Stocks ended lower on US exchanges, though the entire range of trade was much more compressed than recent, more volatile sessions, an indication that the credit crisis, which caused a severe decline in general stock value, may be subsiding.
Today's complete range on the Dow Jones industrial Index was 280 points - still somewhat jumpy, but nothing compared to the 500 to 1000-point swings which occurred during the height of the crisis.
Following yesterday's 400+ point gain, there was some sensibility to Tuesday's decline. After all, most market participants are still a bit shell-shocked by recent events, so short-term traders were taking profits and the end-of-day resettling seemed, by most comparisons, rather normal.
With little in the way of economic news to rattle or sooth traders' nerves, the focus was clearly on earnings. Most of the companies (roughly 65%) reported earnings either in line with estimates or beat expectations. That left a bulk of companies with earnings misses, and by the end of the day, investors had taken note along with taking money off the table.
Dow 9,033.66 -231.77; NASDAQ 1,696.68 -73.35; S&P 500 955.05 -30.35; NYSE Composite 6,051.34 -236.26
Along with the reduced volatility, trading volume trended lower for a second straight day. As the headline numbers suggest, decliners beat advancers, 4489-1845, and new lows posted higher numbers than new highs, 255-14.
NYSE Volume 1,161,591,000
NASDAQ Volume 2,144,611,000
The reduced volume and volatility are the result of extreme measures taken by governments around the world to un-freeze credit markets. Key interest rates, including the LIBOR, the rate at which banks lend to each other, have been falling, and today reached levels not seen since the collapse of Lehman Bros. in September.
Better liquidity in credit markets is key to the general health of the economy, and the recent movement is encouraging.
Corporate earnings, however, were another matter. While 3M (MMM), American Express (AXP), DuPont (DD) and Pfizer (PFE) reported profits in excess of estimates, a couple of larger firms, Caterpillar (CAT) and Texas Instruments (TXN) missed and were punished by investors. A spate of companies also issued 4th quarter and 2009 guidance that was not very rosy.
All of these elements contributed to the overall decline in stocks.
Commodity prices showed sympathy for the most part. Oil for December delivery traded at $72.30, down $2.09 from Monday's close. Gold continued its free-fall, losing another $22.00, to $768.00. Silver bucked the trend, trading 39 cents higher, to $10.08.
Tuesday, October 21, 2008
Monday, October 20, 2008
Dow Up 400, So Why All the Fuss?
Investors got back to doing what they do best on Monday: buying stocks.
Most US indices were up right after the opening bell and remained positive throughout the session. Meanwhile, comments by President Bush, Speaker of the House Nancy Pelosi, and Fed Chairman Ben Bernanke gave more reason for applause and exhilaration, as the government seems intent on another round of handouts to people who really don't need them, this time, American consumers.
The entire credit crunch, recession, global slowdown argument is becoming somewhat laughable or ludicrous. Surely, the US and global economies have hit a serious speed bump, but the extravagant measures taken to stave off what amounts to a little bit of pocketbook pain has been political overkill.
My understanding of the issues gives rise to a great deal of skepticism. As an empiricist, I study what is seen and I haven't seen rampant unemployment, business failures, bankruptcies, food lines or any related real-world evidence that we are in a anything worse than a somewhat mild recessionary pullback, which is a direct result of decades of easy credit.
Once again, the solution to a problem caused by too many dollars in circulation should not be solved by giving away more money. It's like stopping a cut from bleeding by cutting the victim somewhere else. The whole idea is simply beyond ridiculous.
In any case, the government is bound and determined to hand out more money they don't have, a concept with which Wall Street is apparently in favor.
Dow 9,265.43 +413.21; NASDAQ 1,770.03 +58.74; S&P 500 985.40 +44.85; NYSE Composite 6,287.60 +338.80
On the day, advancing issues once again finished well ahead of decliners, 5073-1325. New lows beat new highs, 210-13. Volume was moderate, though strong on the NASDAQ, the index which gained the least on a percentage basis.
NYSE Volume 1,226,914,000
NASDAQ Volume 2,062,091,000
For a change, commodity prices were all higher, with oil gaining $2.26, to $74.65, on widely-circulated reports that OPEC would impose an output cut at their next meeting. Gold rose $2.30, to $790.00 and silver was higher by 36 cents, to $9.69. Both of the precious metals took a serious drubbing last week.
In the short term, volatility is still quite high and will probably remain that way until after the elections on November 4. In the long run, we'll all survive - hooray! - and probably see a recovery in the latter part of 2009. Overall, however, most of us haven't changed a great deal about our daily routines, except for maybe being a little bit more frugal and cost-conscious... a pretty good idea, no matter what the economic conditions.
Most US indices were up right after the opening bell and remained positive throughout the session. Meanwhile, comments by President Bush, Speaker of the House Nancy Pelosi, and Fed Chairman Ben Bernanke gave more reason for applause and exhilaration, as the government seems intent on another round of handouts to people who really don't need them, this time, American consumers.
The entire credit crunch, recession, global slowdown argument is becoming somewhat laughable or ludicrous. Surely, the US and global economies have hit a serious speed bump, but the extravagant measures taken to stave off what amounts to a little bit of pocketbook pain has been political overkill.
My understanding of the issues gives rise to a great deal of skepticism. As an empiricist, I study what is seen and I haven't seen rampant unemployment, business failures, bankruptcies, food lines or any related real-world evidence that we are in a anything worse than a somewhat mild recessionary pullback, which is a direct result of decades of easy credit.
Once again, the solution to a problem caused by too many dollars in circulation should not be solved by giving away more money. It's like stopping a cut from bleeding by cutting the victim somewhere else. The whole idea is simply beyond ridiculous.
In any case, the government is bound and determined to hand out more money they don't have, a concept with which Wall Street is apparently in favor.
Dow 9,265.43 +413.21; NASDAQ 1,770.03 +58.74; S&P 500 985.40 +44.85; NYSE Composite 6,287.60 +338.80
On the day, advancing issues once again finished well ahead of decliners, 5073-1325. New lows beat new highs, 210-13. Volume was moderate, though strong on the NASDAQ, the index which gained the least on a percentage basis.
NYSE Volume 1,226,914,000
NASDAQ Volume 2,062,091,000
For a change, commodity prices were all higher, with oil gaining $2.26, to $74.65, on widely-circulated reports that OPEC would impose an output cut at their next meeting. Gold rose $2.30, to $790.00 and silver was higher by 36 cents, to $9.69. Both of the precious metals took a serious drubbing last week.
In the short term, volatility is still quite high and will probably remain that way until after the elections on November 4. In the long run, we'll all survive - hooray! - and probably see a recovery in the latter part of 2009. Overall, however, most of us haven't changed a great deal about our daily routines, except for maybe being a little bit more frugal and cost-conscious... a pretty good idea, no matter what the economic conditions.
Friday, October 17, 2008
Welcome to the New Reality
After a month of wild gyrations and hefty losses, US markets (and, to some extent, world markets) seem to have finally found some level ground, or, as the case may be, some ground that seems to not be shifting radically from moment to moment.
Dow 8,852.22 -127.04; NASDAQ 1,711.29 -6.42; S&P 500 940.55 -5.88; NYSE Composite 5,948.80 -22.10
Even though the major indices ended Friday with across-the-board losses, thanks to the outsize gains on Monday, the Dow, S&P NASDAQ and NYSE Composite all had their first positive week in the last five, with gains between 2 and 4%.
These new ranges may be closer to reality for most of the stocks making up the various indices, especially in terms of dividend yield and price-to-earnings ratios. Of course, there are still high-fliers nestled in overvalue-land and a large number of companies whose earnings outstrip their share prices (bargains), but for the most part, the indices seem to have settled into a range, albeit a lower one, that is reflective of fair value.
Looking forward, the prognostications of a severe recession may actually not come to bear. Corporate earnings have thus far held up fairly well, the banking virus has not spread far beyond the financial sector, and there have been some pleasing side effects, notably lower prices for food and fuels, and that deflationary trend should continue well into next year.
While lower prices are an outstanding benefit for consumers, lower prices for finished goods are generally not seen as a harbinger of great things to come for corporations.
However, this time it may be different. Since the one bubble barely mentioned is the one which existed in base, or raw, materials, commonly known as commodities, those entities like sides of beef, bushels of corn, barrels of oil and tons of coal, it makes perfect sense that finished goods will be less costly to produce, meaning companies will be able to make significant savings at the bottom of the manufacturing regimen.
How these lower costs are passed through the rest of the economy remains to be seen, but, given sound management at the manufacturing level, an actual boost to corporate profits. In dynamic markets, such as the global one in which most listed companies now reside, cost and price adjustments need to be applied rapidly in order to maintain competitive edge.
In the market conditions of the recent past, companies had the luxury of maintaining high profit margins, as long as cash and credit were flowing, but now must be aware of lessened demand, and the need for price adjustment. In general, with lower (though not by much) margins, market share will take precedence over getting every last dime from cost-conscious consumers.
The widespread pain of the credit crisis, blared across TV screens, radio waves and computer screens, has not had any noticeable effect on consumers. With overall more money in their pockets due to reduced petrol prices, some may even consider saving some. Who knows? The next administration and congress might even see fit to lower taxes, modify banking and credit card interest regulations and keep their own books balanced. The end result would be more money in circulation and a much less stressed-out consumer.
I know that may appear a rosy scenario as compared to what been passing for news lately, but I urge you to take a look not only at your portfolio of investments, but the lives of others, many of whom either had no nest-egg in stocks, or a small one, or are young enough not to be distressed by something so common (they happen just about every ten years) as a stock market crash.
One only has to look at a long term chart of the Dow Jones Industrials to see that even at this level, stocks may be marginally overpriced and due for further adjustment. While I can't really make a case for further losses, one simply cannot rule out the possibility, as emotions often have more to do with markets and equity valuation than fundamentals. Besides, I called the bottom at 9450 on the Dow. Well, I was only off by about 1000 points, but who's counting? At least I saw the fallout coming at least a year ahead of most.
On the day, winners and losers finished in a virtual dead-heat, with 3180 advancers and 3161 decliners. New lows again led new highs, 344-49. That persistent metric, which has had new lows ahead of new highs every day except for a handful of days (5 or 6) since October 31 of last year, should slowly begin to show signs of moderation as stock pickers become more selective and a slow recovery develops.
Volume was just a bit on the high side, as expected, today being options expiration, which also explains some of the volatility.
NYSE Volume 1,740,610,000
NASDAQ Volume 2,761,572,000
Commodities continued their death spiral, though oil bucked the trend, gaining 1.87, to $72.13, a number with which most people can be happy. Gold fell another $16.80, to $787.70. Silver dropped another 30 cents, to $9.34 an ounce.
There are reports of an individual bombing a law office and the Goldman family attempting to obtain O.J. Simpson's Hall of Fame ring as part of a civil suit settlement. You see? The is some good news after all.
Dow 8,852.22 -127.04; NASDAQ 1,711.29 -6.42; S&P 500 940.55 -5.88; NYSE Composite 5,948.80 -22.10
Even though the major indices ended Friday with across-the-board losses, thanks to the outsize gains on Monday, the Dow, S&P NASDAQ and NYSE Composite all had their first positive week in the last five, with gains between 2 and 4%.
These new ranges may be closer to reality for most of the stocks making up the various indices, especially in terms of dividend yield and price-to-earnings ratios. Of course, there are still high-fliers nestled in overvalue-land and a large number of companies whose earnings outstrip their share prices (bargains), but for the most part, the indices seem to have settled into a range, albeit a lower one, that is reflective of fair value.
Looking forward, the prognostications of a severe recession may actually not come to bear. Corporate earnings have thus far held up fairly well, the banking virus has not spread far beyond the financial sector, and there have been some pleasing side effects, notably lower prices for food and fuels, and that deflationary trend should continue well into next year.
While lower prices are an outstanding benefit for consumers, lower prices for finished goods are generally not seen as a harbinger of great things to come for corporations.
However, this time it may be different. Since the one bubble barely mentioned is the one which existed in base, or raw, materials, commonly known as commodities, those entities like sides of beef, bushels of corn, barrels of oil and tons of coal, it makes perfect sense that finished goods will be less costly to produce, meaning companies will be able to make significant savings at the bottom of the manufacturing regimen.
How these lower costs are passed through the rest of the economy remains to be seen, but, given sound management at the manufacturing level, an actual boost to corporate profits. In dynamic markets, such as the global one in which most listed companies now reside, cost and price adjustments need to be applied rapidly in order to maintain competitive edge.
In the market conditions of the recent past, companies had the luxury of maintaining high profit margins, as long as cash and credit were flowing, but now must be aware of lessened demand, and the need for price adjustment. In general, with lower (though not by much) margins, market share will take precedence over getting every last dime from cost-conscious consumers.
The widespread pain of the credit crisis, blared across TV screens, radio waves and computer screens, has not had any noticeable effect on consumers. With overall more money in their pockets due to reduced petrol prices, some may even consider saving some. Who knows? The next administration and congress might even see fit to lower taxes, modify banking and credit card interest regulations and keep their own books balanced. The end result would be more money in circulation and a much less stressed-out consumer.
I know that may appear a rosy scenario as compared to what been passing for news lately, but I urge you to take a look not only at your portfolio of investments, but the lives of others, many of whom either had no nest-egg in stocks, or a small one, or are young enough not to be distressed by something so common (they happen just about every ten years) as a stock market crash.
One only has to look at a long term chart of the Dow Jones Industrials to see that even at this level, stocks may be marginally overpriced and due for further adjustment. While I can't really make a case for further losses, one simply cannot rule out the possibility, as emotions often have more to do with markets and equity valuation than fundamentals. Besides, I called the bottom at 9450 on the Dow. Well, I was only off by about 1000 points, but who's counting? At least I saw the fallout coming at least a year ahead of most.
On the day, winners and losers finished in a virtual dead-heat, with 3180 advancers and 3161 decliners. New lows again led new highs, 344-49. That persistent metric, which has had new lows ahead of new highs every day except for a handful of days (5 or 6) since October 31 of last year, should slowly begin to show signs of moderation as stock pickers become more selective and a slow recovery develops.
Volume was just a bit on the high side, as expected, today being options expiration, which also explains some of the volatility.
NYSE Volume 1,740,610,000
NASDAQ Volume 2,761,572,000
Commodities continued their death spiral, though oil bucked the trend, gaining 1.87, to $72.13, a number with which most people can be happy. Gold fell another $16.80, to $787.70. Silver dropped another 30 cents, to $9.34 an ounce.
There are reports of an individual bombing a law office and the Goldman family attempting to obtain O.J. Simpson's Hall of Fame ring as part of a civil suit settlement. You see? The is some good news after all.
Thursday, October 16, 2008
Down and Up Wall Street
The roller coaster ride continues.
US stock indices evened things out on Thursday, heading higher after a huge Monday rally and two dizzying days of losses, but not before scaring the bejezus out of investors.
The Dow was up over 100 points early on, but then sunk to a loss of nearly 400 points, touching the lows of the day just after 11:00 am at 8197.67. At that point, some reasonably good news on the CPI (unchanged for September), corporate earnings and a continuing decline in the price of oil contributed to spirited buying enthusiasm, picking up stocks of all varieties - especially airlines and banks.
The Dow finished with a nice gain of over 400 points. Other major US indices sported similar upswings. Foreign markets in Europe and Asia were mostly lower on the day, reflecting the protracted volatility around the globe.
Dow 8,979.26 +401.35; NASDAQ 1,717.71 +89.38; S&P 500 946.43 +38.59; NYSE Composite 5,970.90 Up 210.94
Market internals were all over the map, just like the indices themselves. Advancing issues beat out losers, 4160-2244. New lows ranked up to 965 against only 51 new highs. Volume was impressive, at the highest levels of the week.
NYSE Volume 1,997,849,000
NASDAQ Volume 3,372,358,000
Commodities were once again showing the stresses of deflation. Oil fell $4.62, to $70.26, a price less than half of what it was just three months ago when crude hit an all-time high. Gold slipped $34.50, to $804.50 and silver fell 55 cents to $9.64, the first time silver has ended below $10.00 since August, 2007.
With general agreement that the entire planet is headed for recession, commodities are the first to show signs of strain. This is a continuing trend that should eventually spill over into finished products of all kinds, just in time for Christmas, though post-holiday sales should offer even better bargains.
US stock indices evened things out on Thursday, heading higher after a huge Monday rally and two dizzying days of losses, but not before scaring the bejezus out of investors.
The Dow was up over 100 points early on, but then sunk to a loss of nearly 400 points, touching the lows of the day just after 11:00 am at 8197.67. At that point, some reasonably good news on the CPI (unchanged for September), corporate earnings and a continuing decline in the price of oil contributed to spirited buying enthusiasm, picking up stocks of all varieties - especially airlines and banks.
The Dow finished with a nice gain of over 400 points. Other major US indices sported similar upswings. Foreign markets in Europe and Asia were mostly lower on the day, reflecting the protracted volatility around the globe.
Dow 8,979.26 +401.35; NASDAQ 1,717.71 +89.38; S&P 500 946.43 +38.59; NYSE Composite 5,970.90 Up 210.94
Market internals were all over the map, just like the indices themselves. Advancing issues beat out losers, 4160-2244. New lows ranked up to 965 against only 51 new highs. Volume was impressive, at the highest levels of the week.
NYSE Volume 1,997,849,000
NASDAQ Volume 3,372,358,000
Commodities were once again showing the stresses of deflation. Oil fell $4.62, to $70.26, a price less than half of what it was just three months ago when crude hit an all-time high. Gold slipped $34.50, to $804.50 and silver fell 55 cents to $9.64, the first time silver has ended below $10.00 since August, 2007.
With general agreement that the entire planet is headed for recession, commodities are the first to show signs of strain. This is a continuing trend that should eventually spill over into finished products of all kinds, just in time for Christmas, though post-holiday sales should offer even better bargains.
Tuesday, October 14, 2008
After Record Day, Some Give-Back
Following a day in which stocks rose by record amounts, Tuesday witnessed some profit-taking and a small sense of calm.
Stocks fell generally, but not by large amounts. The return to declines was, in a way, expected, and acceptable, as the Treasury announced it will purchase up to $250 billion in equity stakes of banks, including shares of Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, Goldman Sachs and others.
Other government central banks around the world have already made similar investments in banks, to the tune of over $500 billion thus far.
While nobody is saying that the credit crisis is over, most analysts are in agreement that the worst may be behind us. What is still unclear, however, is how the credit freeze and subsequent government activity will affect the general economy. Consensus is clear that a worldwide recession is on the horizon - or already begun.
Dow 9,310.99 -76.62; NASDAQ 1,779.01 -65.24; S&P 500 998.01 -5.34; NYSE Composite 6,380.5298 -20.43
Market internals were mixed, but tended more toward normal than they have in the past three weeks. Declining issues edged out advancers, 3462-3049. New lows outstripped new highs, 291-74, though the number of new highs was the best showing since the last week of September.
Volume was heavy, a good sign that more investors feel confident trading in US equity markets.
NYSE Volume 1,877,556,000
NASDAQ Volume 2,936,985,000
Commodities continued to trade in mixed fashion though the tinge of deflation remains on the periphery. Oil futures lost another $2.73, with crude closing below $80 for the second time in three days, at $78.95. Gold lost $3.00, to $839.50, though silver gained 27 cents to $11.06. Silver has been buffeted about wildly of late and may be somewhat oversold.
A number of companies reported earnings during the day. Tech bellwether Intel (INTC) beat forecasts but issued some gloomy guidance. Beverage-maker PepsiCo (PEP) missed analyst estimates by 2 cents and announced planned layoffs of 3300 employees.
Dow component Johnson & Johnson (JNJ) reported a 30% rise in 3rd quarter profits over the same period of 2007. The company reported earnings of 1.17 per share, against analyst expectations of 1.11.
Stocks fell generally, but not by large amounts. The return to declines was, in a way, expected, and acceptable, as the Treasury announced it will purchase up to $250 billion in equity stakes of banks, including shares of Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, Goldman Sachs and others.
Other government central banks around the world have already made similar investments in banks, to the tune of over $500 billion thus far.
While nobody is saying that the credit crisis is over, most analysts are in agreement that the worst may be behind us. What is still unclear, however, is how the credit freeze and subsequent government activity will affect the general economy. Consensus is clear that a worldwide recession is on the horizon - or already begun.
Dow 9,310.99 -76.62; NASDAQ 1,779.01 -65.24; S&P 500 998.01 -5.34; NYSE Composite 6,380.5298 -20.43
Market internals were mixed, but tended more toward normal than they have in the past three weeks. Declining issues edged out advancers, 3462-3049. New lows outstripped new highs, 291-74, though the number of new highs was the best showing since the last week of September.
Volume was heavy, a good sign that more investors feel confident trading in US equity markets.
NYSE Volume 1,877,556,000
NASDAQ Volume 2,936,985,000
Commodities continued to trade in mixed fashion though the tinge of deflation remains on the periphery. Oil futures lost another $2.73, with crude closing below $80 for the second time in three days, at $78.95. Gold lost $3.00, to $839.50, though silver gained 27 cents to $11.06. Silver has been buffeted about wildly of late and may be somewhat oversold.
A number of companies reported earnings during the day. Tech bellwether Intel (INTC) beat forecasts but issued some gloomy guidance. Beverage-maker PepsiCo (PEP) missed analyst estimates by 2 cents and announced planned layoffs of 3300 employees.
Dow component Johnson & Johnson (JNJ) reported a 30% rise in 3rd quarter profits over the same period of 2007. The company reported earnings of 1.17 per share, against analyst expectations of 1.11.
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