $3.10 per Gallon
The markets were cruising along in positive territory Monday until mid-day when everything began to slide. By the close, only the Dow remained on the plus side, setting another record high finish.
Dow 13,346.78 +20.56; NASDAQ 2,546.44 -15.78; S&P 500 1,503.15 -2.70; NYSE Composite 9,765.38 -21.65
It was a split decision in more ways than one. Declining issues beat advancers by a better than 2-1 margin, though new highs upticked to 386 against 116 new lows. There's a bit of churning going on as investors take profits, reassess and reinvest.
According to general assumptions, much of today's action was attributable to apprehension regarding the monthly release of the government's Consumer Price Index figures, the April numbers due out tomorrow morning prior to the market's open.
Dow 13,346.78 +20.56; NASDAQ 2,546.44 -15.78; S&P 500 1,503.15 -2.70; NYSE Composite 9,765.38 -21.65
It was a split decision in more ways than one. Declining issues beat advancers by a better than 2-1 margin, though new highs upticked to 386 against 116 new lows. There's a bit of churning going on as investors take profits, reassess and reinvest.
According to general assumptions, much of today's action was attributable to apprehension regarding the monthly release of the government's Consumer Price Index figures, the April numbers due out tomorrow morning prior to the market's open.
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Conventional wisdom seems to be that if the numbers are bad (i.e., they show an inflationary trend), the Fed may be influenced to do nothing, or worse, raise rates, when the markets are hoping for some easing. If the headline number comes in at 0.5% or less, with the core at 0.2%, that should allay investor fears, but anything over those figures will be cause for concern, especially at the Fed, which has vowed for years to keep inflation under control while failing miserably in the process.
Regardless of Fed performance, Bernanke and company has made reference to an "inflation target" of between 1 and 2 % (using the core number, of course, which excluded food and energy) and they will use the tried and true interest rate hike to cool off the economy should they determine inflationary risk to be at an intolerable level.
Whatever the Fed does has little to do with the fundamentals of individual stocks, though an interest rate increase would cast a significant pall over Wall Street. Most days are precarious for investors and speculators, though being in record territory does impart some peculiar thought processes. On the one hand, stocks are robust and the economic picture is rosy. Meanwhile, the pessimist sees this high-flying behavior an open invitation for everything to come crashing down.
In the long run, it's probably going to take an event more significant than a 25 basis point hike in the federal funds rate to stop the party.
Side notes: Sure enough, the only time I make a prediction on an individual stock, it goes the other way. On Wednesday of last week, I noted that Marvel Enterprises (MVL) may be considered for a long term hold. As of today, it has slipped nearly 3 points from where I called it a buy to 26.81. I called the stock with an 18-month upside in the 38-42 range. I suppose all I can do now is reiterate my position. At it's current level Marvel sports a forward P/E ratio around 17. It is shouting, "buy" now; any lower, it will be screaming. This is not a falling knife situation. Once options expire on Friday, expect a congenial rebound.
Lest I forget, oil grabbed a bid on a Saudi pledge not to increase production. It closed modestly higher, up 9 cents to $62.46, and every American must be grateful to our Vice President, Mr. Cheney, for all he did while in the Middle East last week. The Lundberg Survey quoted the national average for unleaded regular gas at an all-time high of $3.10 per gallon on Monday.
Tomorrow, May 15, is the date certain for the "American gas boycott" whereby we're not supposed to buy any gas. Nobody seriously expects the effort to have any effect at all, though the sentiment of millions will be with anyone who refrains for a day. A better solution would be to have a national no-driving day. That could be effective.
I have two suggestions. One is to stay home and drink Canadian beer. In most northern states, it can be had for about the same price per gallon as gas, and it goes into you, not your car. Plus, the effects on one's mental well being are far superior.
My second suggestion is for Big Oil to just skip $4/gallon and go straight to $5. They have shown no propensity to stop increasing the price, so why not just goose it up good? They can always lower it later on and look good by comparison.
Gold and silver were both off marginally. Somehow, their fates are tied to oil's, though the relationship has become tenuous at best.
Friday, May 11, 2007
When Numbers Have Meaning
The Dow Jones Industrial Average set a new closing high on Friday, May 11.
The number of new highs was 268 while new lows totaled 113. Advancing issues overwhelmed decliners 23-8.
Dow 13,326.22 +111.09: Nasdaq 2,562.22 +28.48; S&P 500 1,505.85 +14.38; NYSE Composite 9707.03 +117.66
The markets are becoming more defined but not prohibitive.
Oil, gold and silver showed marginal gains for the day. US equities remain a solid, if not significant, investment. The rally continues.
The number of new highs was 268 while new lows totaled 113. Advancing issues overwhelmed decliners 23-8.
Dow 13,326.22 +111.09: Nasdaq 2,562.22 +28.48; S&P 500 1,505.85 +14.38; NYSE Composite 9707.03 +117.66
The markets are becoming more defined but not prohibitive.
Oil, gold and silver showed marginal gains for the day. US equities remain a solid, if not significant, investment. The rally continues.
Thursday, May 10, 2007
Broad Sell-off for US Stocks as Investors Take Profits
While some pundits may claim the sky was falling today and today's trade signals the end of the rally, others will point out that this kind of profit-taking pull-back is quite normal after such a long string of gains.
Just a day after the Fed decided to keep rates unchanged, the Census Bureau and the Bureau of Economic Analysis of the Department of Commerce announced that the US trade deficit increased to $63.9 billion in March, up from a revised $57.9 billion in February. The news was a little surprising though hardly exceptional.
What certainly worried Wall Street more were the string of dismal figures coming in from retailers, which showed April same-store sales falling sharply from the same period a year ago. Topping the list was the nation's largest retailer, Wal-Mart (WMT), which reported a decline of 3.5%. Other notables reporting sluggish sales below last year's levels included JC Penny (JCP), Federated (FD), the Gap (GPS), and Nordstrom (JWN).
Accordingly, investors headed for the exits in many of the retailers, though Wal-Mart escaped with merely an 0.18 loss. Analysts defended the numbers, citing an early Easter and an unusually cold April, especially in the population-dense Northeast.
Dow 13,215.13 -147.74; NASDAQ 2,533.74 -42.60; S&P 500 1,491.47 -21.11; NYSE Composite 9,669.37 -158.56
While the retail numbers and increased trade deficit are causes for concern, most believe the US economy to be in relatively sound shape, though overall growth is expected to stall out at around 1.5 - 2 percent for all of 2007. Such a projection is hardly surprising, considering the slowdown in housing and high fuel prices, both having negative effects on consumers and, ultimately, business.
The serious concern is that the US economy could fall into recession, actually contracting instead of expanding. Current wisdom sees that as a remote possibility. Former Fed Chairman Alan Greenspan gave it a 1 in 3 chance of occurring in 2007. Other economics experts are of similar mind, though calls for the Fed to reduce interest rates are growing louder.
A few more negative signals may induce Ben Bernanke and the FOMC to drop the federal funds rate a quarter point at their next meeting in late June, though most believe the Chairman will move slowly and cautiously, keeping one eye on inflation and the other on the overall health of the economy.
Putting today's action into perspective, it has to be respected that the markets have been on quite a roll, with the Dow rising over 1000 points in less than 2 months. Corporate profits are still strong and the business environment is probably the most lax and calm as it's ever been. Regulators and government interference has been cut to minimal under the pro-business Republican reign. That influence may be waning, though a dramatic shift under Democrats is unlikely as they too receive most of their campaign money from big business.
Declining issues far outpaced advancers, by a 7-2 ratio. New highs remained positive, though less than has been the norm. There were 263 issues making new highs with 121 reaching new lows - the first time in two weeks that the number of new lows have surpassed 100.
Oil edged higher, adding 26 cents to the cost of a barrel, ending the day at $61.81. Gold continued to slide, losing a substantial $15.50 on the day, ending at $667.00. Silver also sold off, though not in such a dramatic fashion, losing .33 to close at 13.14.
Both of the metals have flirted with breakouts recently and failed. Oil, on the other hand, may be headed into a stabilizing period. With high gas prices seen as a major threat to the economy, the US Congress has made noises about investigations and windfall profits taxes, so it may be about time for the Big Oil cartel to back down on its over-aggressive appetite for US greenbacks.
There has been good news from overseas, though few have noticed. After reaching lows against the Yen, Euro and British Pound, the US Dollar has recently shown some resolve and gained strength against most of our major trading partners. Apparently, the world's currency standard still has some muscle.
Just a day after the Fed decided to keep rates unchanged, the Census Bureau and the Bureau of Economic Analysis of the Department of Commerce announced that the US trade deficit increased to $63.9 billion in March, up from a revised $57.9 billion in February. The news was a little surprising though hardly exceptional.
What certainly worried Wall Street more were the string of dismal figures coming in from retailers, which showed April same-store sales falling sharply from the same period a year ago. Topping the list was the nation's largest retailer, Wal-Mart (WMT), which reported a decline of 3.5%. Other notables reporting sluggish sales below last year's levels included JC Penny (JCP), Federated (FD), the Gap (GPS), and Nordstrom (JWN).
Accordingly, investors headed for the exits in many of the retailers, though Wal-Mart escaped with merely an 0.18 loss. Analysts defended the numbers, citing an early Easter and an unusually cold April, especially in the population-dense Northeast.
Dow 13,215.13 -147.74; NASDAQ 2,533.74 -42.60; S&P 500 1,491.47 -21.11; NYSE Composite 9,669.37 -158.56
While the retail numbers and increased trade deficit are causes for concern, most believe the US economy to be in relatively sound shape, though overall growth is expected to stall out at around 1.5 - 2 percent for all of 2007. Such a projection is hardly surprising, considering the slowdown in housing and high fuel prices, both having negative effects on consumers and, ultimately, business.
The serious concern is that the US economy could fall into recession, actually contracting instead of expanding. Current wisdom sees that as a remote possibility. Former Fed Chairman Alan Greenspan gave it a 1 in 3 chance of occurring in 2007. Other economics experts are of similar mind, though calls for the Fed to reduce interest rates are growing louder.
A few more negative signals may induce Ben Bernanke and the FOMC to drop the federal funds rate a quarter point at their next meeting in late June, though most believe the Chairman will move slowly and cautiously, keeping one eye on inflation and the other on the overall health of the economy.
Putting today's action into perspective, it has to be respected that the markets have been on quite a roll, with the Dow rising over 1000 points in less than 2 months. Corporate profits are still strong and the business environment is probably the most lax and calm as it's ever been. Regulators and government interference has been cut to minimal under the pro-business Republican reign. That influence may be waning, though a dramatic shift under Democrats is unlikely as they too receive most of their campaign money from big business.
Declining issues far outpaced advancers, by a 7-2 ratio. New highs remained positive, though less than has been the norm. There were 263 issues making new highs with 121 reaching new lows - the first time in two weeks that the number of new lows have surpassed 100.
Oil edged higher, adding 26 cents to the cost of a barrel, ending the day at $61.81. Gold continued to slide, losing a substantial $15.50 on the day, ending at $667.00. Silver also sold off, though not in such a dramatic fashion, losing .33 to close at 13.14.
Both of the metals have flirted with breakouts recently and failed. Oil, on the other hand, may be headed into a stabilizing period. With high gas prices seen as a major threat to the economy, the US Congress has made noises about investigations and windfall profits taxes, so it may be about time for the Big Oil cartel to back down on its over-aggressive appetite for US greenbacks.
There has been good news from overseas, though few have noticed. After reaching lows against the Yen, Euro and British Pound, the US Dollar has recently shown some resolve and gained strength against most of our major trading partners. Apparently, the world's currency standard still has some muscle.
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