Stocks gave back some of the outsize gains of the past two weeks in another sign that the summer rally is at an end. Earnings reports are dwindling down, though a few key companies are still releasing figures. For the most part, however, investors are looking beyond the earnings numbers and taking closer inspection of overall economic data, like this morning's June Durable Goods report showing a 1.0% decline after a downwardly-revised 0.8% drop in May.
That report put a pall over the markets and stocks struggled throughout the session. Most of the losses came after the release of the Fed's beige book at 2:00 pm, which confirmed what many already knew: the US economy is slowing down, though not yet experiencing negative growth. With this weighing on the minds of investors, some were quick to take profits, though there still seem to be plenty of buyers keeping stocks at elevated levels.
Dow 10,497.88, -39.81 (0.38%)
NASDAQ 2,264.56, -23.69 (1.04%)
S&P 500 1,106.13, -7.71 (0.69%)
NYSE Composite 6,999.18, -45.81 (0.65%)
Declining issues held their edge over advancers for the second straight session, 4357-2048 (2:1), though new highs continued their advantage over new lows, 203-68. The divergence, not only in the high-lows vs. the A-D line, but also in the relative out-performance of the Dow over the NASDAQ, signals a good deal of confusion in the markets, and the markets generally don't appreciate confusion. Tops on the list of confusing issues is the decoupling of listed companies from the US economy. Companies have shown strong performance in their most recent earnings reports, but all of the US economic news has been on the sorry side. This is emblematic of US-based companies actually deriving major portions of their revenue offshore, particularly in Asia and Latin America, two areas which are on the opposite side of the Euro-Us debt collapse.
NASDAQ Volume 1,865,542,625
NYSE Volume 4,554,030,500
Adding to market woes was the announcement - late in the day - by California Governor Arnold Schwarzenegger that the the Golden State was now in an official "state of emergency" triggering an executive order which calls for state employees to begin mandatory 3 day per month furloughs without pay starting in August.
The issue is the state's $19 billion budget shortfall, and the legislature's unwillingness to bring spending and revenue into equilibrium. With states across the country gearing up for fall semesters of schooling and teacher unions refusing to budge on key wage and benefit issues, California has effectively fired a warning shot across the collective bows of state capitols, many of which are facing serious budget shortfalls and intransigent government worker unions.
The commodity space was unsettled as well, with oil down again, by 51 cents, to $76.99. Gold gained a paltry $2.40, to $1,160.40, while silver declined 20 cents, to $17.42.
Market inconsistency should come to a head by Friday, when the government releases its first estimate of second quarter GDP prior to the opening bell. Thursday's initial unemployment claims will also be closely watched.
Wednesday, July 28, 2010
Tuesday, July 27, 2010
Dull Summer Session May mark End of Rally
With the passing of the Tuesday session, it appears that the recent rally in stocks has pretty much run its course. More than 75% of the S&P 500 companies having already reported, there are fewer opportunities for quick scores on earnings rises and investors are now looking seriously forward to Friday's initial estimate of 2nd quarter GDP due to be released prior to the opening bell.
Now that the European credit crisis has been put down for at least a nap, the market has been able to focus on earnings for much of the past two weeks, and the results are obvious. All of the major indices have experienced significant bounces since the start of the month, with gains in the range of 7-9% overall.
In particular, the Dow is up a whopping 850 points since its interim bottom on July 2nd (9686.48), though it is still some distance from the most recent high of 11,250 in late April. While the major averages have all found comfort zones above their respective 200-day moving averages, chartists will note that criss-crossing the 50 and 200-day MAs are not uncommon circumstances, especially in periods of economic uncertainty, like the current markets conditions.
Thus, it's unsurprising that many analysts are taking a rather dim view of the currently-stalling rally, seeing it as transitory and temporary. After all, markets became severely oversold by the end of June, and perceptually, stocks were cheap, even if they remain well above traditional norms.
Projections for what the government will report 2nd quarter GDP as are all in the range of 2.3 to 3.5% annualized growth, which would be a slowdown for the second straight quarter, and therefore, not helpful in alleviating stresses over a return to recession. With just about anyone who matters already resolved on slower growth for the remainder of 2010, it's difficult to imagine stocks breaking to new highs any time soon. The rational bet is for the major averages to continue trading in the same ranges that have prevailed since last October, though risk is skewed to the downside quite prominently.
Dow 10,537.69, +12.26 (0.12%)
NASDAQ 2,288.25, -8.18 (0.36%)
S&P 500 1,113.84, -1.17 (0.10%)
NYSE Composite 7,044.99, -1.01 (0.01%)
Declining issues held sway over advancers, 3618-2812, but new highs ramped far ahead of new lows, 401-63. Volume was slim.
NASDAQ Volume 1,940,649,125
NYSE Volume 5,330,884,000
Part of the reason for Tuesday's lackluster performance can be tied to consumer confidence, which fell again in July, to 50.4, from an upwardly revised 54.3 in June. The dour outlook by consumers is keeping a lid on prices and profits.
Commodities seemed to have been struck with liquidity issues on the day. Crude oil for September delivery fell $1.48, to $77.50, but continue to be range-bound, between $70 and $80 per barrel.
Gold was zapped lower by $25.00, to $1,158.00, it's lowest price in three months. In concert, silver dropped 57 cents, to $17.62.
Companies reporting strong earnings included DuPont (DD) and Cummins (CMI), both of which beat earnings and revenue forecasts.
The prolonged slump in residential housing and employment continue to weigh on the minds of consumers and investors alike.
Now that the European credit crisis has been put down for at least a nap, the market has been able to focus on earnings for much of the past two weeks, and the results are obvious. All of the major indices have experienced significant bounces since the start of the month, with gains in the range of 7-9% overall.
In particular, the Dow is up a whopping 850 points since its interim bottom on July 2nd (9686.48), though it is still some distance from the most recent high of 11,250 in late April. While the major averages have all found comfort zones above their respective 200-day moving averages, chartists will note that criss-crossing the 50 and 200-day MAs are not uncommon circumstances, especially in periods of economic uncertainty, like the current markets conditions.
Thus, it's unsurprising that many analysts are taking a rather dim view of the currently-stalling rally, seeing it as transitory and temporary. After all, markets became severely oversold by the end of June, and perceptually, stocks were cheap, even if they remain well above traditional norms.
Projections for what the government will report 2nd quarter GDP as are all in the range of 2.3 to 3.5% annualized growth, which would be a slowdown for the second straight quarter, and therefore, not helpful in alleviating stresses over a return to recession. With just about anyone who matters already resolved on slower growth for the remainder of 2010, it's difficult to imagine stocks breaking to new highs any time soon. The rational bet is for the major averages to continue trading in the same ranges that have prevailed since last October, though risk is skewed to the downside quite prominently.
Dow 10,537.69, +12.26 (0.12%)
NASDAQ 2,288.25, -8.18 (0.36%)
S&P 500 1,113.84, -1.17 (0.10%)
NYSE Composite 7,044.99, -1.01 (0.01%)
Declining issues held sway over advancers, 3618-2812, but new highs ramped far ahead of new lows, 401-63. Volume was slim.
NASDAQ Volume 1,940,649,125
NYSE Volume 5,330,884,000
Part of the reason for Tuesday's lackluster performance can be tied to consumer confidence, which fell again in July, to 50.4, from an upwardly revised 54.3 in June. The dour outlook by consumers is keeping a lid on prices and profits.
Commodities seemed to have been struck with liquidity issues on the day. Crude oil for September delivery fell $1.48, to $77.50, but continue to be range-bound, between $70 and $80 per barrel.
Gold was zapped lower by $25.00, to $1,158.00, it's lowest price in three months. In concert, silver dropped 57 cents, to $17.62.
Companies reporting strong earnings included DuPont (DD) and Cummins (CMI), both of which beat earnings and revenue forecasts.
The prolonged slump in residential housing and employment continue to weigh on the minds of consumers and investors alike.
Friday, July 23, 2010
Euro Stress Tests a Joke and Wall St. Loves Them
Apparently, according to the central bankers of the world, and especially those in the US and Europe, banks are well enough capitalized to easily survive any kind of future monetary event.
That was the official word from Europe, where it was announced today that only seven of 91 banks in the region failed the European Union's stress tests. The other 84, for the most part, are not only well-capitalized, but strong, vibrant and growing.
After much hand-wringing and posturing over the past four months and with the goading and encouragement of not only Treasury Secretary Tim Geithner, but Fed Chairman Ben Bernanke (who, incidentally is currently on a visit to Europe), Europe followed the lead set down by its American counterparts in 2009 and conducted their own rather flimsy and opaque tests to determine how the largest banks in the region might fare under certain - supposedly bad - economic conditions.
The tests, as in America, revealed very little about banking in the Eurozone. Except for giving European leaders and banking executives a little more breathing room by taking media focus off of them, the stress tests were designed wholly to persuade the general population that all is well in the world of global finances, which begs the question, "why all the fuss in the first place?"
In the broadest, most general terms, what the conduct of the combined central banks of the nations of Europe and the US, plus the mega-banking operations scattered around those countries shows is that the entire financial calamities of the past two years were either made wholly of flimsy cloth or that the economies of many of these nations, and the USA, are in perilous conditions.
Choose whichever poison suits you best, but keeping the banking system and sovereign debt structures at status quo is probably grand for bankers - for now - and pretty much meaningless - for now - for the general populations. Later on, within months, most likely, the truth shall be exposed for all to see, that the nations and their central banks have been painted into a liquidity corner from which many cannot escape without severe austerity measures or default on scads and scads of debt.
With an entire global structure built upon fiat money with nothing to back it except a nation's good word, the eventuality of final collapse is assured, the only remaining question being a matter of timing. The politicians, bankers and associated ruling class participants will keep the charade going for as long as they can. In the meantime, in towns and cities and states across America and across Europe, the dismantling of the middle class will continue apace. Credit cannot and will not be extended to anyone with less-than perfect credit histories and sufficient collateral. Major corporations will continue to flourish at the expense of smaller rivals. Stocks will head up, and then down, and then repeat the pattern. Slowly, almost imperceptibly, the structure of governance and the prosperity of individuals will fall prey to the ravenous appetites of massive governments and business structures working hand-in-hand.
All that one can hope for under these conditions is for a continuance of the deflationary spiral which has been fought at every chance by the central bankers, though mostly in vain. Some of the largest economies in the world continue to limp along with interest rates at or near zero and credit choked off to the general public. Obfuscation and new regulations will only serve to exacerbate the situation until the populations finally give up or rise up.
In Europe, surrender is not so easily assumed. In the United States, it is almost certain, except for a very small percentage who will fly under the radar of the government, skirting the laws and rules, until they too are caught in the widening liquidity trap.
It's not a pretty picture going forward and it may take years to fully play out, but the absolute scurrilous nature of Europe's attempt to mollify the public is handwriting on the wall, writ small, but with larger implications.
As for Wall Street's role in the continuing dance of fools, stocks waited patiently on Friday, hugging the unchanged mark until after the stress test results were released. Once assured there would be no serious blow-back, the major indices took off on a tear toward and beyond their 200-day moving averages, as presaged right here on these pages in yesterday's post.
After the results were announced, traders took a few breaths, some supposedly went out onto their terraces for a smoke, and when they resumed trading, about 12:45, proceeded to take stocks higher in a hurry, pushing the Dow Jones Industrials up more than 100 points in the nest 45 minutes. The die already cast, the trades were executed.
All closed higher, and especially important, the S&P 500 finished the week above the 1100 mark, yet another sign that there's absolutely nothing to be concerned about. Your jobs are safe, your pensions in good hands, with the government and the Masters of the Universe on Wall Street continuing to monitor the health of your and your children's portfolios.
If it wasn't for all of this being so neatly wrapped up on a glorious summer Friday afternoon, one might presume that it was all preordained, completely organized right down to the final neat detail.
Dow 10,424.62, +102.32 (0.99%)
NASDAQ 2,269.47, +23.58 (1.05%)
S&P 500 1,102.66, +8.99 (0.82%)
NYSE Composite 6,965.11, +63.20 (0.92%)
Advancing issues led decliners, as expected, by a healthy margin, 4992-1425. New highs exceeded new lows, 298-80. Volume was at almost the exact same level as that of the previous two sessions; not surprising, since these days it's just the same people moving the same stocks back and forth, to and fro.
NASDAQ Volume 2,263,999,250
NYSE Volume 5,161,690,500
Commodities markets were a bit more rational, with oil closing down 22 cents, at $78.98; gold losing $7.80, to $1,187.70; and silver dipping two cents, to $18.10.
With the indices all closing above their 200-day MAs, one might assume that the bulls are off and running once again, but I purport that it is only a temporary condition, based entirely on strong earnings reports (notwithstanding everything else, a very positive sign, but wholly in contraction with economic reality) which will come to a sudden end next week. This looks every bit like a temporary summer rally, which end as quickly as they begin.
That was the official word from Europe, where it was announced today that only seven of 91 banks in the region failed the European Union's stress tests. The other 84, for the most part, are not only well-capitalized, but strong, vibrant and growing.
After much hand-wringing and posturing over the past four months and with the goading and encouragement of not only Treasury Secretary Tim Geithner, but Fed Chairman Ben Bernanke (who, incidentally is currently on a visit to Europe), Europe followed the lead set down by its American counterparts in 2009 and conducted their own rather flimsy and opaque tests to determine how the largest banks in the region might fare under certain - supposedly bad - economic conditions.
The tests, as in America, revealed very little about banking in the Eurozone. Except for giving European leaders and banking executives a little more breathing room by taking media focus off of them, the stress tests were designed wholly to persuade the general population that all is well in the world of global finances, which begs the question, "why all the fuss in the first place?"
In the broadest, most general terms, what the conduct of the combined central banks of the nations of Europe and the US, plus the mega-banking operations scattered around those countries shows is that the entire financial calamities of the past two years were either made wholly of flimsy cloth or that the economies of many of these nations, and the USA, are in perilous conditions.
Choose whichever poison suits you best, but keeping the banking system and sovereign debt structures at status quo is probably grand for bankers - for now - and pretty much meaningless - for now - for the general populations. Later on, within months, most likely, the truth shall be exposed for all to see, that the nations and their central banks have been painted into a liquidity corner from which many cannot escape without severe austerity measures or default on scads and scads of debt.
With an entire global structure built upon fiat money with nothing to back it except a nation's good word, the eventuality of final collapse is assured, the only remaining question being a matter of timing. The politicians, bankers and associated ruling class participants will keep the charade going for as long as they can. In the meantime, in towns and cities and states across America and across Europe, the dismantling of the middle class will continue apace. Credit cannot and will not be extended to anyone with less-than perfect credit histories and sufficient collateral. Major corporations will continue to flourish at the expense of smaller rivals. Stocks will head up, and then down, and then repeat the pattern. Slowly, almost imperceptibly, the structure of governance and the prosperity of individuals will fall prey to the ravenous appetites of massive governments and business structures working hand-in-hand.
All that one can hope for under these conditions is for a continuance of the deflationary spiral which has been fought at every chance by the central bankers, though mostly in vain. Some of the largest economies in the world continue to limp along with interest rates at or near zero and credit choked off to the general public. Obfuscation and new regulations will only serve to exacerbate the situation until the populations finally give up or rise up.
In Europe, surrender is not so easily assumed. In the United States, it is almost certain, except for a very small percentage who will fly under the radar of the government, skirting the laws and rules, until they too are caught in the widening liquidity trap.
It's not a pretty picture going forward and it may take years to fully play out, but the absolute scurrilous nature of Europe's attempt to mollify the public is handwriting on the wall, writ small, but with larger implications.
As for Wall Street's role in the continuing dance of fools, stocks waited patiently on Friday, hugging the unchanged mark until after the stress test results were released. Once assured there would be no serious blow-back, the major indices took off on a tear toward and beyond their 200-day moving averages, as presaged right here on these pages in yesterday's post.
After the results were announced, traders took a few breaths, some supposedly went out onto their terraces for a smoke, and when they resumed trading, about 12:45, proceeded to take stocks higher in a hurry, pushing the Dow Jones Industrials up more than 100 points in the nest 45 minutes. The die already cast, the trades were executed.
All closed higher, and especially important, the S&P 500 finished the week above the 1100 mark, yet another sign that there's absolutely nothing to be concerned about. Your jobs are safe, your pensions in good hands, with the government and the Masters of the Universe on Wall Street continuing to monitor the health of your and your children's portfolios.
If it wasn't for all of this being so neatly wrapped up on a glorious summer Friday afternoon, one might presume that it was all preordained, completely organized right down to the final neat detail.
Dow 10,424.62, +102.32 (0.99%)
NASDAQ 2,269.47, +23.58 (1.05%)
S&P 500 1,102.66, +8.99 (0.82%)
NYSE Composite 6,965.11, +63.20 (0.92%)
Advancing issues led decliners, as expected, by a healthy margin, 4992-1425. New highs exceeded new lows, 298-80. Volume was at almost the exact same level as that of the previous two sessions; not surprising, since these days it's just the same people moving the same stocks back and forth, to and fro.
NASDAQ Volume 2,263,999,250
NYSE Volume 5,161,690,500
Commodities markets were a bit more rational, with oil closing down 22 cents, at $78.98; gold losing $7.80, to $1,187.70; and silver dipping two cents, to $18.10.
With the indices all closing above their 200-day MAs, one might assume that the bulls are off and running once again, but I purport that it is only a temporary condition, based entirely on strong earnings reports (notwithstanding everything else, a very positive sign, but wholly in contraction with economic reality) which will come to a sudden end next week. This looks every bit like a temporary summer rally, which end as quickly as they begin.
Thursday, July 22, 2010
Stocks Explode to Upside on Earnings
Well, apparently whatever it was that Ben Bernanke said on Wednesday to the Senate Committee, spooking the markets into an immediate and swift pullback, was not all that important because prior to the opening bell three Dow components - 3M (MMM), AT&T (T) and Caterpillar (CAT) - released second quarter earnings above expectations and sent stocks off to a roaring start.
The enthusiasm for equities was not in the least tempered by higher initial unemployment claims, which came in at 464,000, well ahead of last week's 427,000. So long as companies were turning sizable profits, nothing was holding back investors from buying.
Even existing home sales being down 5.1% for June or the Index of Leading Indicators dipping 0.2% had no effect on the rush to buy into the good news from corporate earnings.
Dow 10,322.30, +201.77 (1.99%)
NASDAQ 2,245.89, +58.56 (2.68%)
S&P 500 1,093.67, +24.08 (2.25%)
NYSE Composite 6,901.91, +170.75 (2.54%)
Advancing issues reversed Wednesday's drubbing, leading decliners, 5498-1017, and new highs soared ahead of new lows, 278-82. On a day which held such unbridled enthusiasm, there were more new highs (46) on the NASDAQ than new highs (39), reversing a three-day counter-trend. Volume was roughly at the same level as the previous session, though for bulls, it was a positive sign.
NASDAQ Volume 2,264,130,750
NYSE Volume 5,504,649,500
Oil futures were really the big winner on the day, with the September contract rising $2.74, to $79.30, the basis for which was unknown. Gold and silver were ahead only slightly, with gold gaining $3.90, to $1,195.50, and silver up 32 cents, to $18.12.
Every sector showed positive results as earnings season finally produced some results on which traders could trust with their money.
Despite the high quality of earnings, the major indices have yet to break through their 200-day moving averages, which are providing fairly stiff resistance, though corporate earnings continue to defy economic indicators.
At some point, possibly as early as tomorrow, stocks should break out from their recent range, tossing aside the cockeyed government reports and focusing on profits and valuations, like today.
Anecdotally, valuations may be as rich as they may get. For instance, 3M, which reported earnings of $1.54 for the most recent quarter, is trading at a multiple of 16.5 times trailing earnings, fairly rich.
AT&T is trading at 11.5 times earnings, while Caterpillar sports an ultra-rich multiple of 25.75 times earnings.
Traditionally, stocks trade in a range of 12-15 times earnings. Considering the headwinds into which companies are running, the low end of that range may be more appropriate at the present. That kind of metric is keeping a lid on stocks currently.
The enthusiasm for equities was not in the least tempered by higher initial unemployment claims, which came in at 464,000, well ahead of last week's 427,000. So long as companies were turning sizable profits, nothing was holding back investors from buying.
Even existing home sales being down 5.1% for June or the Index of Leading Indicators dipping 0.2% had no effect on the rush to buy into the good news from corporate earnings.
Dow 10,322.30, +201.77 (1.99%)
NASDAQ 2,245.89, +58.56 (2.68%)
S&P 500 1,093.67, +24.08 (2.25%)
NYSE Composite 6,901.91, +170.75 (2.54%)
Advancing issues reversed Wednesday's drubbing, leading decliners, 5498-1017, and new highs soared ahead of new lows, 278-82. On a day which held such unbridled enthusiasm, there were more new highs (46) on the NASDAQ than new highs (39), reversing a three-day counter-trend. Volume was roughly at the same level as the previous session, though for bulls, it was a positive sign.
NASDAQ Volume 2,264,130,750
NYSE Volume 5,504,649,500
Oil futures were really the big winner on the day, with the September contract rising $2.74, to $79.30, the basis for which was unknown. Gold and silver were ahead only slightly, with gold gaining $3.90, to $1,195.50, and silver up 32 cents, to $18.12.
Every sector showed positive results as earnings season finally produced some results on which traders could trust with their money.
Despite the high quality of earnings, the major indices have yet to break through their 200-day moving averages, which are providing fairly stiff resistance, though corporate earnings continue to defy economic indicators.
At some point, possibly as early as tomorrow, stocks should break out from their recent range, tossing aside the cockeyed government reports and focusing on profits and valuations, like today.
Anecdotally, valuations may be as rich as they may get. For instance, 3M, which reported earnings of $1.54 for the most recent quarter, is trading at a multiple of 16.5 times trailing earnings, fairly rich.
AT&T is trading at 11.5 times earnings, while Caterpillar sports an ultra-rich multiple of 25.75 times earnings.
Traditionally, stocks trade in a range of 12-15 times earnings. Considering the headwinds into which companies are running, the low end of that range may be more appropriate at the present. That kind of metric is keeping a lid on stocks currently.
Wednesday, July 21, 2010
Our Curious Stock Markets: Bernanke Speaks, Markets Tank
So, what did Federal Reserve Chairman, Ben Bernanke, say that markets, bond traders and equity traders didn't already know?
Hardly a thing, except for this statement slipped neatly into the fourth paragraph of his prepared remarks:
In other words, deflation, not inflation, has been the overwhelming economic force since just before the market malaise of 2008.
Now, that may come to news to some, though not to regular readers of this blog, as I've been reporting and indicating - for probably than anybody wishes to recall - that deflation has been the dominant trend since markets began their decline in August, 2007. That's three years ago, so maybe Mr. Bernanke and the minions of stock traders, analysts and "economists" (what a bunch of bozos these types have proven to be!), are just catching on, and maybe they're still behind the curve.
There are good reasons to enjoy and promote deflation, especially if you are not either wealthy, a banker or otherwise dependent on rising asset values. Those reasons include, but are by no means limited to, potential for significant capital appreciation (hard money) by correctly pricing and purchasing assets through forced liquidations, general lower prices for all manner of daily use goods and services, significant arbitrage situations, lower costs for everything from business startup to attorney fees, and the list goes on and on.
As asset values fall, as they have the past two years, and as there seems to be no end in sight for the continuance of deflation as the dominant trend, it is wise to be always in a strong cash position, with as little debt as possible, and on the look out for price dislocation.
The stock market and individual stocks have been ripe ground for wide variances (volatility) in pricing value, though stocks are not generally for individuals (until the past twenty years or so) and should only be employed for income or capital growth as a small portion of one's overall portfolio. I continue to recommend raw land, preferably arable, cash, cash equivalents, tools of trade and transportation devices, with the bulk of one's allocations in cash (anywhere from 40-80%).
If you own a home, you should be doing everything in your power to own it free and clear. Despite the headlines detailing the horror of the housing market, there have been few times better than the past six months to invest in one's own home. It is an asset, in addition to providing a secure environment for oneself and one's family, that can enhance one's overall financial position and provide leverage for any manner of transaction. All it takes is a little ingenuity, some papers supporting your strong position and a little persuasion to counter-parties of any given transaction.
But the tiny sentence in Bernanke's testimony before the US Senate Committee on Banking, Housing, and Urban Affairs apparently came as somewhat of a shock to astute followers of Fed-speak. The stock market dived and bonds improved on that phrase, and the move extended through and beyond the extent of his statement and for the rest of the trading day.
The move from the start of his testimony, at 2:00 pm ET, through its conclusion and well into his question and answer period at about 3:00 pm, took the Dow from 10,250 all the way down to 10,065, a 185-point drop, erasing Tuesday's gains and putting the Dow up just 22 points from where it ended the previous week.
Dow 10,120.53 109.43 (1.07%)
NASDAQ 2,187.33 35.16 (1.58%)
S&P 500 1,069.59 13.89 (1.28%)
NYSE Compos 6,731.16 88.88 (1.30%)
As expected, decliners overwhelmed advancers, 4497-1970, though new highs remained well above new lows, 239-106, but, for the third day in a row, NASDAQ stocks showed more new lows (56) to new highs (31), a troubling trend underscoring tight credit conditions for smaller, younger, more speculative firms. Volume was at its best level of the week, another disconcerting data point for bulls to ponder, as the previous two days of gains were on lower volume. Obviously, there is a great deal of risk intolerance in the markets.
NASDAQ Volume 2,245,542,250
NYSE Volume 5,465,722,000
Commodities felt the pinch of deflation as well, with crude, after hitting a one-month high on the expiration of the August contract yesterday, slipped $1.02, to $76.56 on the first day of the September contract. It doesn't take a genius to understand what that means, though in futures trading parlance, it's known as "backwardation," a condition wherein the cash price is higher than the futures price. It's been seen in gold and silver recently, and, though not a textbook case here, one contract ending on a high and the next day's new contract selling immediately lower, constitutes the same dynamic.
Gold was up just 10 cents, to $1,191.60, with silver higher by 11 cents, at $17.80, though both traded lower following the New York print around 1:30 pm.
Earnings reports from a wide variety of companies were mostly in line, with few surprises to either the upside or down, though Morgan Stanley (MS) was particularly outstanding, especially in comparison to their chief rival, Goldman Sachs (GS). bank of America, the nation's #1 zombie bank, fell again, losing 41 cents, to $13.36 (3%). The stock has fallen 31.4% since its high of 19.47 on April 14, 2010. Not only does BofA suffer from enormous loan losses and continuing deterioration in their loan portfolio, they are not making new loans of any substantial size and will be under pressure from the newly-passed financial reform legislation - along with most other large banking institutions - for a considerable period of time, which, were I Ben Bernanke, might easily be interpreted as meaning three to four years.
Hardly a thing, except for this statement slipped neatly into the fourth paragraph of his prepared remarks:
Although overall inflation has fluctuated, partly reflecting changes in energy prices, by a number of measures underlying inflation has trended down over the past two years.
In other words, deflation, not inflation, has been the overwhelming economic force since just before the market malaise of 2008.
Now, that may come to news to some, though not to regular readers of this blog, as I've been reporting and indicating - for probably than anybody wishes to recall - that deflation has been the dominant trend since markets began their decline in August, 2007. That's three years ago, so maybe Mr. Bernanke and the minions of stock traders, analysts and "economists" (what a bunch of bozos these types have proven to be!), are just catching on, and maybe they're still behind the curve.
There are good reasons to enjoy and promote deflation, especially if you are not either wealthy, a banker or otherwise dependent on rising asset values. Those reasons include, but are by no means limited to, potential for significant capital appreciation (hard money) by correctly pricing and purchasing assets through forced liquidations, general lower prices for all manner of daily use goods and services, significant arbitrage situations, lower costs for everything from business startup to attorney fees, and the list goes on and on.
As asset values fall, as they have the past two years, and as there seems to be no end in sight for the continuance of deflation as the dominant trend, it is wise to be always in a strong cash position, with as little debt as possible, and on the look out for price dislocation.
The stock market and individual stocks have been ripe ground for wide variances (volatility) in pricing value, though stocks are not generally for individuals (until the past twenty years or so) and should only be employed for income or capital growth as a small portion of one's overall portfolio. I continue to recommend raw land, preferably arable, cash, cash equivalents, tools of trade and transportation devices, with the bulk of one's allocations in cash (anywhere from 40-80%).
If you own a home, you should be doing everything in your power to own it free and clear. Despite the headlines detailing the horror of the housing market, there have been few times better than the past six months to invest in one's own home. It is an asset, in addition to providing a secure environment for oneself and one's family, that can enhance one's overall financial position and provide leverage for any manner of transaction. All it takes is a little ingenuity, some papers supporting your strong position and a little persuasion to counter-parties of any given transaction.
But the tiny sentence in Bernanke's testimony before the US Senate Committee on Banking, Housing, and Urban Affairs apparently came as somewhat of a shock to astute followers of Fed-speak. The stock market dived and bonds improved on that phrase, and the move extended through and beyond the extent of his statement and for the rest of the trading day.
The move from the start of his testimony, at 2:00 pm ET, through its conclusion and well into his question and answer period at about 3:00 pm, took the Dow from 10,250 all the way down to 10,065, a 185-point drop, erasing Tuesday's gains and putting the Dow up just 22 points from where it ended the previous week.
Dow 10,120.53 109.43 (1.07%)
NASDAQ 2,187.33 35.16 (1.58%)
S&P 500 1,069.59 13.89 (1.28%)
NYSE Compos 6,731.16 88.88 (1.30%)
As expected, decliners overwhelmed advancers, 4497-1970, though new highs remained well above new lows, 239-106, but, for the third day in a row, NASDAQ stocks showed more new lows (56) to new highs (31), a troubling trend underscoring tight credit conditions for smaller, younger, more speculative firms. Volume was at its best level of the week, another disconcerting data point for bulls to ponder, as the previous two days of gains were on lower volume. Obviously, there is a great deal of risk intolerance in the markets.
NASDAQ Volume 2,245,542,250
NYSE Volume 5,465,722,000
Commodities felt the pinch of deflation as well, with crude, after hitting a one-month high on the expiration of the August contract yesterday, slipped $1.02, to $76.56 on the first day of the September contract. It doesn't take a genius to understand what that means, though in futures trading parlance, it's known as "backwardation," a condition wherein the cash price is higher than the futures price. It's been seen in gold and silver recently, and, though not a textbook case here, one contract ending on a high and the next day's new contract selling immediately lower, constitutes the same dynamic.
Gold was up just 10 cents, to $1,191.60, with silver higher by 11 cents, at $17.80, though both traded lower following the New York print around 1:30 pm.
Earnings reports from a wide variety of companies were mostly in line, with few surprises to either the upside or down, though Morgan Stanley (MS) was particularly outstanding, especially in comparison to their chief rival, Goldman Sachs (GS). bank of America, the nation's #1 zombie bank, fell again, losing 41 cents, to $13.36 (3%). The stock has fallen 31.4% since its high of 19.47 on April 14, 2010. Not only does BofA suffer from enormous loan losses and continuing deterioration in their loan portfolio, they are not making new loans of any substantial size and will be under pressure from the newly-passed financial reform legislation - along with most other large banking institutions - for a considerable period of time, which, were I Ben Bernanke, might easily be interpreted as meaning three to four years.
Subscribe to:
Posts (Atom)
Posts
