Somebody pulled the "buy" switch on Wall Street, or, perhaps more to the point, shorts got caught with their pants down, as stocks staged the strongest rally since June 1, with the Dow up 172 points and the other major indices tagging along with similarly-sized gains.
There was no real news to serve as a catalyst, though after taking losses over the past two weeks, investors may have been looking for bargains and their buying may have initiated a temporary short squeeze, as just about everybody on the planet is aware of the topping out which occurred the second week of June.
Dow 8,472.40, +172.54 (2.08%)
NASDAQ 1,829.54, +37.20 (2.08%)
S&P 500 920.26, +19.32 (2.14%)
NYSE Composite 5,911.03, +115.31 (1.99%)
Advancing issues finished well ahead of decliners, 5191-1273, and new highs took a slim edge over new lows, 61-60, ending a nine-day run in which lows led. Volume was only marginally higher than in recent sessions, another hint that the move could have been based on a short squeeze.
NYSE Volume 1,177,536,000
NASDAQ Volume 2,247,375,000
Crude oil was up $1.56, to $70.23. Gold was also up $5.10, to $939.50. Silver added 9 cents, closing at $14.03.
Thursday's action certainly looks like the garden variety snap-back rally made on the backs of short-sellers, who must be in abundance at this juncture. It will be interesting to see whether the rally has any legs as the week comes to an end.
Thursday, June 25, 2009
Wednesday, June 24, 2009
Fed Comments Don't Help
As expected, the FOMC of the Federal Reserve left interest rates alone, but, in the press release accompanying the non-event said that economic conditions had improved slightly since April, though the Fed's policy statement was peppered with pejoratives and qualifiers, lending to an overall uneasy feeling on Wall Street.
Possibly the most annoying part of the release was the comment on commodities and inflation: "The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time."
At least the Fed is being honest about future prospects, but, on Wall Street as well as on Main Street, no inflation means no or a slow recovery. Collapsing pricing power means that business will have to deal with margins as they are, or lower, and sales volume also at or close to current levels. Overall, it's a picture of stagnation, though not as bad as conditions might have been six months ago.
After the 2:15 announcement, stocks gyrated in both directions briefly before taking a slight nose-dive. Especially hard hit was the Dow, which had been sporting solid gains, but ended up as the only major index in the red. All of the other indices finished the session off their highs, though only marginally.
What did boost the market was the positive reading on durable goods orders, which spiked to a gain of 1.8% in May, the second straight gain of that size, lending some credence to the bottom of the recession having already passed. Naturally, there are skeptics still, and even more who wonder whether the gains of recent months hadn't already priced in such positive developments. After watching the economy write while the market soared, investors may be facing a complete reversal of fortune: watching stocks slip as the economy actually improves.
Dow 8,299.86, -23.05 (0.28%)
NASDAQ 1,792.34. +27.42 (1.55%)
S&P 500 900.94, +5.84 (0.65%)
NYSE Composite 5,795.72, +36.23 (0.63%)
Advancing issues far outpaced decliners, 4251-2184, but new lows finished ahead of new highs for the ninth straight session, 67-50. Volume was roughly the same as yesterday, due primarily to the Fed announcement. Without that catalyst, it would have been one of the slowest sessions of the year.
NYSE Volume 1,101,553,000
NASDAQ Volume 2,171,782,000
Crude oil slipped on gasoline supply data, down 57 cents, to $68.67, a positive sign for motorists, as gas prices are almost certain to decline after the July 4 weekend. Gold posted a gain of $10.10, to $934.40. Silver added 7 cents, closing at $13.94 the ounce. The metals remain in no-man's land, stuck between interim lows and all-time highs reached last year. There's some doubt about gold and silver entering the picture of late. Failing to retest the highs may signal a breakdown and turn from the 7-year bull market. If that's the case, it presents an incredible buying opportunity, as the price of both gold and silver should rise significantly once the world economies are back on track.
When that is going to happen, however, is anybody's guess. Even the Fed is now couching its comments, and if they don't know, who does? Best guess at this point is that recovery occurs some time next year, but is relatively weak. GDP growth may not exceed 3% until late 2011 or later.
Possibly the most annoying part of the release was the comment on commodities and inflation: "The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time."
At least the Fed is being honest about future prospects, but, on Wall Street as well as on Main Street, no inflation means no or a slow recovery. Collapsing pricing power means that business will have to deal with margins as they are, or lower, and sales volume also at or close to current levels. Overall, it's a picture of stagnation, though not as bad as conditions might have been six months ago.
After the 2:15 announcement, stocks gyrated in both directions briefly before taking a slight nose-dive. Especially hard hit was the Dow, which had been sporting solid gains, but ended up as the only major index in the red. All of the other indices finished the session off their highs, though only marginally.
What did boost the market was the positive reading on durable goods orders, which spiked to a gain of 1.8% in May, the second straight gain of that size, lending some credence to the bottom of the recession having already passed. Naturally, there are skeptics still, and even more who wonder whether the gains of recent months hadn't already priced in such positive developments. After watching the economy write while the market soared, investors may be facing a complete reversal of fortune: watching stocks slip as the economy actually improves.
Dow 8,299.86, -23.05 (0.28%)
NASDAQ 1,792.34. +27.42 (1.55%)
S&P 500 900.94, +5.84 (0.65%)
NYSE Composite 5,795.72, +36.23 (0.63%)
Advancing issues far outpaced decliners, 4251-2184, but new lows finished ahead of new highs for the ninth straight session, 67-50. Volume was roughly the same as yesterday, due primarily to the Fed announcement. Without that catalyst, it would have been one of the slowest sessions of the year.
NYSE Volume 1,101,553,000
NASDAQ Volume 2,171,782,000
Crude oil slipped on gasoline supply data, down 57 cents, to $68.67, a positive sign for motorists, as gas prices are almost certain to decline after the July 4 weekend. Gold posted a gain of $10.10, to $934.40. Silver added 7 cents, closing at $13.94 the ounce. The metals remain in no-man's land, stuck between interim lows and all-time highs reached last year. There's some doubt about gold and silver entering the picture of late. Failing to retest the highs may signal a breakdown and turn from the 7-year bull market. If that's the case, it presents an incredible buying opportunity, as the price of both gold and silver should rise significantly once the world economies are back on track.
When that is going to happen, however, is anybody's guess. Even the Fed is now couching its comments, and if they don't know, who does? Best guess at this point is that recovery occurs some time next year, but is relatively weak. GDP growth may not exceed 3% until late 2011 or later.
Tuesday, June 23, 2009
Stocks Continue to Slump on Low Volume
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.
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.
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.
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