As is often the case during earnings season, much of the real action happened after the closing bell. That was when tech bellwethers Google (GOOG) and IBM (IBM) announced third quarter earnings results. But first, a recap of the day's trading, which was, by most accounts, choppy and surprising at the end.
Stocks spent most of the day in a narrow range just below the break even line. Around 2:30 pm, the major indices managed to pop into the green and stayed there into the close, marking new 2009 highs for the major indices. These moves were in spite of the chorus of boos surrounding Goldman Sach's 3rd quarter earnings announcement before the bell, which was better than expectations, but not good enough to keep the stock from sliding throughout the session. Most of the interest was focused not on Goldman's stellar 3rd quarter, but on the bonuses being paid to executives.
The company practically owns the deal-making space, now that Bear Stearns and Lehman Bros. have departed, and they made boatloads of money - $3.19 billion, beating the estimates handily - but because of a Meredith Whitney downgrade on Tuesday (based on valuation - Goldman shares have nearly quadrupled since last November) and general dislike for the firm many believe runs the government, the banking business and most of the known universe. Like them or hate them, making 300% on your money in a year isn't hard to take. Sure, they pay their executives handsomely, but they bring in huge money for their shareholders, so the only people griping are those not smart enough to have gotten on the bandwagon.
The stock lost a whole 3 points and change on the day. I'm sure owners of the stock are really crying in their champagne.
Also before the bell was the usual horrid unemployment claims number. Another 514,000 Americans filed for unemployment benefits this week. These numbers cannot be taken seriously. First, unemployment benefits are so easy to come by these days that the people claiming them probably shouldn't even be counted as seriously unemployed. All you have to do is a poor job and somebody will certainly furlough you. Additionally, according to the figures, which have been over 500,000 for more than a year, there have been at least 25 million people collecting benefits in the past 12 months. That's an enormous figure, even in bad times. What matters more is how long these people stay out of work, not how many are stepping up to the collection plate.
The number of people still collecting benefits fell below 6 million, and that number has been trending lower for months, a positive sign for the economy.
Citigroup also reported before the bell and the results were mixed. The company which received the most assistance from the feds, and is partially owned by you ,me, and our neighbors across America, hasn't done a very good job of managing our money, which came as no surprise and had little influence on the general market.
Dow 10,062.94, +47.08 (0.47%)
NASDAQ 2,173.29, +1.06 (0.05%)
S&P 500 1,096.56, +4.54 (0.42%)
NYSE Composite 7,204.05. +21.67 (0.30%)
Declining issues finished slightly ahead of advancers, 3338-3081. There were 727 new highs to just 73 new lows. Volume was in the range it's been since Tuesday. There is still a ton of money on the sidelines, missing out on the rally. This stagnant money will be great for savvy traders, because when it finally does come in, it will send a strong selling signal at a supposed market top. Smart guys and gals will be able to maximize profits upon exiting. Look for an unusually high volume number to send the signal that it's time to unload.
NYSE Volume 6,184,697,500
NASDAQ Volume 2,199,385,750
Commodities were led by oil, which gained $2.40, to $77.58. The price of oil, and its derivative, gas, is approaching a level at which it can damage the economic recovery. more money being spent on fuel means less to spend on all the other things Americans enjoy. Though there's unanimity in the chorus of oil traders that the price will go higher, I'd still not engage in that trade as it can only go so far before crimping its own demand. Many would agree that it's already too high, but, since all hatred is currently focused on bankers, the oil moguls are getting a free ride. Buy some Chevron or ExxonMobil stock if you don't like the higher prices for gas. The gains will even out, and if prices do fall, your stock will only be worth a little less. It's a zero sum trade if you play it properly.
The precious metals were hit by profit taking. Gold sold off to $1,050.60, a key inflection point, down by $14.10. Silver dipped 49 cents, to $17.42.
As for Google, the company posted its largest profit and revenue ever. That about covers the state of the internet. Technology companies are extremely healthy, with squeaky clean balance sheets. Like Google, most of the larger ones have no, or very small amounts of, debt.
IBM also beat forecasts, but revenue slipped. Big Blue is still recovering from the last year in which many of its major clients suffered or went out of business. They're doing just fine, however, having hit new 52-week highs in just the past week.
Google also posted a string of new 52-week highs in recent days. The search giant is branching out into other areas, a sign that they feel supremely confident about the economy going forward.
You should too.
Thursday, October 15, 2009
Wednesday, October 14, 2009
Dow Pops 10,000
I am actually exhausted from playing today's breakout rally. I've been up since 4:00 am, so great was my anticipation of the day the Dow finally popped 10,000. Here's what you need to know:
The last time the Dow crossed and closed above 10000 was on December 11, 2003. By January 26, 2004, it had topped out at 10,702, finally peaking in October, 2007 above 14,000.
Prior to that, the Dow's first cross of 10,000 was March 26 of 1999, during the heat of the dot-com boom. After testing the level for 5 trading days, the index finally climbed above the mark on April 7. On January 16, 2000, it peaked at 11722.98.
The people telling you that Dow 10,000 is insignificant and that it has crossed over that point 26 times are misleading you, whether on purpose or through partial ignorance. Every time the Dow has pierced the 10,000 mark to the upside in the midst of a rally, it has continued higher, significantly.
Today's move was interesting in that it came with options expiration just 2 days away. This kept a lid on stocks through most of the session, frustrating all but the most savvy investors, who knew that option positions were being flipped with every uptick short of 10,000. By 3:00, the lid came off as players sat back, counted their profits and held overnight. Some of the biggest options payoffs come on the final days of trading, though recently, Wednesdays have been the most active. Nobody wants to be caught in an upside down position with no way out, so holding until the final expiration is only for the best or the worst options traders.
Noting that, Thursday and Friday may be a little light, but Monday, when new positions are being staked out, should be explosive. There are more earnings due out over the course of the next three weeks, with the next two the busiest. Knowing which stocks to play will be essential to profits.
Dow 10,015.86, +144.80 (1.47%)
NASDAQ 2,172.23, +32.34 (1.51%)
S&P 500 1,092.02, +18.83 (1.75%)
NYSE Composite 7,182.38, +150.51 (2.14%)
Today really was all about the Dow Jones Industrials, but only 25 of the 30 stocks were gainers. Home Depot (HD), Johnson & Johnson (JNJ), AT&T (T), Verizon (VZ) and Wal-Mart (WMT) were the only losers and their losses were light. There will always be laggards, but as long as there are leaders, the Dow Index is still relevant.
On the day, simple indicators expressed exactly what kind of session it was: BULLISH! Advancers clobbered declining issues, 4887-1640 (3-1). New highs were all over the place, 921 of them, the most in over two years. There were 94 new lows. Volume was average, which means that those still out of the market have not yet found the courage to get in the game. They have missed the most significant rally of a generation, but the best part is that they don't know it's not over yet. There are still plenty of success stories to be told in this rally. When the outside money comes in, it will just add fuel to the already overheated fire and probably cause a correction as profits are taken with enthusiasm. Market tops always occur when the late money or stupid money gets involved and this is no different.
NYSE Volume 6,248,702,000
NASDAQ Volume 2,383,078,250
Talk has been rampant about predictions for the end of the year. Dow 10,700 and 11,150 and S&P 1200 have been popular numbers thrown out by experienced, professional traders. Those sound like reasonable targets. All of the major indices made new 2009 and multi-month highs.
Commodities took a back seat to stocks. Oil gained $1.03, to $75.18. Gold fell 30 cents, to $1,064.70. Silver was up 7 cents, to $17.91. They were a side show, but still tradable on pullbacks.
The rally was led by a troika of grand news. Intel posted exceptional 3rd quarter numbers and even better guidance. JP Morgan Chase blew the lid off, beat the 52 cents the street was expecting by 30 cents. 82 cents per share! Then, at 8:30 am, retail sales showed improvement when the cash for clunkers was stripped out. Finally, consumer demand has emerged. Just n time for Christmas.
There are more companies reporting tomorrow, notable Goldman Sachs (GS) and Google (GOOG). They are both expected to have blockbuster results.
The importance of Dow 10,000 cannot be underestimated. everyone who works on Wall Street feels better tonight than they did this morning. All investors who are in the market are probably a little more at ease. We, after all are human, and the number is an emotional one. It just plain makes us feel good about the economy. Everyone on the planet can relate to the big, round number, especially following the events of the past year.
There are more gains ahead.
Happy trading!
The last time the Dow crossed and closed above 10000 was on December 11, 2003. By January 26, 2004, it had topped out at 10,702, finally peaking in October, 2007 above 14,000.
Prior to that, the Dow's first cross of 10,000 was March 26 of 1999, during the heat of the dot-com boom. After testing the level for 5 trading days, the index finally climbed above the mark on April 7. On January 16, 2000, it peaked at 11722.98.
The people telling you that Dow 10,000 is insignificant and that it has crossed over that point 26 times are misleading you, whether on purpose or through partial ignorance. Every time the Dow has pierced the 10,000 mark to the upside in the midst of a rally, it has continued higher, significantly.
Today's move was interesting in that it came with options expiration just 2 days away. This kept a lid on stocks through most of the session, frustrating all but the most savvy investors, who knew that option positions were being flipped with every uptick short of 10,000. By 3:00, the lid came off as players sat back, counted their profits and held overnight. Some of the biggest options payoffs come on the final days of trading, though recently, Wednesdays have been the most active. Nobody wants to be caught in an upside down position with no way out, so holding until the final expiration is only for the best or the worst options traders.
Noting that, Thursday and Friday may be a little light, but Monday, when new positions are being staked out, should be explosive. There are more earnings due out over the course of the next three weeks, with the next two the busiest. Knowing which stocks to play will be essential to profits.
Dow 10,015.86, +144.80 (1.47%)
NASDAQ 2,172.23, +32.34 (1.51%)
S&P 500 1,092.02, +18.83 (1.75%)
NYSE Composite 7,182.38, +150.51 (2.14%)
Today really was all about the Dow Jones Industrials, but only 25 of the 30 stocks were gainers. Home Depot (HD), Johnson & Johnson (JNJ), AT&T (T), Verizon (VZ) and Wal-Mart (WMT) were the only losers and their losses were light. There will always be laggards, but as long as there are leaders, the Dow Index is still relevant.
On the day, simple indicators expressed exactly what kind of session it was: BULLISH! Advancers clobbered declining issues, 4887-1640 (3-1). New highs were all over the place, 921 of them, the most in over two years. There were 94 new lows. Volume was average, which means that those still out of the market have not yet found the courage to get in the game. They have missed the most significant rally of a generation, but the best part is that they don't know it's not over yet. There are still plenty of success stories to be told in this rally. When the outside money comes in, it will just add fuel to the already overheated fire and probably cause a correction as profits are taken with enthusiasm. Market tops always occur when the late money or stupid money gets involved and this is no different.
NYSE Volume 6,248,702,000
NASDAQ Volume 2,383,078,250
Talk has been rampant about predictions for the end of the year. Dow 10,700 and 11,150 and S&P 1200 have been popular numbers thrown out by experienced, professional traders. Those sound like reasonable targets. All of the major indices made new 2009 and multi-month highs.
Commodities took a back seat to stocks. Oil gained $1.03, to $75.18. Gold fell 30 cents, to $1,064.70. Silver was up 7 cents, to $17.91. They were a side show, but still tradable on pullbacks.
The rally was led by a troika of grand news. Intel posted exceptional 3rd quarter numbers and even better guidance. JP Morgan Chase blew the lid off, beat the 52 cents the street was expecting by 30 cents. 82 cents per share! Then, at 8:30 am, retail sales showed improvement when the cash for clunkers was stripped out. Finally, consumer demand has emerged. Just n time for Christmas.
There are more companies reporting tomorrow, notable Goldman Sachs (GS) and Google (GOOG). They are both expected to have blockbuster results.
The importance of Dow 10,000 cannot be underestimated. everyone who works on Wall Street feels better tonight than they did this morning. All investors who are in the market are probably a little more at ease. We, after all are human, and the number is an emotional one. It just plain makes us feel good about the economy. Everyone on the planet can relate to the big, round number, especially following the events of the past year.
There are more gains ahead.
Happy trading!
Tuesday, October 13, 2009
Slow Day, But Intel, CSX Movers After Hours
Stocks largely marked time on Tuesday as investors awaited third quarter earnings results from Intel (INTC), the world's largest chip maker, and CSX (CSX), one of the nation's largest freight railway operators.
After something of a disappointment from Johnson & Johnson (JNJ) before the bell, stocks sold off at the open and struggled close to break even throughout the rest of the day. It was apparent that there would be no major movement in the indices until the Intel announcement.
Dow 9,871.06, -14.74 (0.15%)
NASDAQ 2,139.89, +0.75 (0.04%)
S&P 500 1,073.18, -3.01 (0.28%)
NYSE Composite 7,031.87, -19.29 (0.27%)
Decliners beat advancers, though not broadly, 2808-3571. New highs continued to outperform new lows, 312-56. Volume was expectedly moderate.
NYSE Volume 5,026,830,000
NASDAQ Volume 2,052,388,000
Most of the real action that will affect markets for the near term occurred after the closing bell, when CSX reported 3rd quarter earnings results.
Net income from continuing operations was $293 million, or 0.74 cents per share. CSX said revenue in the quarter fell 23 percent to $2.3 billion, in line with analysts' expectations. The earnings beat expectations by .03 cents per share. The stock, which was traded lower by 63 cents during the regular session, was up sharply - +1.24, to $45.52 - in after hours trading.
Just minutes after CSX reported, Intel blew away estimates in all areas, reporting 3rd quarter earnings of $1.9 billion or 33 cents per share, compared with a net profit of $2.01 billion, or 35 cents per share, in the year ago period.
Revenue also beat forecasts handily, at $9.4 billion when expectations were set at $9.06 billion. After being halted pending the release, the stock soared nearly 6% in after hours trading, gaining more than $1.00 per share, pushing the stock above 21.50, a new 52-week-high. Significantly, Intel's earnings boosted a slew of other stocks after the close, including many in the tech and computer sector. Companies like Apple (APPL), Hewlett Packard (HPQ), Google (GOOG) and Cisco (CSCO) all gained in after-hours trading.
Commodities were solid during the session, with oil up 88 cents, to $74.15; gold up to a new record high of $1,065.00 on a gain of $7.50. Silver lagged somewhat, picking up 2 cents, to $17.84.
With real news coming both from the base (CSX) and the top (Intel) of the economy, unless there's some kind of disaster between here and the opening bell on Wednesday (retail sales for September are due out at 8:30 am), stocks should soar at the open, led by technology.
After something of a disappointment from Johnson & Johnson (JNJ) before the bell, stocks sold off at the open and struggled close to break even throughout the rest of the day. It was apparent that there would be no major movement in the indices until the Intel announcement.
Dow 9,871.06, -14.74 (0.15%)
NASDAQ 2,139.89, +0.75 (0.04%)
S&P 500 1,073.18, -3.01 (0.28%)
NYSE Composite 7,031.87, -19.29 (0.27%)
Decliners beat advancers, though not broadly, 2808-3571. New highs continued to outperform new lows, 312-56. Volume was expectedly moderate.
NYSE Volume 5,026,830,000
NASDAQ Volume 2,052,388,000
Most of the real action that will affect markets for the near term occurred after the closing bell, when CSX reported 3rd quarter earnings results.
Net income from continuing operations was $293 million, or 0.74 cents per share. CSX said revenue in the quarter fell 23 percent to $2.3 billion, in line with analysts' expectations. The earnings beat expectations by .03 cents per share. The stock, which was traded lower by 63 cents during the regular session, was up sharply - +1.24, to $45.52 - in after hours trading.
Just minutes after CSX reported, Intel blew away estimates in all areas, reporting 3rd quarter earnings of $1.9 billion or 33 cents per share, compared with a net profit of $2.01 billion, or 35 cents per share, in the year ago period.
Revenue also beat forecasts handily, at $9.4 billion when expectations were set at $9.06 billion. After being halted pending the release, the stock soared nearly 6% in after hours trading, gaining more than $1.00 per share, pushing the stock above 21.50, a new 52-week-high. Significantly, Intel's earnings boosted a slew of other stocks after the close, including many in the tech and computer sector. Companies like Apple (APPL), Hewlett Packard (HPQ), Google (GOOG) and Cisco (CSCO) all gained in after-hours trading.
Commodities were solid during the session, with oil up 88 cents, to $74.15; gold up to a new record high of $1,065.00 on a gain of $7.50. Silver lagged somewhat, picking up 2 cents, to $17.84.
With real news coming both from the base (CSX) and the top (Intel) of the economy, unless there's some kind of disaster between here and the opening bell on Wednesday (retail sales for September are due out at 8:30 am), stocks should soar at the open, led by technology.
Monday, October 12, 2009
Dow, S-P, NYSE All Hit New 2009 Highs
On the day Americans celebrate the man who discovered our continent - Christopher Columbus - investors were discovering new 2009 highs on three of the four major indices. The Dow Jones Industrials, S&P 500 and NYSE Composite all closed at highs of the year, with the Dow eclipsing an intra-day high with the new mark now 9931.82, just 69 points shy of the enormously psychological 10,000 mark.
Stocks were up sharply in the opening hour, but weakened into the afternoon, and sold off sharply between 2:00 and 2:30 pm, sending the Dow and NASDAQ into negative territory. The Dow recovered to close modestly positive, but the NASDAQ, surprisingly weak on the session, finished fractionally lower. It was the only major index to close in the red. The sudden drop on the indices, though very sharp, was probably due to options expiration this week, as a major trader likely closed a large number of positions. The general market didn't seem to make much of it, as all of the indices recovered nicely with strong buying into the close.
Interestingly, the Dow Jones Transports sported solid gains on the day. The transports have been something of a laggard in recent sessions, but showed remarkable strength into the close, led by Ryder Systems (R) nearly 10% one-day move.
The act that the Transportation Index also closed at a new 2009 high is a bullish signal, inferring that rail and truck transport - the things that move goods across the nation and to the ports - are showing signs of recovery. Those issues are at the bottom of the economy, with shipping of energy - coal, natural gas, oil - and goods of all manner on the rise.
Dow 9,885.80, +20.86 (0.21%)
NASDAQ 2,139.14, -0.14 (0.01%)
S&P 500 1,076.18, +4.69 (0.44%)
NYSE Composite 7,051.16, +35.62 (0.51%)
Market internals were positive, in line with the headline numbers. Advancing issues beat decliners, 3386-3002, though there were quite a few more losers than gainers on the NASDAQ. There were 731 new highs to 67 new lows, a bullish sign. The new high-new low indicator has been the most reliable metric for market movement, though there is some fear that stocks may be getting to an overbought condition as earnings begin rolling out. Companies will have to show top-line growth this quarter in order to keep pace with their high valuations.
Volume was low due to the observance of Columbus Day.
NYSE Volume 4,169,401,250
NASDAQ Volume 1,758,818,250
Commodities were a big story on the day. Oil sipped past the $73.00 mark, gaining $1.50, to close at $73.27. Gold caught a bid higher, by $8.90, to finish at $1,057.50. Silver also gained 13 cents, to $17.82. The resumption of the rally in the precious metals seems to have been re-ignited by oil's gains.
The only notable earnings-related news was from Black & Decker, which pre-announced better-than-expected results. Market direction for Tuesday may be guided by Johnson & Johnson (JNJ), which is supposed to released 3rd quarter earnings prior to the bell. There will be some anticipation concerning Intel (INTC), which reports after the close.
Stocks were up sharply in the opening hour, but weakened into the afternoon, and sold off sharply between 2:00 and 2:30 pm, sending the Dow and NASDAQ into negative territory. The Dow recovered to close modestly positive, but the NASDAQ, surprisingly weak on the session, finished fractionally lower. It was the only major index to close in the red. The sudden drop on the indices, though very sharp, was probably due to options expiration this week, as a major trader likely closed a large number of positions. The general market didn't seem to make much of it, as all of the indices recovered nicely with strong buying into the close.
Interestingly, the Dow Jones Transports sported solid gains on the day. The transports have been something of a laggard in recent sessions, but showed remarkable strength into the close, led by Ryder Systems (R) nearly 10% one-day move.
The act that the Transportation Index also closed at a new 2009 high is a bullish signal, inferring that rail and truck transport - the things that move goods across the nation and to the ports - are showing signs of recovery. Those issues are at the bottom of the economy, with shipping of energy - coal, natural gas, oil - and goods of all manner on the rise.
Dow 9,885.80, +20.86 (0.21%)
NASDAQ 2,139.14, -0.14 (0.01%)
S&P 500 1,076.18, +4.69 (0.44%)
NYSE Composite 7,051.16, +35.62 (0.51%)
Market internals were positive, in line with the headline numbers. Advancing issues beat decliners, 3386-3002, though there were quite a few more losers than gainers on the NASDAQ. There were 731 new highs to 67 new lows, a bullish sign. The new high-new low indicator has been the most reliable metric for market movement, though there is some fear that stocks may be getting to an overbought condition as earnings begin rolling out. Companies will have to show top-line growth this quarter in order to keep pace with their high valuations.
Volume was low due to the observance of Columbus Day.
NYSE Volume 4,169,401,250
NASDAQ Volume 1,758,818,250
Commodities were a big story on the day. Oil sipped past the $73.00 mark, gaining $1.50, to close at $73.27. Gold caught a bid higher, by $8.90, to finish at $1,057.50. Silver also gained 13 cents, to $17.82. The resumption of the rally in the precious metals seems to have been re-ignited by oil's gains.
The only notable earnings-related news was from Black & Decker, which pre-announced better-than-expected results. Market direction for Tuesday may be guided by Johnson & Johnson (JNJ), which is supposed to released 3rd quarter earnings prior to the bell. There will be some anticipation concerning Intel (INTC), which reports after the close.
Friday, October 9, 2009
Blowing The Top Off
On strength in the health care and technology sectors, US equities managed to finish one of their best weeks of the year with a strongly positive session. IBM led the Dow to new 52-week and 2009 highs, while the S&P finished just .17 short of its high for the year, set back on September 22 (1071.66). The NASDAQ also closed within shouting distance of its 200 closing high, just 7 points short of 2146.30, also the close on September 22.
The major indices closed higher every day this week except for the Dow, which posted a 6-point loss on Wednesday. This sets up an interesting scenario for the first big week of earnings season. A number of highly-traded stocks report next week, including Charles Schwab (SCHW) on Monday; Intel (INTC) and Johnson & Johnson (JNJ) on Tuesday; JP Morgan Chase (JPM) on Wednesday; Citigroup (C), Cypress Semi (CY), Goldman Sachs (GS), Google (GOOG), IBM (IBM) and Nokia (NOK) on Thursday; and Bank of America (BAC) and General Electric (GE) on Friday.
Dow 9,864.94, +78.07 (0.80%)
NASDAQ 2,139.28, +15.35 (0.72%)
S&P 500 1,071.49, +6.01 (0.56%)
NYSE Composite 7,015.54, +24.87 (0.36%)
Advancing issues beat decliners, 3942-2445, though the gains were not as broadly-based as earlier in the week. New highs beat new lows, 482-45. Volume was significantly below the levels of the rest of the week, but nobody seemed to care, with stocks soaring, even on a day in which the markets decoupled from the dollar trade, which was strengthened through intervention by the Bank of Japan and some veiled comments from the Fed Chairman, friendly uncle Ben Bernanke.
NYSE Volume 4,310,388,500
NASDAQ Volume 1,900,588,625
Due to the strong dollar, moves in the commodity markets were muted, though oil managed to gain 8 cents, to $71.77. Gold kicked back from its three-day record run, losing $7.70, to $1,048.60. Silver relinquished 13 cents to close at $17.69.
Considering the conditions in the market, it was something magnificent to see the Dow soar to a new closing high, but the US economy appears to be something of a coiled spring, about to explode with growth in all directions. Companies have cut the workforce to the bone while recovering from the worst financial crisis since the Great Depression. While there are still voices of macro-economics who believe that our debt levels are too high (they are) and the banking sector too weak (probably not in comparison to the rest of the world) to promote significant expansion, companies and investors are not convinced. Most of the working population is working, though this latest recession and the accompanying stimulus may have created an even larger underclass of unproductive cretins living off the earnings of the producers.
The big fear is that unemployment stays at elevated levels for too long a period. The government, by its actions such as extending unemployment benefits and increasing welfare payments only serves to exacerbate the condition, and washington must reign in its own profligacy. Otherwise, the massive spending the feds have thrown at the problem will create an ever more severe economic crisis in which the government cannot meet the demands of the people it is sworn to serve.
It's likely a very positive development that the dollar exhibited some strength and that bonds have sold off, increasing yields. If anything, the market, especially bond yields, will telegraph the next Fed move to raise interest rates, which seems to be coming sooner rather than later, and would be a good sign of real recovery and strength.
What most economics fail to include in their calculations are the robust dynamics of the US economy and the magic of innovation, which usually serves as a spur to both economic and job growth. The government jawboning about clean and green energy is a step in the right direction, but the markets will be the ultimate arbitrageur of what works and what doesn't. New products continue to come to market, and that builds economic activity more than any feeble weak-dollar trade ever could.
The US economy appears poised to break out into a new era of prosperity and the market is forecasting that development. As trite and cliche as it may sound, those who say that it's a mistake to bet against the US economy are probably dead right.
The major indices closed higher every day this week except for the Dow, which posted a 6-point loss on Wednesday. This sets up an interesting scenario for the first big week of earnings season. A number of highly-traded stocks report next week, including Charles Schwab (SCHW) on Monday; Intel (INTC) and Johnson & Johnson (JNJ) on Tuesday; JP Morgan Chase (JPM) on Wednesday; Citigroup (C), Cypress Semi (CY), Goldman Sachs (GS), Google (GOOG), IBM (IBM) and Nokia (NOK) on Thursday; and Bank of America (BAC) and General Electric (GE) on Friday.
Dow 9,864.94, +78.07 (0.80%)
NASDAQ 2,139.28, +15.35 (0.72%)
S&P 500 1,071.49, +6.01 (0.56%)
NYSE Composite 7,015.54, +24.87 (0.36%)
Advancing issues beat decliners, 3942-2445, though the gains were not as broadly-based as earlier in the week. New highs beat new lows, 482-45. Volume was significantly below the levels of the rest of the week, but nobody seemed to care, with stocks soaring, even on a day in which the markets decoupled from the dollar trade, which was strengthened through intervention by the Bank of Japan and some veiled comments from the Fed Chairman, friendly uncle Ben Bernanke.
NYSE Volume 4,310,388,500
NASDAQ Volume 1,900,588,625
Due to the strong dollar, moves in the commodity markets were muted, though oil managed to gain 8 cents, to $71.77. Gold kicked back from its three-day record run, losing $7.70, to $1,048.60. Silver relinquished 13 cents to close at $17.69.
Considering the conditions in the market, it was something magnificent to see the Dow soar to a new closing high, but the US economy appears to be something of a coiled spring, about to explode with growth in all directions. Companies have cut the workforce to the bone while recovering from the worst financial crisis since the Great Depression. While there are still voices of macro-economics who believe that our debt levels are too high (they are) and the banking sector too weak (probably not in comparison to the rest of the world) to promote significant expansion, companies and investors are not convinced. Most of the working population is working, though this latest recession and the accompanying stimulus may have created an even larger underclass of unproductive cretins living off the earnings of the producers.
The big fear is that unemployment stays at elevated levels for too long a period. The government, by its actions such as extending unemployment benefits and increasing welfare payments only serves to exacerbate the condition, and washington must reign in its own profligacy. Otherwise, the massive spending the feds have thrown at the problem will create an ever more severe economic crisis in which the government cannot meet the demands of the people it is sworn to serve.
It's likely a very positive development that the dollar exhibited some strength and that bonds have sold off, increasing yields. If anything, the market, especially bond yields, will telegraph the next Fed move to raise interest rates, which seems to be coming sooner rather than later, and would be a good sign of real recovery and strength.
What most economics fail to include in their calculations are the robust dynamics of the US economy and the magic of innovation, which usually serves as a spur to both economic and job growth. The government jawboning about clean and green energy is a step in the right direction, but the markets will be the ultimate arbitrageur of what works and what doesn't. New products continue to come to market, and that builds economic activity more than any feeble weak-dollar trade ever could.
The US economy appears poised to break out into a new era of prosperity and the market is forecasting that development. As trite and cliche as it may sound, those who say that it's a mistake to bet against the US economy are probably dead right.
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