US stock indices finished in the red for the second straight day as another spate of so-so economic news crossed the new wires. It wasn't so much the initial jobless claims figures that shook things up - they were improved over the previous week at 550,000, but the continuing claims were higher, at 6.31 million, due to extensions in unemployment benefits keeping more workers on the government dime for longer than the usual 39 weeks.
With money coming in and no prospects for gainful employment on the horizon, many of those already furloughed are living check to check, those being furnished by government agencies. As long as no new jobs are being created, America will continue to devolve from a nation of entrepreneurs into a de facto welfare state, with government picking up the tab for everything from rent to food to health care to spending money. The hard side of that reality is for the businessman or woman who will face ever higher taxes and costs related to doing business with a sub-prime clientele.
The path of the nation doesn't have to be as stark, though the current crop of clowns in congress certainly seem to be pushing in that direction. Gone is the resolve to work hard, the commitment to family values and self-reliance. They are being rapidly replaced with the mantra of "good-for-the-whole" socialism, with all of its incentives for sloth, laziness, avarice and assorted vices. The malaise which began with a real estate bubble promoted by George W. Bush's "ownership society" - truly the most false and baseless political creed of recent memory - has proceeded along a perceptible, predictable and inescapable path to homelessness and destitution across a wide swath of the country.
Some areas are doing better than others, obviously, but the hardest hit are those which have suffered the double-whammy of rampant unemployment on top of foreclosures, such as Detroit, most of southern Florida, Las Vegas and many parts of exurbia Southern California. The deep South, never a bellwether for enterprise, is still largely backwards, the Northeast and West Coast are still culturally significant and maintaining a facade of social manners, though the biggest states - New York and California - are overburdened by huge government apparatus and absurdly high rates of taxation. The Midwest continues to hold pockets of civility, though many of the larger cities are reeling from the economic downturn.
While most to these realities are overlooked by the financial media and Wall Street's "everybody's an investor" mentality, the general welfare of the bulk of the lower and middle class populations is not of great concern so long as government largely continues to foot the bills. All of this works for smart companies who ignore the larger picture, have cut labor and other costs and continue to profit and take market share. The largess of the government these past five months has been like manna from heaven for many keen companies. They'll keep making money without regard to its source.
That's why the past two days haven't been very dramatic. Investor types know that their recent gains could eventually sour, but current government policies, like cash for clunkers, are greasing the wheels with billions of borrowed dollars. And those polices are going to stay in place and have other, similar, social-programming policies piled atop them. Business could care less, as long as the money continues to roll in.
Dow 9,256.26, -24.71 (0.27%)
NASDAQ 1,973.16, -19.89 (1.00%)
S&P 500 997.08, -5.64 (0.56%)
NYSE Composite 6,517.67, -40.52 (0.62%)
Declining issues grabbed the edge over advancers once again, today by a wider margin, 4185-2223, but new highs were better than new lows, 169-63. Volume continued to run at a less-leisurely pace than in previous weeks for the second straight day.
NYSE Volume 1,389,338,000
NASDAQ Volume 2,447,769,000
Commodity prices stagnated, with oil off 3 cents, to $71.94, gold down $3.40, to $962.90 and silver off 12 cents, at $14.65.
The real troubling news came from the retail sector, which has been taken out to pasture and summarily slaughtered over the past 12 months, as company after company reported dismal same-store sales in comparison to a year ago. Those retail figures are likely to remain bad until they can be matched up against already bad numbers, and that won't begin until November or December at the earliest. While retail wonks are concerned about back-to-school sales (somewhat of a non sequitur - how much beyond a few new items of clothing, notebooks, pens and gadgets do students really need?), the more serious concern is the holiday season, now less than five months out. After a dismal Christmas season for many retailers, the concern is that consumers will still be buying at less-than-robust levels. That may already be a given and currently being priced into many retail stocks, though the consumer tech area could really be hit hardest of all through the fall and winter.
Looking ahead to Friday, market sentiment will largely be in response to the government's non-farm employment report for July, which is expected to show job losses in the neighborhood of 325-375, 000. The number, unless it is completely out of line with the usual government massage, should fall into that range, which should cheer investors. The actual anticipatory knee-knocking trepidation leading up the the big Friday number has been overdone. While nobody expects miracles, any improvement will be billed as a good sign of a slowly recovering economy, whether or not that is actually the case. Espeically on the heels of ADP's private sector jobs number of -371,000 for July, released just yesterday, the government figure is quickly becoming an anachronistic afterthought, month after tiresome month.
Thursday, August 6, 2009
Wednesday, August 5, 2009
Stocks Turn Lower on Jobs Report
The middle of the week was a day spent underwater as investors weighed a benign employment report from private firm ADP and a lower ISM services number that sent jitters through the market.
While ADP reported that private employers shed 371,000 jobs in July, the ISM services index dropped unexpectedly from 47 in June to 46.4 in July. That prompted more profit-taking than usual around the 10:00 hour as the major indices slipped to their lowest levels of the session soon afterward. Losses were limited, because the prevailing mood is that the worst of the recession is now behind us, and traders are putting much more faith in the efforts of lawmakers on Capitol Hill and in the administration to keep diligently working on getting the US economy back on a positive growth track.
The ADP report foreshadows the "official" government non-farms payroll data due out on Friday prior to the opening bell. It is expected that jobs losses were less severe in July than in previous months, though unemployment continues to be a thorn in the side of the bulls. Positive growth cannot be expected if employers are still cutting payrolls, and even though unemployment is a lagging indicator, investors remain wary that the economy could take another turn for the worse.
What's almost a certainty regarding job losses and foreclosures are government deficits as far as the eye can see. With fewer people employed and/or in self-owned properties, government revenues will not keep pace with the outlays already in municipal, state and federal budgets. Most of the states face deficits for the next two fiscal years, with few exceptions. The problems facing cities of all sizes have yet to brought into serious focus.
However, government budgets and how they pay their bills are a sideshow compared to the rest of the private economy. For better or worse, Americans have been bred to spend every last dollar on goods and services whether they need them or not and the spending, especially by those on public assistance, retirement income or other such pension programs, has been keeping the economy from completely collapsing. Those who are still working have reigned in spending somewhat, while the rich are finding bargains galore as luxury goods have been slashed to fire sale prices in some cases. Cash has been for months and is now king, and will remain so until the labor and housing markets improve.
Retailers are taking it hard, along with commercial developers. There is an overhang of commercial space supply nationwide. Most medium to large cities have aging structures dotting the landscape that are now empty and will remain so until either the market complete caves in and forced bankruptcies are the norm, or the general economy improves to a point at which commercial development makes sense. One such area is currently in apartment building, which has seen growth as more and more Americans are forced out of their homes and into more affordable rental units.
It's still a dicey situation, especially since banks are seeing more foreclosures now than they did during the subprime circus. Foreclosures will continue at a high level until the banks gain some sense of market economic (not likely) or more Americans are on the street or in substandard housing. Today's home buyers believe they're getting bargains when the reality of the situation says they're still overpaying by 10 or as much as 25% in some markets.
Eventually, there will either be another major blow to the economy or things will sort themselves out as in normal recessions. This is hardly a normal recession, however, so betting the farm on improvement over the next 12-18 months is probably foolhardy. Stocks have been appreciating at an accelerated rate, but today's equities more resembles a casino than an orderly market discounting future earnings. There's been a radical downsizing across American enterprises - a trend that is notable, frightening, and seemingly unstoppable. If 2008 was remembered as the year the markets went bust and 2009 a further bottoming out with a rapid recovery, 2010 may well be defined as the year reality struck home. Expect some major bankruptcies in the retail and commercial spaces soon and a rebirth of small business and cottage industries as Americans, ever resourceful, find new ways to skin cats and not only bring home the bacon but make it right in their family rooms.
Dow 9,280.97, -39.22 (0.42%)
Nasdaq 1,993.05, -18.26 (0.91%)
S&P 500 1,002.72, -2.93 (0.29%)
NYSE Composite 6,558.19, -10.95 (0.17%)
In general terms, today's pullback was acceptable and probably healthy. Stocks have been on quite a tear for five months and some give back is expected. This by no means that the current rally has run out of steam. After being on the wrong side of the trade for some time, late-comers will eventually set up a blow-off topping pattern after which stocks will take some serious dips and dives. That's for the fall, however. For now, the rally shows no lack of momentum.
On the day, advancing issues were beaten by decliners, 3722-2727. New highs were recorded by 218 companies, as compared to the 67 new lows. The high-low indicator continues to scream "buy" even though stocks are already overpriced in many categories. But, as market participants are sure to point out, there's always someone who will buy if you're selling. The key is to not be the last guy in line, a condition which is quickly approaching. Better buying opportunities will likely avail themselves in months ahead - either later this year or in 2010.
Volume was a little better than what has been the norm, which may mean nothing at all, or that traders are getting more serious as summer winds down.
NYSE Volume 1,921,048,000
Nasdaq Volume 2,392,697,000
Commodities were mixed, but mostly higher. Oil gained 55 cents, to $71.97. Gold was down by $3.40, to $966.30, while silver, the buy of the year, gained 7 cents, to $14.76.
While ADP reported that private employers shed 371,000 jobs in July, the ISM services index dropped unexpectedly from 47 in June to 46.4 in July. That prompted more profit-taking than usual around the 10:00 hour as the major indices slipped to their lowest levels of the session soon afterward. Losses were limited, because the prevailing mood is that the worst of the recession is now behind us, and traders are putting much more faith in the efforts of lawmakers on Capitol Hill and in the administration to keep diligently working on getting the US economy back on a positive growth track.
The ADP report foreshadows the "official" government non-farms payroll data due out on Friday prior to the opening bell. It is expected that jobs losses were less severe in July than in previous months, though unemployment continues to be a thorn in the side of the bulls. Positive growth cannot be expected if employers are still cutting payrolls, and even though unemployment is a lagging indicator, investors remain wary that the economy could take another turn for the worse.
What's almost a certainty regarding job losses and foreclosures are government deficits as far as the eye can see. With fewer people employed and/or in self-owned properties, government revenues will not keep pace with the outlays already in municipal, state and federal budgets. Most of the states face deficits for the next two fiscal years, with few exceptions. The problems facing cities of all sizes have yet to brought into serious focus.
However, government budgets and how they pay their bills are a sideshow compared to the rest of the private economy. For better or worse, Americans have been bred to spend every last dollar on goods and services whether they need them or not and the spending, especially by those on public assistance, retirement income or other such pension programs, has been keeping the economy from completely collapsing. Those who are still working have reigned in spending somewhat, while the rich are finding bargains galore as luxury goods have been slashed to fire sale prices in some cases. Cash has been for months and is now king, and will remain so until the labor and housing markets improve.
Retailers are taking it hard, along with commercial developers. There is an overhang of commercial space supply nationwide. Most medium to large cities have aging structures dotting the landscape that are now empty and will remain so until either the market complete caves in and forced bankruptcies are the norm, or the general economy improves to a point at which commercial development makes sense. One such area is currently in apartment building, which has seen growth as more and more Americans are forced out of their homes and into more affordable rental units.
It's still a dicey situation, especially since banks are seeing more foreclosures now than they did during the subprime circus. Foreclosures will continue at a high level until the banks gain some sense of market economic (not likely) or more Americans are on the street or in substandard housing. Today's home buyers believe they're getting bargains when the reality of the situation says they're still overpaying by 10 or as much as 25% in some markets.
Eventually, there will either be another major blow to the economy or things will sort themselves out as in normal recessions. This is hardly a normal recession, however, so betting the farm on improvement over the next 12-18 months is probably foolhardy. Stocks have been appreciating at an accelerated rate, but today's equities more resembles a casino than an orderly market discounting future earnings. There's been a radical downsizing across American enterprises - a trend that is notable, frightening, and seemingly unstoppable. If 2008 was remembered as the year the markets went bust and 2009 a further bottoming out with a rapid recovery, 2010 may well be defined as the year reality struck home. Expect some major bankruptcies in the retail and commercial spaces soon and a rebirth of small business and cottage industries as Americans, ever resourceful, find new ways to skin cats and not only bring home the bacon but make it right in their family rooms.
Dow 9,280.97, -39.22 (0.42%)
Nasdaq 1,993.05, -18.26 (0.91%)
S&P 500 1,002.72, -2.93 (0.29%)
NYSE Composite 6,558.19, -10.95 (0.17%)
In general terms, today's pullback was acceptable and probably healthy. Stocks have been on quite a tear for five months and some give back is expected. This by no means that the current rally has run out of steam. After being on the wrong side of the trade for some time, late-comers will eventually set up a blow-off topping pattern after which stocks will take some serious dips and dives. That's for the fall, however. For now, the rally shows no lack of momentum.
On the day, advancing issues were beaten by decliners, 3722-2727. New highs were recorded by 218 companies, as compared to the 67 new lows. The high-low indicator continues to scream "buy" even though stocks are already overpriced in many categories. But, as market participants are sure to point out, there's always someone who will buy if you're selling. The key is to not be the last guy in line, a condition which is quickly approaching. Better buying opportunities will likely avail themselves in months ahead - either later this year or in 2010.
Volume was a little better than what has been the norm, which may mean nothing at all, or that traders are getting more serious as summer winds down.
NYSE Volume 1,921,048,000
Nasdaq Volume 2,392,697,000
Commodities were mixed, but mostly higher. Oil gained 55 cents, to $71.97. Gold was down by $3.40, to $966.30, while silver, the buy of the year, gained 7 cents, to $14.76.
Tuesday, August 4, 2009
Stocks Churn Out Another Gain
Stocks traded lower early, then rebounded quickly, but remained mixed throughout most of the session Tuesday following Monday's big gains. The follow-though was encouraging to the bulls, who now are becoming more confident that the nearly 2-year bear market has relented and the US economy is on a path back to growth.
There are positive signs beginning to blossom everywhere, much more so than in the Spring, when the "green shoots" mentality hit the market. Though stocks stumbled through June, July was the best in 20 years, and August is already sporting gains. How much further the rally can continue and whether or not it is actually a bull market remain on the consciouses of traders, analysts and investors worldwide.
Dow 9,320.19, +33.63 (0.36%)
NASDAQ 2,011.31, +2.70 (0.13%)
S&P 500 1,005.65, +3.02 (0.30%)
NYSE Composite 6,569.14, +3.49 (0.05%)
Among the highlights of the most recent rally has been both the advance-decline line and the major shift in new highs vs. new lows, despite the market making comparison with some very poor 2008 prices. These indicators remain very positive short term and should continue to guide trading. On the day, winners outpaced losers, 3728-2702 and new highs galloped ahead of new lows, 250-88. Volume was expectedly moderate, owing to the mid-summer time frame and general skittishness of many investors who may still be on the sidelines.
The big bet is whether or not the most severe banking crisis since the 1930s has finally been averted and it seems that could be the case. With a good deal of sleight-of-hand by the Fed, Treasury and the easing of accounting standards, the banks have survived, even if only as shells of their former selves. Banks such as Bank of America and Citigroup may be technically bankrupt, but nobody wants to hear that story, so life goes on as though they were pure as driven snow in their balance sheets.
Obviously, there are still bargains aplenty in the US markets and elsewhere around the world. The Far East, including China, Indonesia, Malaysia and parts of the East Asian peninsula may be offering the best investment opportunities on the planet, with South America coming in a strong second. These underdeveloped nations could benefit from perceived low costs for raw materials, making way for a great global infrastructure expansion. Surely , this is the case in China, and other countries are following suit.
While the rest of the world may actually outstrip the USA in terms of growth, America is still seen by many as the most prosperous and developed nation, for good reason. The US is a world leader in many markets, despite having off-shored much of its manufacturing in recent years. The upside is that aging and ancient plants built with 19th or 20th century technology should make way for more efficient building and greater technical opportunities. Its still a mixed bag of blessings hidden within the darker clouds overhanging Wall Street, but the resilience of American enterprise is legendary and must not be viewed as a failure by any means.
NYSE Volume 1,355,576,000
NASDAQ Volume 2,255,762,000
Commodities were mixed as September Light Crude dipped 16 cents to $71.42, while gold gained prodigiously, up $10.90, to $969.70. Silver followed suit with a 44 cent rise, to $14.70.
On tap for Wednesday is the ADP Employment Change for July, a key number which should move the markets. The expectation is that the economy shed only 350,000 jobs during the month. Should that be the case, it would be very positive for the market and the overall sentiment. The report is due to hit the news wires at 8:15 am.
There are positive signs beginning to blossom everywhere, much more so than in the Spring, when the "green shoots" mentality hit the market. Though stocks stumbled through June, July was the best in 20 years, and August is already sporting gains. How much further the rally can continue and whether or not it is actually a bull market remain on the consciouses of traders, analysts and investors worldwide.
Dow 9,320.19, +33.63 (0.36%)
NASDAQ 2,011.31, +2.70 (0.13%)
S&P 500 1,005.65, +3.02 (0.30%)
NYSE Composite 6,569.14, +3.49 (0.05%)
Among the highlights of the most recent rally has been both the advance-decline line and the major shift in new highs vs. new lows, despite the market making comparison with some very poor 2008 prices. These indicators remain very positive short term and should continue to guide trading. On the day, winners outpaced losers, 3728-2702 and new highs galloped ahead of new lows, 250-88. Volume was expectedly moderate, owing to the mid-summer time frame and general skittishness of many investors who may still be on the sidelines.
The big bet is whether or not the most severe banking crisis since the 1930s has finally been averted and it seems that could be the case. With a good deal of sleight-of-hand by the Fed, Treasury and the easing of accounting standards, the banks have survived, even if only as shells of their former selves. Banks such as Bank of America and Citigroup may be technically bankrupt, but nobody wants to hear that story, so life goes on as though they were pure as driven snow in their balance sheets.
Obviously, there are still bargains aplenty in the US markets and elsewhere around the world. The Far East, including China, Indonesia, Malaysia and parts of the East Asian peninsula may be offering the best investment opportunities on the planet, with South America coming in a strong second. These underdeveloped nations could benefit from perceived low costs for raw materials, making way for a great global infrastructure expansion. Surely , this is the case in China, and other countries are following suit.
While the rest of the world may actually outstrip the USA in terms of growth, America is still seen by many as the most prosperous and developed nation, for good reason. The US is a world leader in many markets, despite having off-shored much of its manufacturing in recent years. The upside is that aging and ancient plants built with 19th or 20th century technology should make way for more efficient building and greater technical opportunities. Its still a mixed bag of blessings hidden within the darker clouds overhanging Wall Street, but the resilience of American enterprise is legendary and must not be viewed as a failure by any means.
NYSE Volume 1,355,576,000
NASDAQ Volume 2,255,762,000
Commodities were mixed as September Light Crude dipped 16 cents to $71.42, while gold gained prodigiously, up $10.90, to $969.70. Silver followed suit with a 44 cent rise, to $14.70.
On tap for Wednesday is the ADP Employment Change for July, a key number which should move the markets. The expectation is that the economy shed only 350,000 jobs during the month. Should that be the case, it would be very positive for the market and the overall sentiment. The report is due to hit the news wires at 8:15 am.
Thursday, July 30, 2009
Sharp Rally Ends Softly on GDP Worries
US stock indices were up sharply early in the day on nothing in particular, though a more technical outlook might have foreseen the advance in the making after four days of sluggishness and little movement in US stocks.
The NASDAQ soared above 2000 for the first time since October, 2008, a span of ten months. The Dow and S&P reached 9-month highs during the session. Pent-up demand and an extension of the 5-month-long rally pushed stocks to their best levels of the year and had investors cheering despite contrary economic indicators and
Initial unemployment claims came in at 584,000, a touch higher than expected and a fairly sizable leap from the revised 559,000 of the prior week. Unemployment continues to be a key issue, though stocks don't seem to mind the unusually high levels of joblessness, probably a serious mistake.
In earnings news, markets were bolstered by positive developments in Avon Products (AVP), which saw profits plunge, but recruitment of sales representatives grow by 11%. Despite the poor quarter, the company actually bettered expectations and also announced layoffs of 1200 office staff. The stock trader up 2.41 (8.2%) on the news.
Other companies beating street estimates were Barrick Gold (ABX), health insurer Cigna (SI), Medifast (MED), Dow Chemical (DOW) and OfficeMax, which narrowed its quarterly loss by implementing a severe cost-cutting effort across the company.
Generally speaking, most public companies are weathering the recession better than the average consumer, though companies are narrowing losses or turning profits more from cost-cutting, labor force reductions, inventory depletion and other intra-company disciplines rather than increased sales. Most companies reporting this quarter have shown revenue declines from year-ago periods.
Those corporate results are what have many analysts baffled. With a healthy recovery nowhere in sight yet, stocks continue to gain in almost all sectors. While profits are still attainable, they have come on the heads of hourly or salaried workers or at the expense of organic growth. Profit expectations have been lowered nearly everywhere; still, the market gallops ahead as though the country were in a boom rather than at the mid-point of a major bust. There is likely to be a backlash and second leg down to price in the realities of a smaller overall economy in which companies are hardly flourishing but rather just hanging on.
Dow 9,154.46, -83.74 (0.92%)
NASDAQ 1,984.30, -16.54 (0.84%)
S&P 500 986.75, -11.60 (1.19%)
NYSE Composite 6,384.31, -103.74 (1.65%)
Late-day selling (after 3:30 pm) wiped out more than half of the gains on the major indices, however. The Dow, which had been up 175 points, finished higher by just 83. The NASDAQ drooped back below 2000 and the S&P failed to reach the magical 1000 mark. Advancers still beat decliners handily, 4784-1586. New highs skyrocketed to 267, versus just 106 new lows. A sign of the Wall Street mania could be seen in Starbucks (SBUX), which recorded a new 52-week high. Volume was improved over previous sessions, but was still not what would be seen in a serious bull market rally.
NYSE Volume 1,358,965,000
NASDAQ Volume 2,557,626,000
Commodities did an abrupt about-face in light of the positive tone on Wall Street. How much the street influences action in raw materials and other commodities is unknown, though today it seemed to be a major factor. Oil for September delivery rebounded $3.59, to $66.94. Gold spiked $7.60, to $937.30 and silver gained 23 cents, to $13.49. The sudden surge in prices may have had more to do with attitude than reality. Oil demand and gas usage is down, and unwinding upside-down positions may have influenced today's commodity action, though strong demand for a 7-year note auction by the Treasury was seen as a major positive. The debt machine continues to pump nearly non-stop, as though there is no limit to the unprecedented credit creation which is supposed to save us all.
The final numbers from Wall Street - especially considering the halving of gains in the final half-hour - were in anticipation of a major announcement tomorrow morning. At 8:30 am, the government announces preliminary second quarter GDP, the most relevant gauge of growth available, and it became obvious that there are some jangled nerves anticipating what many expect to be a very positive - though negative - number. The self-appointed "experts" say the economy shrank at the rate of 1.5% (annualized) in the three months ended June 30. That would be an enormous improvement over the average of 5.9% from the previous 6 months.
A negative growth rate ensures that the nation is still in recession, though the smaller number would indicate that conditions are improving. What that means as far as the second half of 2009 and all of 2010 are concerned is a matter of great conjecture. Nobody knows what the future holds, but most straight-thinking economists don't expect a very robust recovery. Of course, many of them have been wrong before, but tomorrow's opening bell should be a real loud clanger.
The NASDAQ soared above 2000 for the first time since October, 2008, a span of ten months. The Dow and S&P reached 9-month highs during the session. Pent-up demand and an extension of the 5-month-long rally pushed stocks to their best levels of the year and had investors cheering despite contrary economic indicators and
Initial unemployment claims came in at 584,000, a touch higher than expected and a fairly sizable leap from the revised 559,000 of the prior week. Unemployment continues to be a key issue, though stocks don't seem to mind the unusually high levels of joblessness, probably a serious mistake.
In earnings news, markets were bolstered by positive developments in Avon Products (AVP), which saw profits plunge, but recruitment of sales representatives grow by 11%. Despite the poor quarter, the company actually bettered expectations and also announced layoffs of 1200 office staff. The stock trader up 2.41 (8.2%) on the news.
Other companies beating street estimates were Barrick Gold (ABX), health insurer Cigna (SI), Medifast (MED), Dow Chemical (DOW) and OfficeMax, which narrowed its quarterly loss by implementing a severe cost-cutting effort across the company.
Generally speaking, most public companies are weathering the recession better than the average consumer, though companies are narrowing losses or turning profits more from cost-cutting, labor force reductions, inventory depletion and other intra-company disciplines rather than increased sales. Most companies reporting this quarter have shown revenue declines from year-ago periods.
Those corporate results are what have many analysts baffled. With a healthy recovery nowhere in sight yet, stocks continue to gain in almost all sectors. While profits are still attainable, they have come on the heads of hourly or salaried workers or at the expense of organic growth. Profit expectations have been lowered nearly everywhere; still, the market gallops ahead as though the country were in a boom rather than at the mid-point of a major bust. There is likely to be a backlash and second leg down to price in the realities of a smaller overall economy in which companies are hardly flourishing but rather just hanging on.
Dow 9,154.46, -83.74 (0.92%)
NASDAQ 1,984.30, -16.54 (0.84%)
S&P 500 986.75, -11.60 (1.19%)
NYSE Composite 6,384.31, -103.74 (1.65%)
Late-day selling (after 3:30 pm) wiped out more than half of the gains on the major indices, however. The Dow, which had been up 175 points, finished higher by just 83. The NASDAQ drooped back below 2000 and the S&P failed to reach the magical 1000 mark. Advancers still beat decliners handily, 4784-1586. New highs skyrocketed to 267, versus just 106 new lows. A sign of the Wall Street mania could be seen in Starbucks (SBUX), which recorded a new 52-week high. Volume was improved over previous sessions, but was still not what would be seen in a serious bull market rally.
NYSE Volume 1,358,965,000
NASDAQ Volume 2,557,626,000
Commodities did an abrupt about-face in light of the positive tone on Wall Street. How much the street influences action in raw materials and other commodities is unknown, though today it seemed to be a major factor. Oil for September delivery rebounded $3.59, to $66.94. Gold spiked $7.60, to $937.30 and silver gained 23 cents, to $13.49. The sudden surge in prices may have had more to do with attitude than reality. Oil demand and gas usage is down, and unwinding upside-down positions may have influenced today's commodity action, though strong demand for a 7-year note auction by the Treasury was seen as a major positive. The debt machine continues to pump nearly non-stop, as though there is no limit to the unprecedented credit creation which is supposed to save us all.
The final numbers from Wall Street - especially considering the halving of gains in the final half-hour - were in anticipation of a major announcement tomorrow morning. At 8:30 am, the government announces preliminary second quarter GDP, the most relevant gauge of growth available, and it became obvious that there are some jangled nerves anticipating what many expect to be a very positive - though negative - number. The self-appointed "experts" say the economy shrank at the rate of 1.5% (annualized) in the three months ended June 30. That would be an enormous improvement over the average of 5.9% from the previous 6 months.
A negative growth rate ensures that the nation is still in recession, though the smaller number would indicate that conditions are improving. What that means as far as the second half of 2009 and all of 2010 are concerned is a matter of great conjecture. Nobody knows what the future holds, but most straight-thinking economists don't expect a very robust recovery. Of course, many of them have been wrong before, but tomorrow's opening bell should be a real loud clanger.
Wednesday, July 29, 2009
Stumbling Along Wall Street
Stocks extended their prolonged stagger into a fourth consecutive session. Trading was murky, directionless and, in many cases, pointless, as the debate over whether or not the economy was improving continued amid mixed signals from corporations posting earnings and generally positive tones from economic news and data. Meanwhile, the hoodlums in congress sounded downright belligerent as Barney Frank, Chairman of the House Financial Services Committee threatened the banks with forced writedown on mortgages if the banks don't stop the flood of foreclosures themselves.
Frank must think he's running for re-election soon (even-numbered years, Barney) to make such a blustery statement as he did today.
Dow 9,070.72, -26.00 (0.29%)
NASDAQ 1,967.76, -7.75 (0.39%)
S&P 500 975.15, -4.47 (0.46%)
NYSE Composite 6,280.57, -48.10 (0.76%)
The tone was definitely more to the negative today, however, as decliners raced past advancing issues, 3909-2416. New highs continued their dominance over new lows, 138-53. Volume was sluggish again, a trend which has persisted for months.
NYSE Volume 1,258,526,000
NASDAQ Volume 2,126,488,000
While stocks were just dawling along, commodities were taking it on the chin in a big, deflationary way. September crude fell $3.38, to $63.35. Gold was off sharply for the second straight day, losing $12.00, to $929.70. Silver also slid 48 cents, back down to $13.26. In the raw materials of the commodity world, where reality has a definite price, the outlook continues to sour. Due to the worldwide slowdown in industrial output, there is a glut of everything on the market; from livestock to oil to precious metals to grain, copper and natural gas, the abundance is evident on the ground, in the ground and above the ground. The deflationary spiral the Fed and other central banks have so stridently attempted to avoid is now becoming an unmistakable fact of life. Nobody's buying. All prices will fall, and continue to fall, for at least another six to twelve months.
The absence of pricing power will continue to cause economic disruptions, especially in areas in which prices are fixed, such as taxation. Property values have plunged, but governments have been slow and/or reluctant to re-assess property in accordance with the new reality. Thus, the coming wave of foreclosures will not only include mortgages, but municipalities are facing an avalanche of tax deliquencies and, subsequently, revenue shortfalls. The dance of death for governments across the landscape is only in the third inning of a nine-inning game and the big hitters are just beginning to get a bead on the ball. Upside-down balance sheets for towns, cities and states are quickly becoming the norm and not all the money created out of thin air by the Fed will save them.
This is the catastrophe which cannot be fixed by stimulus or bailout legislation. It will take an actual reordering of priorites by governments of all size, to stop the bloat at every level and make drastic cuts in expenses, personnel, pensions and benefits. If you thought the economy was on the mend, just wait until the end of the third quarter when the facts of life become naked to the eye. Americans are wallowing in seas of red ink in both the private and public sectors. Manufacturing has completely crumbled. Cottage indutries and home businesses will sprout from coast to coast in order to bring in extra cash or merely to survive.
Stocks are only a part of the bigger picture. The government has failed miserably and still won't admit it. Our political structure has been poisoned by lobbyists and liars in high position. Our social fabric is being held together with string and safety pins. Be prepared for another dip in the economy which may come out of the blue this time, not as well telegraphed as the October surprise of 2008.
Frank must think he's running for re-election soon (even-numbered years, Barney) to make such a blustery statement as he did today.
Dow 9,070.72, -26.00 (0.29%)
NASDAQ 1,967.76, -7.75 (0.39%)
S&P 500 975.15, -4.47 (0.46%)
NYSE Composite 6,280.57, -48.10 (0.76%)
The tone was definitely more to the negative today, however, as decliners raced past advancing issues, 3909-2416. New highs continued their dominance over new lows, 138-53. Volume was sluggish again, a trend which has persisted for months.
NYSE Volume 1,258,526,000
NASDAQ Volume 2,126,488,000
While stocks were just dawling along, commodities were taking it on the chin in a big, deflationary way. September crude fell $3.38, to $63.35. Gold was off sharply for the second straight day, losing $12.00, to $929.70. Silver also slid 48 cents, back down to $13.26. In the raw materials of the commodity world, where reality has a definite price, the outlook continues to sour. Due to the worldwide slowdown in industrial output, there is a glut of everything on the market; from livestock to oil to precious metals to grain, copper and natural gas, the abundance is evident on the ground, in the ground and above the ground. The deflationary spiral the Fed and other central banks have so stridently attempted to avoid is now becoming an unmistakable fact of life. Nobody's buying. All prices will fall, and continue to fall, for at least another six to twelve months.
The absence of pricing power will continue to cause economic disruptions, especially in areas in which prices are fixed, such as taxation. Property values have plunged, but governments have been slow and/or reluctant to re-assess property in accordance with the new reality. Thus, the coming wave of foreclosures will not only include mortgages, but municipalities are facing an avalanche of tax deliquencies and, subsequently, revenue shortfalls. The dance of death for governments across the landscape is only in the third inning of a nine-inning game and the big hitters are just beginning to get a bead on the ball. Upside-down balance sheets for towns, cities and states are quickly becoming the norm and not all the money created out of thin air by the Fed will save them.
This is the catastrophe which cannot be fixed by stimulus or bailout legislation. It will take an actual reordering of priorites by governments of all size, to stop the bloat at every level and make drastic cuts in expenses, personnel, pensions and benefits. If you thought the economy was on the mend, just wait until the end of the third quarter when the facts of life become naked to the eye. Americans are wallowing in seas of red ink in both the private and public sectors. Manufacturing has completely crumbled. Cottage indutries and home businesses will sprout from coast to coast in order to bring in extra cash or merely to survive.
Stocks are only a part of the bigger picture. The government has failed miserably and still won't admit it. Our political structure has been poisoned by lobbyists and liars in high position. Our social fabric is being held together with string and safety pins. Be prepared for another dip in the economy which may come out of the blue this time, not as well telegraphed as the October surprise of 2008.
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