CPI Shows Inflation, Fed Lowers Growth Forecast, PPT Pumps Stocks

A somewhat expected rise in the Consumer Price Index (CPI) roiled investors prior to the opening bell and stocks drifted in negative ranges in early trading. The reading of a rise of 0.4% in January (4.8% annualized) spooked even the most ardent supporters of Fed and administration policies.

By noon, the Plunge Protection Team had seen enough selling to convince them to pump stocks higher and in a 20 minute span, the Dow Jones Industrials gained 120 points and the other indices followed into positive territory.

As the day wore on, the market meddlers of the PPT goosed stocks even more, pushing them to the highs of the day, up more than 125 points, shortly before 3:00 pm.

The obvious manipulation by the PPT (aka President's Working Group on Financial Markets) were in response to more somber news via the January FOMC meeting minutes in which the Fed lowered its 2008 growth forecast from a range of 1.8-2.5% in November to 1.3-2% in January.

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The Fed and their agents in the PPT are fooling nobody. The economy is clearly headed for - if not already in - a recession, and stocks remain grossly overvalued relative to aggregate earnings. But, it is an important election year, and the purveyors of power simply cannot stomach the idea that their reign of terror over the American public is at an end.

Nothing short of miracles (Mike Huckabee, anyone?) will salvage the US economy and the Fed is in desperate straits. The pure futility of lowering interest rates to an unsustainable 3% or lower is beginning to manifest itself in higher prices for everything from gas to bread to appliances.

Under its current framework, the Fed is on a path of destruction of the US dollar and with it will go any last vestige of respect and confidence in equity markets. Of course, the Fed continues a tradition of hampering real growth by denying that excesses need to be liquidated, instead relying on market massages and wrong-headed rate cuts.

The real culprit is the absolute seizure of credit markets, especially at money center banks. Merger and acquisition activity is going in reverse, with many deals having been canceled, and until the Fed and the banks take responsibility for their follies over the past seven years by liquidating themselves, the economy will slowly and surely continue to deteriorate.

Dow 12,427.26 +90.04; NASDAQ 2,327.10 +20.90; S&P 500 1,360.03 +11.25; NYSE Composite 9,073.96 +50.92

Advancing issues outpaced decliners, 3752-2614, though new lows continued to overwhelm new highs, 257-99. With the exception of two days in December 2007, new lows have had the edge over new highs since October 31, approaching four months.

If there is any indicator that the economy is in trouble, it is the continuing readings of new lows over new highs. The stock market is clearly struggling for every gain, and most of them have been helped along by the PPT. Sooner or later, these phony gains will be eviscerated and stocks will plunge to more sensible, sustainable, reasonable levels. It's widely assumed that without meddling from the PPT, the Dow would already have touched down at the 11,000 mark or lower.

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The more nudging by the Fed and the PPT, the more disastrous will be the inevitable crash. It's coming, and it won't be pretty, though anyone who has been paying attention won't be at all surprised.

As for the rest of the clueless sheeple out there... keep watching and listening to the perma-bulls like Larry Kudlow and flag-wavers like Rush Limbaugh and Sean Hannity and see what good that does you.

The price of crude oil closed at another record high on Wednesday, gaining 73 cents to $100.74. Yes, my friends, George Bush and his Republican administration has succeeded in making $100/barrel oil a reality. (sick bastards)

Gold was up $8.00 to a new record, $937.80. Silver was higher by 25 cents, to $17.76.

NYSE Volume 3,835,300,000
NASDAQ Volume 2,293,634,250

Bear Market Norm: Stocks Give Up Early Gains

Any stock trader or analyst worth his/her salt will tell you that a tell-tale sign of a bear market is for markets to rise in the morning, only to give back all of those gains later in the day.

As traders got back to work on Tuesday following the long weekend, their senses returned about 2:15 as stocks took a serious nose dive from the high platform set earlier. By the time the session ended, it was more of the usual misery, except for the NYSE Composite, which closed with a modest gain.

The indices took their usual gyrations in the final hour with all the grace of a drunken albatross, zig-zagging to the close, which, for the main, was much closer to the bottom than the top of the day's trading range.

Finding a culprit for today's demise is difficult. Financials were battered once again, as were techs, especially Google (GOOG), possibly being viewed as an overpriced luxury in this market. Or, it could have been the price of oil, which approached $100 on the day, though that mostly boosted the energy sector, which actually does profit from the pain of consumers in the form of higher prices on everything from heating fuel to gasoline.

Dow 12,337.22 -10.99; NASDAQ 2,306.20 -15.60; S&P 500 1,348.78 -1.21; NYSE Composite 9,023.04 +52.28

While the overall losses were unsubstantial, the drop from the early highs were somewhat dramatic. The Dow lost over 200 points from the day's highs and the NASDAQ shed 46 from the day's top.

Advancers and decliners were nearly even, with 3325 up and 2992 down. New lows continued to dominate new highs, 234-99.

As mentioned earlier, crude oil shot up again, adding $4.41 to close at a record $100.01. Seems all those commentators suggesting a drop in demand missed the memo from the sheiks and thieves. Oil isn't going down. As a last-gasp, the price of oil will go kicking and screaming into the stratosphere unless people take action and simply stop using the stuff (or stealing lots of it).

The precious metals went ballistic, with gold gaining $23.70 to $929.80 and silver up 39 cents to $17.51. The underlying story with gold is that there must have been another mad dash for cash today, which would also explain the turnaround in the markets. Obviously, the credit crunch is still alive and grinding down banks and financiers with alarming efficiency.

CPI numbers are due to be released tomorrow morning. Get ready for more inflation noise and more selling of US equities. Volume remains at suppressed levels. That may change soon.

NYSE Volume 3,472,779,000
NASDAQ Volume 1,918,283,000

Tired Markets End Week Mixed; Economy Remains Top Concern

The floor traders weren't the only ones tuckered out as another volatile week came to an end. Economists and financial news journalists tired themselves out dissecting Thursday's remarks to Congress by Fed Chairman Ben Bernanke.

There was more substance than style to the Chairman's message. He basically held nothing back, telling anyone within earshot (read: the entire civilized world) that the American economy was in a very rough patch.

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Most of the action in stocks took place during and immediately after his testimony, leaving little to the imaginative traders who might have been looking for a bounce on Friday.

Sadly for those on the bullish side of the trade, Friday began in the red and remained there all day. There was some indication of PPT activity near the close, though it could just as easily have been short-covering that boosted the markets in the final hour.

The overall tone of trade was as dull as a old spoon, as the day's volume tapered off to merely a trickle, and with nearly no resistance, the insiders saw an easy path to offering some small glimmer of hope and goosed the indices up in the final fifteen minutes of the session.

The S&P popped over to positive with just ten minutes left to trade. With the markets closed on Monday in observance of President's Day, there weren't many traders left to compete with whomever was driving the mini-rally.

The overall effort was half-hearted and meant nothing in the larger scheme, still biased to the downside.

Dow 12,348.21 -28.77; NASDAQ 2,321.80 -10.74; S&P 500 1,349.99 +1.13; NYSE Composite 8,970.76 +2.35

Friday's main driver was industrial production, a figure released prior to the market opening, which showed an economy flat lining, with growth of 0.1%, essentially nothing. Capacity utilization remained flat at 81.5%, and that's a number that bears watching. If production tails off, that will be a prime indicator with layoffs following quickly behind.

Adding to the Street's bad mood, the Reuters/University of Michigan index of consumer sentiment fell to 69.6 in February from 78.4 in January, the lowest level since 1992.

The shocker from the New York Empire State Index, which fell to a level not seen since March of 2003 (the end of the last bear market and recession), at -11.7, was just more grist for the recession mill and certainly aided in the pervasively dour mood that clouded markets as the week ended.

Declining issues actually registered somewhat of an outsize edge over gainers, 3765-2456, and new lows trumped new highs once more, 275-56. The highs vs. lows reading implied that more stocks were being dumped on Friday and some sector adjustments were being made in larger portfolios. Difficult to tell with any degree of accuracy, but the shift seemed to be away from small cap techs (especially those in need of capital) toward larger caps with positive balance sheets.

Money on hand is going to be all the rage as economic forces push lenders closer to illiquid levels and insolvency in coming months. Cash will indeed be king, which also goes to explain the low volume of late. Smart money is sitting this dance out.

Commodities, even oil, languished. Oil was up just 4 cents to close at 95.50. Gold dipped $4.70 to $906.10 and silver fell 14 cents to $17.12.

Economic issues will take center stage again for the next four to six weeks, now that most companies have reported earnings. The outlook, including, somewhat amazingly, appears more dire than ever as America tilts closer the low end of the business cycle.

NYSE Volume 3,485,640,750
NASDAQ Volume 1,999,531,625

Bernanke, Paulson Speak, Markets Sink

One would suppose, with three-quarters of the Plunge Protection Team (PPT) busy testifying before congress, that there would be nobody at the controls to prevent a market sell-off.

That's precisely what happened - be it coincidence or otherwise - on Thursday, as Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson and SEC Chairman Christopher Cox delivered testimony on the economy to Senate Banking Committee members.

In their remarks, both Bernanke and Paulson both indicated they felt the economy was in a somewhat delicate condition, owing mostly to a continuing credit crisis in which bankers have had difficulty lending to any but the most credit-worthy applicants.

What their remarks did not reveal, though hinted at, was that the bankers themselves were the cause of the precarious credit conditions, by participating in the massive fraud and deception that is now the subprime mortgage and related derivative investment mess.

And what a mess it is. Bank of America report released today suggested that the losses related to subprime mortgages was more than $7.7 trillion globally.

Another money center was hit with unfortunate fallout on Thursday, adding to the market's woes. Swiss financial giant UBS revealed a net loss of 4.4 billion Swiss francs ($4.0 billion dollars, $2.7 billion euros) in 2007, including an $18 billion writedown in damaged securities.

Dow 12,376.98 -175.26; NASDAQ 2,332.54 -41.39; S&P 500 1,348.86 -18.35; NYSE Composite 8,968.41 -105.07

Today's losses nearly matched yesterday's outsized gains, and even though the markets are higher for the week, momentum has clearly swung back to the bears. Declining issues outpaced advancers, 4720-1530, while new lows expanded the gap over new highs, 203-97.

Friday's economic reports include the NY Empire State Index and capacity utilization, though neither will likely weigh more on investors than today's dire and apprehensive assertions by Paulson, Cox and Bernanke.

Volume continues to be on the tepid side, as money largely sits, awaiting a safe entry point or going elsewhere.

Oil gained another $2.19 today, closing at $95.46. For the second day in a row, precious metals barely budged. Gold was up 80 cents to $911.00; silver lost 10 cents to $17,26.

Here's a tip. Buy sugar futures and sell corn futures. It's seven times more efficient to produce ethanol from sugar than from corn. On top of that, Tata Motors (TTM) is financing in a company which has tested and is producing a car that runs on air. That should serve as quite a blow to the oil barons.

NYSE Volume 3,630,146,750
NASDAQ Volume 2,270,238,000

Tech Drives Stocks Higher

While Tuesday's rally may have been all about perception over reality, Wednesday's massive move had everything to do with tech stocks.

Led by volume leaders Microsoft (MSFT), Cisco (CSCO) and Applied Materials (AMAT), the NASDAQ outperformed the other indices by a wide margin. The NASDAQ was up 2.32% at the close, followed by the Dow (+1.45%) and the S&P (+1.36). The broad-based NYSE Composite gained 1.21%.

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Stocks across the board were aided by consumer spending figures for January which were up 0.3% after losing ground in December, and while the gain is a plus, it's significance is minimal in the overall economic picture.

So too the current rally, which has put this week in stark contrast to the dismal performance of the prior one. Stocks bumped up against formidable resistance in the Dow 12,550 area and backed off going into the close.

Dow 12,552.24 +178.83; NASDAQ 2,373.93 +53.89; S&P 500 1,367.21 +18.35; NYSE Composite 9,073.48 +108.13

All of this sets up an interesting couple of days to close out the week. On Thursday, the only important economic news will be new unemployment claims, which will be released at 8:30 am. Friday, investors will be mulling over capacity utilization figures, net imports and exports, the NY Empire State Index and the University of Michigan's Consumer Sentiment reading.

Thursday could go either way, though breaking through the congestion and resistance could prove difficult. If stocks manage gains, the next level to overcome is in the 12,740 range, at the closing high of Feb 1st.

Advancing issues pounded decliners, 4419-1926, though new lows persisted in their long-standing (back to Oct. 31, 2007) advantage over new highs, 176-85. Expect that gap to decline if stocks stage another strong effort.

Oil gained 49 cents to $93.27 per barrel. Gold and silver were down and up marginally, respectively.

NYSE Volume 3,728,637,500
NASDAQ Volume 2,246,132,000