As expected, stocks are trading in dawdling fashion due to a dearth of economic reports and almost no news of note. This kind of slowness should continue for another two weeks at least, through the 4th of July weekend, before second quarter corporate earnings reports begin trickling to the market.
Until that time, there's little to get excited about, presenting a wide window of opportunity for investors to shift positions, take profits or get out of the way. We've seen some of this activity already expressed in the prior 9 or 10 sessions and are looking forward to more of the same. There simply isn't any catalyst working in either direction.
To say that the trading range was tight would be overstatement. The Dow covered a mere 84 points from top to bottom today; the S&P moved less than 10 points up and down through the session.
The NAR reported an uptick in existing home sales, to an annual rate of 4.77 million units in May. While the number was better than April's revised 4.66 million, it wasn't as good as the expectation number of 4.82. Overall, it was a real yawner for the market, signifying less than nothing.
Kroger (KR) reported increased profits on lower sales, citing more people eating at home for the profit uptick and lower prices for gas for the declining sales from the same period a year ago. That kind of data should influence Darden Restaurants (DRI), which reports tomorrow. The owners of Olive Garden, Red Lobster and other popular chains has been beating expectations for the past two quarters, contradicting generally-accepted trends. Tomorrow's report could be telling, one way or the other.
Dow 8,322.91, -16.10 (0.19%)
NASDAQ 1,764.92, -1.27 (0.07%)
S&P 500 895.10, +2.06 (0.23%)
NYSE Composite 5,759.49, +34.42 (0.60%)
Declining issues beat back advancers once more, 3496-2905. For the eighth consecutive session, new lows surpassed new highs, 70-21. Also, the gap between the two was the largest since the index reverted to its 21-month-old form after a brief period (6 sessions) with new highs on top. As the volume and velocity of trading slows to a crawl, sentiment seems to be expanding toward the negative at an accelerating rate. In this period, no news may turn out to be bad news.
NYSE Volume 1,209,363,000
NASDAQ Volume 2,171,108,000
Crude oil for August delivery (first day of the new contract) gained $1.74, to $69.24, while most other commodities posted marginal gains. Gold finished $3.30 higher, at $924.30; silver added 14 cents, to $13.85. While the prices of both gold and silver are quite a bit lower than, say, two weeks ago, they may not present the buying opportunity some see. If deflation continues to persist, all commodities will suffer, even the best-performing ones. Traditionally a hedge against inflation, gold, in particular, could find itself lower by as much as 20% in coming months.
Here's an excellent article on the relationship between the US dollar and stocks and commodities by Simon Maierhofer. The author supports my long-standing contention that deflation will persist as the dominant theme. I predict that prices will be down, the business condition tough, for more than two more years before inflation rears that ugly head again. Once more, the "experts" are completely in the dark as to the nature of price inflation or deflation. Despite the creation of trillions of dollars "out of thin air" now being vaporized in malinvestments, final demand is still slack and will continue to be so until economic conditions are rebalanced, and that's not going to happen for some time.
Tuesday, June 23, 2009
Monday, June 22, 2009
Stocks Continue Relentless Decline
Without any prodding from economic reports or corporate catalysts, stocks began the day and the week on a lower footing and spent the entire session in a protracted, broad retreat. If there's any better signal that stocks are on a negative bias, it's a big down day in the absence of news.
Not surprisingly, energy stocks, financials and raw materials were the biggest losers on Monday. These are the same sectors which investors had pumped to extraordinary gains in recent weeks.
The major indices hit their lows of the day around 1:30 pm, but no serious attempt at a rally ever materialized as stocks drifted, closing at or near their lowest levels of the session. The broadest measures - the NYSE Comp. and NASDAQ - were the hardest hit, suffering losses in excess of 3%.
Dow 8,339.01, -200.72 (2.35%)
Nasdaq 1,766.19, -61.28 (3.35%)
S&P 500 893.04, -28.19 (3.06%)
NYSE Composite 5,725.07, -209.17 (3.52%)
The number of advancing issues was dwarfed by declining ones, 5526-961, and new lows surpassed new highs for the 7th straight session, 69-33. Volume was once again a non-factor, remaining at generally sluggish recent levels, though marginally better than last week's levels.
NYSE Volume 6,119,741,000
Nasdaq Volume 2,238,124,250
Commodities responded to the downturn in equities by selling off sharply. Crude oil contracts for July delivery were down $2.62, to $66.93, a two week low. Gold was off $14.70, to $921.50, while silver lost 50 cents, to $13.71.
The declines in both equities and commodities reflects a complete change of sentiment from just a week ago, when all the talk concerned inflation. It seems investors had gotten a bit ahead of themselves regarding not only prospects for a recovery, but for inflationary forces, as well. Deflation remains dominant, as businesses struggle for pricing power. Slack demand across the board, due to stagnant wages, generalized fear of the future and excess household deb burdens, has kept a lid on prices and will likely do so for some time, no matter how much money the Fed attempts to pump into the economy.
A report by the World Bank, which sees the global economy shrinking by 2.9% may have contributed to the dour tone on Wall Street, though european bourses were already trading lower prior to the release. The general mood is one of resignation that the recession will continue through most, if not all, of 2009, and recovery will be tepid, at best.
Noting that, prospects for individual companies are being reassessed. The process of unwinding the gains tacked on from March through June is now well underway. The Dow has shed 460 points since closing at 8799 on June 12, a span of just 6 sessions.
Not surprisingly, energy stocks, financials and raw materials were the biggest losers on Monday. These are the same sectors which investors had pumped to extraordinary gains in recent weeks.
The major indices hit their lows of the day around 1:30 pm, but no serious attempt at a rally ever materialized as stocks drifted, closing at or near their lowest levels of the session. The broadest measures - the NYSE Comp. and NASDAQ - were the hardest hit, suffering losses in excess of 3%.
Dow 8,339.01, -200.72 (2.35%)
Nasdaq 1,766.19, -61.28 (3.35%)
S&P 500 893.04, -28.19 (3.06%)
NYSE Composite 5,725.07, -209.17 (3.52%)
The number of advancing issues was dwarfed by declining ones, 5526-961, and new lows surpassed new highs for the 7th straight session, 69-33. Volume was once again a non-factor, remaining at generally sluggish recent levels, though marginally better than last week's levels.
NYSE Volume 6,119,741,000
Nasdaq Volume 2,238,124,250
Commodities responded to the downturn in equities by selling off sharply. Crude oil contracts for July delivery were down $2.62, to $66.93, a two week low. Gold was off $14.70, to $921.50, while silver lost 50 cents, to $13.71.
The declines in both equities and commodities reflects a complete change of sentiment from just a week ago, when all the talk concerned inflation. It seems investors had gotten a bit ahead of themselves regarding not only prospects for a recovery, but for inflationary forces, as well. Deflation remains dominant, as businesses struggle for pricing power. Slack demand across the board, due to stagnant wages, generalized fear of the future and excess household deb burdens, has kept a lid on prices and will likely do so for some time, no matter how much money the Fed attempts to pump into the economy.
A report by the World Bank, which sees the global economy shrinking by 2.9% may have contributed to the dour tone on Wall Street, though european bourses were already trading lower prior to the release. The general mood is one of resignation that the recession will continue through most, if not all, of 2009, and recovery will be tepid, at best.
Noting that, prospects for individual companies are being reassessed. The process of unwinding the gains tacked on from March through June is now well underway. The Dow has shed 460 points since closing at 8799 on June 12, a span of just 6 sessions.
Friday, June 19, 2009
Dull Trading with Minimal New Flows
Considering what the US economy has been through the past 2 years, maybe a little break in the action now and then is a welcome relief. The considerable slowing of news flows over the past few weeks have truncated trading volumes in US equity markets by as much as 40% in recent days.
There were absolutely no economic reports on which to hang a trade on Friday.
Volume was quite a bit healthier due to a quadruple witching condition which produced a touch of volatility and a good deal more trading activity than has been the norm of recent days. It was another split session for stocks, the third in as many days, which is likely a symptom of the general insecurity and lack of direction which has plagued the markets for two weeks running.
The general direction is down, but people are far from convinced. Meanwhile, many of the biggest players have already headed for vacation spots and have money parked in either defensive positions or fixed investment vehicles.
This was, however, the worst week for the major indices since the week ended May 15 this year. The Dow surrendered 260 points, the S&P gave back 25 points, the NASDAQ shed 31 points, and the NYSE Composite lost 214 points.
Dow 8,539.43, -16.17 (0.19%)
NASDAQ 1,827.47, +19.75 (1.09%)
S&P 500 921.19, +2.82 (0.31%)
NYSE Composite 5,934.05, +27.85 (0.47%)
For the day, advancers finished far ahead of decliners, 3854-2487. New lows narrowly led new highs, 56-55. It was the 6th straight session marking the lows above the highs, though the margin continued to deteriorate over the past 3 sessions.
NYSE Volume 2,127,423,000
NASDAQ Volume 2,954,731,000
Finally, the speculators eased off their ridiculous bid on crude oil, sending it to steep losses, down $1.82, to $69.55. Perhaps this is a sign of a topping point in the seasonal bid. With no real demand rationale to push prices higher, maybe the speculators thought better of their positions and see an end to the over-hyped, and over-extended, trade.
Gold gained $1.60, to $936.20; silver went the other way, down 4 cents, to $14.20.
There is scant economic news next week as the end of the second quarter approaches. After a blank Monday, figures for Existing Home Sales are released on Tuesday, with New Home Sales on Wednesday along with Durable Goods Orders and Crude Inventories. Wednesday is also slated for a rate decision by the Fed's FOMC, so trading should be less than robust until 2:15 in the afternoon, in anticipation of what is surely to be a "no change" call. Regardless, many market participants will hang breathlessly on every word and make trades according to the whims and innuendo of the FOMC.
Markets really ought to begin churning a little bit just before the 4th of July weekend, because right after that, companies will be reporting 2nd quarter earnings, so there will be some fur flying. Until then, investors are either getting out of the way or just staying put, waiting for another seminal trading moment. That next moment may come when the Dow breaches 8000, probably within a month's time.
There were absolutely no economic reports on which to hang a trade on Friday.
Volume was quite a bit healthier due to a quadruple witching condition which produced a touch of volatility and a good deal more trading activity than has been the norm of recent days. It was another split session for stocks, the third in as many days, which is likely a symptom of the general insecurity and lack of direction which has plagued the markets for two weeks running.
The general direction is down, but people are far from convinced. Meanwhile, many of the biggest players have already headed for vacation spots and have money parked in either defensive positions or fixed investment vehicles.
This was, however, the worst week for the major indices since the week ended May 15 this year. The Dow surrendered 260 points, the S&P gave back 25 points, the NASDAQ shed 31 points, and the NYSE Composite lost 214 points.
Dow 8,539.43, -16.17 (0.19%)
NASDAQ 1,827.47, +19.75 (1.09%)
S&P 500 921.19, +2.82 (0.31%)
NYSE Composite 5,934.05, +27.85 (0.47%)
For the day, advancers finished far ahead of decliners, 3854-2487. New lows narrowly led new highs, 56-55. It was the 6th straight session marking the lows above the highs, though the margin continued to deteriorate over the past 3 sessions.
NYSE Volume 2,127,423,000
NASDAQ Volume 2,954,731,000
Finally, the speculators eased off their ridiculous bid on crude oil, sending it to steep losses, down $1.82, to $69.55. Perhaps this is a sign of a topping point in the seasonal bid. With no real demand rationale to push prices higher, maybe the speculators thought better of their positions and see an end to the over-hyped, and over-extended, trade.
Gold gained $1.60, to $936.20; silver went the other way, down 4 cents, to $14.20.
There is scant economic news next week as the end of the second quarter approaches. After a blank Monday, figures for Existing Home Sales are released on Tuesday, with New Home Sales on Wednesday along with Durable Goods Orders and Crude Inventories. Wednesday is also slated for a rate decision by the Fed's FOMC, so trading should be less than robust until 2:15 in the afternoon, in anticipation of what is surely to be a "no change" call. Regardless, many market participants will hang breathlessly on every word and make trades according to the whims and innuendo of the FOMC.
Markets really ought to begin churning a little bit just before the 4th of July weekend, because right after that, companies will be reporting 2nd quarter earnings, so there will be some fur flying. Until then, investors are either getting out of the way or just staying put, waiting for another seminal trading moment. That next moment may come when the Dow breaches 8000, probably within a month's time.
Thursday, June 18, 2009
Trends Continue to Weigh on Stocks
Despite Thursday's overall gains - except on the NASDAQ, yesterday's only winner and today's only loser - the tenor of trade is definitely showing all the requisite signs of a significant market breakdown. After slipping at the open, stocks quickly ramped up, with the Dow reaching 8550 by 10:00 am. From that time until 3:45 pm, the Dow traded in a very tight 40-point range between 8550-8590, so the entire session looks somewhat suspect. In the final 15 minutes, the index dipped below 8550 briefly, but caught a bid late in the session.
Dow 8,555.60, +58.42 (0.69%)
NASDAQ 1,807.72, -0.34 (0.02%)
S&P 500 918.37, +7.66 (0.84%)
NYSE Composite 5,906.20, +41.65 (0.71%)
There was little in the way of economic news or reports, though weekly unemployment claims came in slightly higher than expected and the continuing claims number actually fell for the first time since January. That's another actually positive sign, but far too little upon which to pin any trades. In fact, volume dipped again to levels resembling last week, which was horribly slow.
The Conference Board Leading Economic Index increased by 1.2% in May, marking the first time since July 2007 that the 6-month change in the index has been positive. May was also the second straight month that the LEI had improved, another positive sign that the recession was easing.
The problem with these kinds of numbers are that twofold: they are subject to revision, and they do not - outside of any other context - presage the end of the recession, only showing that the rate of decline has eased. In other words, If you are operating at 50% capacity when you should be at 90%, an increase for a month to 55% is good, but in now way predictive of getting production back to 90%. The new reality is that the economy is not going to come back to anything closely resembling the credit-fueled days of 2002-2007, a reason the Obama administration and its lapdog media are so careful when commenting on the economy. The very last thing they want to do is offer false hope, an indication that they know how severe the current condition really is and aren't sharing it with everyone else.
On the day, advancers narrowly beat back decliners, 3574-2827, and new lows finished ahead of new highs for the 5th straight session, 51-39. Volume, as mentioned above, was well below par, which, unlike scoring at the US Open, is not good.
NYSE Volume 1,088,429,000
NASDAQ Volume 2,118,909,000
One thing that's becoming tiresome is the continuing rise in the price of oil, which was up again today by 34 cents, to $71.37. There's no compelling reason for oil prices to be hiking at this time, except the kneejerk seasonal trade that figures US motorists to travel more in summer months. One has to consider this to be one of the worst trades of the decade, and there have been plenty of them. With the world economy in recession and prices falling for just about everything, the only way oil rises is by naked insider speculation. As risky strategies are concerned, this one is nearly off the charts and could easily backfire. If the recession continues through the summer - and who doubts that it won't? - supplies may actually indicate that prices should fall, and quickly. That's when these contracts get unwound and the speculators take on some serious losses. Look for oil to stall out fairly soon (July 4 is usually the high) and head back to a more reasonable level around $55-$60/barrel, if not lower.
The annoying thing about the oil futures trade, is that, like the elections in Iran, they are so blatantly out of kilter with reality. Other commodities were mostly lower, including hating oil and natural gas, so why should oil have some special status? It's all speculation, and with any luck (for automotive travelers everywhere) their price-rigging scheme will blow up in their faces.
Gold ended down $1.40, to $934.60. Silver was off 4 cents, to $14.24.
Unless there's a massive rally tomorrow, the major indices will finish the week with losses, which, after three months of nearly unrelenting gains, is likely not only expected, but healthy.
Dow 8,555.60, +58.42 (0.69%)
NASDAQ 1,807.72, -0.34 (0.02%)
S&P 500 918.37, +7.66 (0.84%)
NYSE Composite 5,906.20, +41.65 (0.71%)
There was little in the way of economic news or reports, though weekly unemployment claims came in slightly higher than expected and the continuing claims number actually fell for the first time since January. That's another actually positive sign, but far too little upon which to pin any trades. In fact, volume dipped again to levels resembling last week, which was horribly slow.
The Conference Board Leading Economic Index increased by 1.2% in May, marking the first time since July 2007 that the 6-month change in the index has been positive. May was also the second straight month that the LEI had improved, another positive sign that the recession was easing.
The problem with these kinds of numbers are that twofold: they are subject to revision, and they do not - outside of any other context - presage the end of the recession, only showing that the rate of decline has eased. In other words, If you are operating at 50% capacity when you should be at 90%, an increase for a month to 55% is good, but in now way predictive of getting production back to 90%. The new reality is that the economy is not going to come back to anything closely resembling the credit-fueled days of 2002-2007, a reason the Obama administration and its lapdog media are so careful when commenting on the economy. The very last thing they want to do is offer false hope, an indication that they know how severe the current condition really is and aren't sharing it with everyone else.
On the day, advancers narrowly beat back decliners, 3574-2827, and new lows finished ahead of new highs for the 5th straight session, 51-39. Volume, as mentioned above, was well below par, which, unlike scoring at the US Open, is not good.
NYSE Volume 1,088,429,000
NASDAQ Volume 2,118,909,000
One thing that's becoming tiresome is the continuing rise in the price of oil, which was up again today by 34 cents, to $71.37. There's no compelling reason for oil prices to be hiking at this time, except the kneejerk seasonal trade that figures US motorists to travel more in summer months. One has to consider this to be one of the worst trades of the decade, and there have been plenty of them. With the world economy in recession and prices falling for just about everything, the only way oil rises is by naked insider speculation. As risky strategies are concerned, this one is nearly off the charts and could easily backfire. If the recession continues through the summer - and who doubts that it won't? - supplies may actually indicate that prices should fall, and quickly. That's when these contracts get unwound and the speculators take on some serious losses. Look for oil to stall out fairly soon (July 4 is usually the high) and head back to a more reasonable level around $55-$60/barrel, if not lower.
The annoying thing about the oil futures trade, is that, like the elections in Iran, they are so blatantly out of kilter with reality. Other commodities were mostly lower, including hating oil and natural gas, so why should oil have some special status? It's all speculation, and with any luck (for automotive travelers everywhere) their price-rigging scheme will blow up in their faces.
Gold ended down $1.40, to $934.60. Silver was off 4 cents, to $14.24.
Unless there's a massive rally tomorrow, the major indices will finish the week with losses, which, after three months of nearly unrelenting gains, is likely not only expected, but healthy.
Wednesday, June 17, 2009
New Regs for Financials; TARP Repayment Sparks Midday Rally
The Obama administration announced a number of proposed regulatory changes which, if enacted, would materially impact the overall functioning of the US economy. The Office of Thrift Supervision would be replaced by a new Consumer Financial Protection Agency and the Federal Reserve would have a larger role in the supervision of the US economy.
To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.
Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.
On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.
S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.
Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.
Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)
Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.
NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000
Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.
May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.
Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.
For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.
To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.
Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.
On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.
S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.
Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.
Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)
Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.
NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000
Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.
May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.
Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.
For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.
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