Crosscurrents in the market continue to blow negative economic data into the mix. Today's rash of non-encouraging news came from two sources: the Commerce Department, which reported that durable goods orders fell 2.4%, when analysts were looking for a 0.4% gain; and the National Association of Realtors, in their monthly report on new home sales, which showed a gain, from a seasonally-adjusted 446K to 449K, smaller than expectations.
These minor gyrations in key economic data have been in the mix for two days and the markets have responded with something along the lines of a 2-3% decline in the value of stocks. Of course, not all stocks - nor indices - are created equal, and Friday's close demonstrated that the trade on the day was into defensive stocks and widely held issues, as the Dow outperformed the other majors on a relative basis. The losses on the Dow, as compared to yesterday, were almost exactly the same, but the NYSE Composite fared much better. On Thursday, the Comp was down 1.47%, as compared to -0.57% today.
There was a smattering of good news, as the Michigan Consumer Sentiment Survey moved higher in September, to 73.5, from 70.2 in July. People had a right to feel better this month. Until just this week, the weather was nice (except in Georgia) and the stock market was up. Kids being back in school must have added at least half a point to the adult happiness index.
Dow 9,665.19, -42.25 (0.44%)
NASDAQ 2,090.92, -16.69 (0.79%)
S&P 500 1,044.38, -6.40 (0.61%)
NYSE Composite 6,823.51, -38.80 (0.57%)
Our simple indicators are suggesting that whatever decline is currently built into the markets, it's not going to be a large one, or, at worst, it's not going to damage all stocks and all sectors. After the big hits on Wednesday and Thursday, today's drop was moderate and much less broadly-based. Advancers were once more beaten back by decliners, 3640-2727, which was a vast improvement from Thursday's 3-1 ratio. New highs topped new lows, 213-42, roughly in line with yesterday's numbers. Volume was off significantly from the prior two days, suggesting that whatever downside risk is prevailing, it isn't much. There was no panic selling at all, though stocks did finish much closer to their lows than their highs, so until that trend reverses course, there's likely to be choppiness in the near term.
NYSE Volume 5,279,540,000
NASDAQ Volume 2,336,395,000
Commodities were muted once more, with oil up a mere 13 cents, to $66.02, close to yesterday's two-month low. Gold fell $7.30, to $991.60, while silver slipped 24 cents, to $16.06.
In total, the week was not that bad, considering the recent run in stocks, which happen to be the only place to make money these days. The 10-year Treasury was a strong performer, with yields down from 4.48% earlier in the week to 4.33 on Friday.
With September coming to an end next week, the outlook will be focused on employment - or the lack thereof - as September non-farms payroll data is likely to have a huge impact. The market will be looking for job losses of under 200,000, after the August numbers came in at -216,000. That may be somewhat of a reach and could harm stocks short term.
One caveat to all of this is that expectations for a smooth recovery from the very sharp recession may be a bit too optimistic. While the data on existing home sales and durable goods this week took a step backwards, understanding that nothing moves in exactly a straight line could prove to be a valuable piece to the economic puzzle. Like the stock market, the economy runs into bumps and grinds as well. It's a huge country, and the data may not be perfectly reliable as well, so it's a good idea to keep a broad perspective and an open mind.
Improvement will happen, but not all at once and certainly not in measured doses.
Friday, September 25, 2009
Thursday, September 24, 2009
Drop in Existing Home Sales Drops Stocks
The pins and needles upon which traders have been treading these last six months finally began to prick and tingle at the soles of their feet and the soul of investing. With stocks recovering mildly from Wednesday's selloff on news that unemployment claims had dipped - for the third straight week - the 10:00 am announcement from the National Association of Realtors that existing home sales for August had fallen 2.7% in August sent shivers through the markets, turning early gains into day-long markets.
The damage done by the one small piece of news demonstrated just how fragile this rally has become. Adding to the pressure was a stronger dollar, which helped keep stocks down, but did more damage to commodities. Overall, the damage was limited though broad, the Dow Jones Industrials outperforming the rest of the market, a sign that investors may have made a run to more quality names.
Dow 9,707.44, -41.11 (0.42%)
Nasdaq 2,107.61, -23.81 (1.12%)
S&P 500 1,050.78, -10.09 (0.95%)
NYSE Composite 6,862.31, -102.38 (1.47%)
Stocks closed lower for the second straight session, with declining issues leading advancers by a wide margin, 4899-1554, or, better than 3-1. New highs and lows both retreated, though highs remained the leader, 229-38. Volume was strong.
NYSE Volume 6,546,583,500
Nasdaq Volume 2,646,965,000
Commodity prices were affected negatively by the strengthening dollar, which, to many ordinary folks, is just fine, as the price of oil for November delivery dropped significantly, down $3.08, to $65.89, a 2-month low. Gold dipped below the magic $1000 mark, losing $15.50, to $998.90. Silver didn't do any better, dropping 62 cents to $16.30.
What's interesting to note is the interplay between the dollar, commodities and stocks, as they have been coupled together for quite some time. As the dollar has weakened, both stocks and commodities have risen, but, especially in the oil trade, some decoupling of stocks from commodities may be beginning to take place.
In reality, the two should have little to do with each other, since they are both asset classes. Wall Street may be outsmarting itself at the moment, as the long-term rally still remains in place for stocks, while commodities are arguably overpriced in this somewhat deflationary environment.
Tomorrow, traders will seek insight from durable goods orders at 8:30 am, followed by the Michigan Consumer Sentiment survey at 9:55 and new home sales at 10:00 am.
There are significant cross-currents at work, though the markets maintained their upside bias with the Dow finishing just above 4700 and the S&P finding support at 1048.
The damage done by the one small piece of news demonstrated just how fragile this rally has become. Adding to the pressure was a stronger dollar, which helped keep stocks down, but did more damage to commodities. Overall, the damage was limited though broad, the Dow Jones Industrials outperforming the rest of the market, a sign that investors may have made a run to more quality names.
Dow 9,707.44, -41.11 (0.42%)
Nasdaq 2,107.61, -23.81 (1.12%)
S&P 500 1,050.78, -10.09 (0.95%)
NYSE Composite 6,862.31, -102.38 (1.47%)
Stocks closed lower for the second straight session, with declining issues leading advancers by a wide margin, 4899-1554, or, better than 3-1. New highs and lows both retreated, though highs remained the leader, 229-38. Volume was strong.
NYSE Volume 6,546,583,500
Nasdaq Volume 2,646,965,000
Commodity prices were affected negatively by the strengthening dollar, which, to many ordinary folks, is just fine, as the price of oil for November delivery dropped significantly, down $3.08, to $65.89, a 2-month low. Gold dipped below the magic $1000 mark, losing $15.50, to $998.90. Silver didn't do any better, dropping 62 cents to $16.30.
What's interesting to note is the interplay between the dollar, commodities and stocks, as they have been coupled together for quite some time. As the dollar has weakened, both stocks and commodities have risen, but, especially in the oil trade, some decoupling of stocks from commodities may be beginning to take place.
In reality, the two should have little to do with each other, since they are both asset classes. Wall Street may be outsmarting itself at the moment, as the long-term rally still remains in place for stocks, while commodities are arguably overpriced in this somewhat deflationary environment.
Tomorrow, traders will seek insight from durable goods orders at 8:30 am, followed by the Michigan Consumer Sentiment survey at 9:55 and new home sales at 10:00 am.
There are significant cross-currents at work, though the markets maintained their upside bias with the Dow finishing just above 4700 and the S&P finding support at 1048.
Wednesday, September 23, 2009
End of Rally or Start of Something Even Better?
Stocks took a 180 degree turn after the highly-anticipated announcement by the FOMC of the Federal Reserve, first blasting higher (the Dow pushing beyond 9900), but just as suddenly reversing course, heading straight down into the close to finish with the largest losses in nearly a month.
Alarmists will say that this is the beginning of a correction, which they said in May, June and July and again at the end of August, but they will still be wrong. The reasons are simple. First, the Fed announcement was probably their rosiest and most bullish since the financial crisis of a year ago. Second, they - the Fed - hasn't stopped pumping money into markets and reiterated that they would continue that posture. Third, the Fed kept interest rates essentially at zero, right where it's been for a year, and they're surely not backing off from that. Fourth, the timing of the sell-out (as opposed to a sell-off, I'll explain below) was extremely suspect and more than likely engineered by some very large players. Those would be the usual suspects from the failed banks and brokerages at Goldman Sachs, Morgan Stanley, JP Morgan Chase and Bank of America.
This kind of unexpected turn has gotten to be expected by market pros, and they're not going to be swayed into selling, though those who bought in anticipation of the market going higher on the Fed announcement (which it did, initially), may have a while before they get back to even. This was mostly planned, well-organized selling, something like the reverse of a short squeeze, with the big money taking theirs off the top. The rally, which is now more than six months old, remains intact and stocks will recover, probably in a very short time. There simply isn't any better place to put money to work. There's also plenty of support in the Dow 9400-9600 range. This was simply profit-taking and nothing more than that since the fundamentals of the market did not change.
Dow 9,748.55, -81.32 (0.83%)
NASDAQ 2,131.42, -14.88 (0.69%)
S&P 500 1,060.87, -10.79 (1.01%)
NYSE Composite 6,964.69, -82.44 (1.17%)
Declining issues beat advancers, 4080-2388, but evidence of the rally remained in the new highs vs. new lows metric. There were 507 new highs on top of 68 new lows, a very wide margin in a trend that continues to suggest higher stock prices. Volume was solid, though much of that volume had to do with the upside achieved earlier in the day. All told, the sell-out was not impressive and unlikely to encourage those of a bearish inclination very much.
NYSE Volume 6,319,143,500
NASDAQ Volume 2,699,233,750
What may have been more significant was action in commodities and in the dollar index. Right after the Fed announcement, the dollar fell abruptly, but soon after reversed course and finished higher, just the opposite of what stocks did.
Oil was absolutely shattered on the day, finishing down $2.79, to $68.97. The metals did not align, though they were lower. Gold sold off by only $1.10, finishing at $1,014.40. Silver fell 21 cents, to $16.91.
What happens next depends completely upon market sentiment, which has been somewhat positive and isn't likely to change soon, unless Thursday's unemployment claims data - both initial and continuing - come in below expectations. The time has come for employment, even though it is a lagging indicator, to start doing something other than tread water. Ditto the real estate market. Existing home sales data is on tap for Thursday at 10:00 am.
If these numbers are poor or show only incremental improvement, stocks could take an even worse beating, though judging by the exquisite timing by the big money players, there's probably going to be a return to the rally in short order. Obviously, one day does not make a trend, and as unexpected and swift was this decline, coming out of nowhere and running a full 150+ points on the Dow in the final 90 minutes of trading, qualifies as a one off event, completely orchestrated by the crooks and swindlers who brought you 9/11, the financial collapse, the TARP and every other suspect financial event of the past 20 years.
Don't be swayed. Their own greed tells us that stocks will have to go much higher short term.
Alarmists will say that this is the beginning of a correction, which they said in May, June and July and again at the end of August, but they will still be wrong. The reasons are simple. First, the Fed announcement was probably their rosiest and most bullish since the financial crisis of a year ago. Second, they - the Fed - hasn't stopped pumping money into markets and reiterated that they would continue that posture. Third, the Fed kept interest rates essentially at zero, right where it's been for a year, and they're surely not backing off from that. Fourth, the timing of the sell-out (as opposed to a sell-off, I'll explain below) was extremely suspect and more than likely engineered by some very large players. Those would be the usual suspects from the failed banks and brokerages at Goldman Sachs, Morgan Stanley, JP Morgan Chase and Bank of America.
This kind of unexpected turn has gotten to be expected by market pros, and they're not going to be swayed into selling, though those who bought in anticipation of the market going higher on the Fed announcement (which it did, initially), may have a while before they get back to even. This was mostly planned, well-organized selling, something like the reverse of a short squeeze, with the big money taking theirs off the top. The rally, which is now more than six months old, remains intact and stocks will recover, probably in a very short time. There simply isn't any better place to put money to work. There's also plenty of support in the Dow 9400-9600 range. This was simply profit-taking and nothing more than that since the fundamentals of the market did not change.
Dow 9,748.55, -81.32 (0.83%)
NASDAQ 2,131.42, -14.88 (0.69%)
S&P 500 1,060.87, -10.79 (1.01%)
NYSE Composite 6,964.69, -82.44 (1.17%)
Declining issues beat advancers, 4080-2388, but evidence of the rally remained in the new highs vs. new lows metric. There were 507 new highs on top of 68 new lows, a very wide margin in a trend that continues to suggest higher stock prices. Volume was solid, though much of that volume had to do with the upside achieved earlier in the day. All told, the sell-out was not impressive and unlikely to encourage those of a bearish inclination very much.
NYSE Volume 6,319,143,500
NASDAQ Volume 2,699,233,750
What may have been more significant was action in commodities and in the dollar index. Right after the Fed announcement, the dollar fell abruptly, but soon after reversed course and finished higher, just the opposite of what stocks did.
Oil was absolutely shattered on the day, finishing down $2.79, to $68.97. The metals did not align, though they were lower. Gold sold off by only $1.10, finishing at $1,014.40. Silver fell 21 cents, to $16.91.
What happens next depends completely upon market sentiment, which has been somewhat positive and isn't likely to change soon, unless Thursday's unemployment claims data - both initial and continuing - come in below expectations. The time has come for employment, even though it is a lagging indicator, to start doing something other than tread water. Ditto the real estate market. Existing home sales data is on tap for Thursday at 10:00 am.
If these numbers are poor or show only incremental improvement, stocks could take an even worse beating, though judging by the exquisite timing by the big money players, there's probably going to be a return to the rally in short order. Obviously, one day does not make a trend, and as unexpected and swift was this decline, coming out of nowhere and running a full 150+ points on the Dow in the final 90 minutes of trading, qualifies as a one off event, completely orchestrated by the crooks and swindlers who brought you 9/11, the financial collapse, the TARP and every other suspect financial event of the past 20 years.
Don't be swayed. Their own greed tells us that stocks will have to go much higher short term.
Tuesday, September 22, 2009
Up and Down
Over the past two days, the markets have been practically at a standstill, with trading ensconced in a fairly tight range. After closing down 41 points on Monday, the Dow rose 51 on Tuesday, for a net gain of 10 points. This kind of range-bound gyration is probably due to a number of factors, one being that the market has been on somewhat of a tear and has cooled off for some profit taking, and also the usual waiting game prior to the Fed rate announcement (due Wednesday at 2:15 pm).
While the Fed is poised to do nothing once again, it's probable that they'll spice up the language somewhat, the accompanying press release stating that there are incipient signs of recovery in various parts of the country, though jobs and real estate prices are still acting as a drag on the economy.
Since none of that is anything new, traders will be - more and more every day - looking at stocks from a valuation standpoint, seeking companies that are well-managed, stable, and with solid cash-debt positions. There's also something of a speculative movement ongoing as well in this trader's market. With so many small firms trading at very low prices, investors have been nibbling and gnawing at stocks mostly priced under $20 per share. There are loads of them, some good, others not, but that's a matter for which markets are built.
The orderliness of the current rally has been something marvelous. Creeping upwards little by little nearly every day, this 6 1/2-month-old boom has not gotten overextended, and still appears reasonably priced considering current conditions. Any good news from the real estate world or job creation front should send it soaring off like a Roman candle.
Dow 9,829.87, +51.01 (0.52%)
NASDAQ 2,146.30, +8.26 (0.39%)
S&P 500 1,071.66, +7.00 (0.66%)
NYSE Composite 7,047.13, +78.54 (1.13%)
Advancing issues finished smartly ahead of decliners on Tuesday, 4259-2214. New highs outpaced new lows, 458-60, continuing a nearly 3-month-old trend that now appears unbreakable. Volume was moderate, tending toward high.
NYSE Volume 5,923,928,000
NASDAQ Volume 2,504,479,500
Commodities were mostly higher on a weaker US dollar. Oil rose $1.84, to $71.55, though it remains stuck in a price range between $65 and $75. Gold bounded higher by $10.60, to $1,015.50. Silver bounced back 24 cents, to $17.12.
While the Fed is poised to do nothing once again, it's probable that they'll spice up the language somewhat, the accompanying press release stating that there are incipient signs of recovery in various parts of the country, though jobs and real estate prices are still acting as a drag on the economy.
Since none of that is anything new, traders will be - more and more every day - looking at stocks from a valuation standpoint, seeking companies that are well-managed, stable, and with solid cash-debt positions. There's also something of a speculative movement ongoing as well in this trader's market. With so many small firms trading at very low prices, investors have been nibbling and gnawing at stocks mostly priced under $20 per share. There are loads of them, some good, others not, but that's a matter for which markets are built.
The orderliness of the current rally has been something marvelous. Creeping upwards little by little nearly every day, this 6 1/2-month-old boom has not gotten overextended, and still appears reasonably priced considering current conditions. Any good news from the real estate world or job creation front should send it soaring off like a Roman candle.
Dow 9,829.87, +51.01 (0.52%)
NASDAQ 2,146.30, +8.26 (0.39%)
S&P 500 1,071.66, +7.00 (0.66%)
NYSE Composite 7,047.13, +78.54 (1.13%)
Advancing issues finished smartly ahead of decliners on Tuesday, 4259-2214. New highs outpaced new lows, 458-60, continuing a nearly 3-month-old trend that now appears unbreakable. Volume was moderate, tending toward high.
NYSE Volume 5,923,928,000
NASDAQ Volume 2,504,479,500
Commodities were mostly higher on a weaker US dollar. Oil rose $1.84, to $71.55, though it remains stuck in a price range between $65 and $75. Gold bounded higher by $10.60, to $1,015.50. Silver bounced back 24 cents, to $17.12.
Friday, September 18, 2009
Tight Range, High Volume
Today was moving day.
Traders moved in and out of positions, realigning their portfolios into what they believe to be the best stocks over the near term, that time frame likely being through December and the holiday season. That is why sector rotation was so evident today, as investors shed shares in basic materials, conglomerates, transportation and energy (the 4 sectors which closed in the red) and into consumer cyclical and non-cyclical stocks. Those two sectors were the biggest movers, up 0.71% and 1.11%, respectively, and another reason why volume was high, but the range in which stocks traded was very tight.
The Dow moved a total of 63 points from top to bottom, which would normally be suggesting a sluggish market, but the overall picture was more dynamic, as volumes exceeded the prior two days.
Dow 9,820.20, +36.28 (0.37%)
Nasdaq 2,132.86, +6.11 (0.29%)
S&P 500 1,068.30, +2.81 (0.26%)
NYSE Composite 7,016.92, +14.75 (0.21%)
The lack of breadth also contributed to the smallish gains. Advancers beat decliners narrowly, 3561-2887. New highs finished ahead of new lows, but not nearly with as much room between them as on Wednesday, 360-44. Notably, the number of new lows was cut in half from most of this week's daily count, an encouraging sign.
Readers will note a major change in how NYSE volume is expressed. Instead of using simple closed volume, from this day forward, we will display consolidated volume, which includes extraneous trading platforms unrecognized by straight Big Board volume calculations.
NYSE Volume 6,744,731,000
Nasdaq Volume 3,107,309,750
There was no economic news released by any government agency, though the Bureau of Labor Statistics did report that unemployment has reached levels above the national average (9.7%) in 14 states. The hardest hit was Michigan, at 15.4%, while the best place to keep a job is in North Dakota, which reported unemployment at 4.3%. We're unsure what people actually do in North Dakota, but apparently, nearly everybody is doing it.
While the mid-section of the country is hardly suffering at all, the far West - California, Nevada and Oregon, specifically - has been hit the worst, with unemployment above 12% in each of those states. Nearly every Southern state has reached or exceeded 10%, along with Ohio and Illinois.
Those figures did not matter much to Wall Street, which is becoming more and more focused on 3rd quarter earnings reports, which will begin flowing to the market within 3 weeks. Expectations, once again, are quite high that companies will show top-line growth as opposed to profits squeezed from cost-cutting and job elimination.
That lies ahead. For now, the rally lives on.
Traders moved in and out of positions, realigning their portfolios into what they believe to be the best stocks over the near term, that time frame likely being through December and the holiday season. That is why sector rotation was so evident today, as investors shed shares in basic materials, conglomerates, transportation and energy (the 4 sectors which closed in the red) and into consumer cyclical and non-cyclical stocks. Those two sectors were the biggest movers, up 0.71% and 1.11%, respectively, and another reason why volume was high, but the range in which stocks traded was very tight.
The Dow moved a total of 63 points from top to bottom, which would normally be suggesting a sluggish market, but the overall picture was more dynamic, as volumes exceeded the prior two days.
Dow 9,820.20, +36.28 (0.37%)
Nasdaq 2,132.86, +6.11 (0.29%)
S&P 500 1,068.30, +2.81 (0.26%)
NYSE Composite 7,016.92, +14.75 (0.21%)
The lack of breadth also contributed to the smallish gains. Advancers beat decliners narrowly, 3561-2887. New highs finished ahead of new lows, but not nearly with as much room between them as on Wednesday, 360-44. Notably, the number of new lows was cut in half from most of this week's daily count, an encouraging sign.
Readers will note a major change in how NYSE volume is expressed. Instead of using simple closed volume, from this day forward, we will display consolidated volume, which includes extraneous trading platforms unrecognized by straight Big Board volume calculations.
NYSE Volume 6,744,731,000
Nasdaq Volume 3,107,309,750
There was no economic news released by any government agency, though the Bureau of Labor Statistics did report that unemployment has reached levels above the national average (9.7%) in 14 states. The hardest hit was Michigan, at 15.4%, while the best place to keep a job is in North Dakota, which reported unemployment at 4.3%. We're unsure what people actually do in North Dakota, but apparently, nearly everybody is doing it.
While the mid-section of the country is hardly suffering at all, the far West - California, Nevada and Oregon, specifically - has been hit the worst, with unemployment above 12% in each of those states. Nearly every Southern state has reached or exceeded 10%, along with Ohio and Illinois.
Those figures did not matter much to Wall Street, which is becoming more and more focused on 3rd quarter earnings reports, which will begin flowing to the market within 3 weeks. Expectations, once again, are quite high that companies will show top-line growth as opposed to profits squeezed from cost-cutting and job elimination.
That lies ahead. For now, the rally lives on.
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