Stocks Drift Lower on Unemployment, Productivity Figures

It appears that the stock market may well be topped out for the short term, though the background of $85 billion in additional monthly stimulus will almost certainly help contain any declines to mere "noise" other than a true correction or change in market sentiment.

About the only thing that could alter the relentless, upward direction of stocks would be war, a series of natural disasters or an alien space invasion, and of those three, war would be the most likely. The suspected antagonists would be China vs. Japan, Israel vs. Iran or an expansion of US efforts in Northern Africa. Even in such a scenario, so intent is the Federal Reserve on its path to devaluing the currency in the name of progress or some nebulous, idealized vision of "growth at all costs," one would tend to believe their efforts at keeping stocks high and interest rates low would only redouble.

So it is that the major indices have come nearly all the way back to previous highs in the nearly five years since the epic crash of 2008-09 without the participation of many individual investors. The reasons contributing to such widespread investor shyness are manifold, highlighted by fear of high frequency trading, flash crashes, suspected manipulation, or the plain and simple conclusion that the stock market is riding on a bubble of Fed largesse which is eventually unsustainable.

It's unfortunate that so many have fled from the market in the midst of one of its most stridently bullish eras, but doubts and fears can linger for generations, and, beyond the market there is widespread distrust of other institutions which place themselves above the common man and often, the law.

While the United States, and, to a large part, Europe, struggles through this long winter of discontent, millions have made adjustments to their lifestyles, opting for more sustainable personal economies as opposed to the heavy-handed debt-as-money regime that seemed to have creaked and cracked in the '08-09 economic downturn. Many such individuals will never return to the market and among those that do, they will be cautious to a fault and ready to flee at the first signs of trouble.

Even though economists and stock-pushers continue the mantra of "recovery,' for most, the results of five years of heavy stimulus has produced perceptibly limited results, keeping the skeptics unconvinced.

Today's action was possibly (who knows for sure?) a reaction to economic data released this morning that say initial unemployment claims nearly steady at 366,000 and a dip in productivity for the fourth quarter of 2012 of two percent, pushing unit labor costs to an inflation-inducing 4.5% gain over the same period.

It is just those kinds of choppy data sets and unintended consequences that serve to amplify fears from main Street to Wall Street. the level of uncertainty about everything from price discovery to government machinations over the budgetary process continuing to put a ceiling on true progress toward a resoration of normalcy.

Dow 13,944.05, -42.47 (0.30%)
NASDAQ 3,165.13, -3.35 (0.11%)
S&P 500 1,509.39, -2.73 (0.18%)
NYSE Composite 8,892.85, 41.38 (0.46%)
NASDAQ Volume 1,916,361,875
NYSE Volume 3,865,233,750
Combined NYSE & NASDAQ Advance - Decline: 2441-3979
Combined NYSE & NASDAQ New highs - New lows: 357-26
WTI crude oil: 95.83, -0.79
Gold: 1,671.30, -7.50
Silver: 31.40, -0.474

Meandering Midweek Market

Mostly, investors were mulling over issues that developed over Monday and Tuesday, as nothing new really sufaced on Wednesday. Europe is still in an uncertain state, as is the US, but there was nothing really developing to move markets and the indices dropped popped, dropped and popped back to positive at the end of the session.

Focus will soon turn to the budget and sequester debates in the congress, though that exercise has already been well telegraphed by the players involved. More can-kicking will likely be the order of the day on both fronts, but it is likely to cause a temporary drag on markets.

Tomorrow's initial unemployment claims may cause some excitement, after ripping back up to 368,000 last week, but the biggest factor overall is still the relentless MBS buying and treasury monetizing by the Fed, at a pace of $85 billion per month, underpinning the market.

Until some change in policy occurs, the bets are all on black, the market continuing to climb, obviously a position tough to stand against.

Dow 13,986.52, +7.22(0.05%)
NASDAQ 3,168.48, -3.10 (0.10%)
S&P 500 1,512.12, +0.83(0.05%)
NYSE Composite 8,934.26, +14.12 (0.16%)
NASDAQ Volume 1,961,700,250
NYSE Volume 3,775,844,750
Combined NYSE & NASDAQ Advance - Decline: 3577-2796
Combined NYSE & NASDAQ New highs - New lows: 324-19
WTI crude oil: 96.62, -0.02
Gold: 1,678.80, +5.30
Silver: 31.88, +0.002

Europe, Ratings Agencies In Focus as Markets Zig-Zag

Editor's Note: Our regrets and apologies to readers for missing our regularly-scheduled post after the close on Monday. There were negotiations from which we could not extricate ourselves in a timely manner.

Stocks took a dive on Monday, but rebounded sharply on Turnaround Tuesday, raising the indices nicely, but not back to levels seen before Monday's decline.

In the news on Monday was Europe (remember them?), once again rearing its ugly, socialist head over stories emanating from Spain over alleged corruption in the government of Prime Minister Mariano Rajoy (no, really?), which the Spanish PM has denied. While there's little doubt that corruption exists in all levels of government worldwide, especially at the sovereign or federal level, proving such becomes a task not for the feint of heart, as there are vested interests which will defend their salaries, positions and perks like maddened pit bulls.

Italy was also in the news Monday, as fraud and conspiracy charges are being levied against the world's oldest bank, Banca Monte dei Paschi di Siena, and are slowly but surely finding their way to the top of government, eventually to land in the lap of Prime Minister Mario Monti.

National elections are slated for February 24-25, with former Premier Silvio Berlusconi, 76, gaining on front-runner Pier Luigi Bersani. Unemployment and rampant waves of criminality are among major issues in Italy.

On the US home front, the Justice Department finally found some level of damming evidence over which to bring charges against Standard & Poor's. The rating agency is alleged with fraud over their ratings of sub-prime loans in the 2004-06 period, helping bring about the 2008-09 market crash and financial panic. The government is seeking $5 billion in damages.

While the DoJ has reportedly combed through two million pages of emails and internal documents, the real reason for the agency to now bring charges is that - after four months of negotiations with the firm - it wants and needs the money that fines will bring to the federal coffers. Besides that, statues of limitations on fraud are expiring quickly, prompting action. It's a shame this is happening so late in the game and also that the banks which originated and packaged the faulty loans aren't being prosecuted as well.

There was a rush of earnings news, mostly positive, though YUM Brands (YUM) was hard hit on Tuesday even though the company beat on both the top and bottom lines. At the heart of the company's issues is KFC, and tainted chicken sold though their Chinese outlets. The government is continuing its probe of the company which guided forward flat earnings due to the issues arising from the problematic cluckers. KFC is highly profitable in China. More than 40% of YUM's profits come from China.

Dow 13,979.30, +99.22(0.71%)
NASDAQ 3,171.58, +40.41(1.29%)
S&P 500 1,511.29, +15.58(1.04%)
NYSE Composite 8,920.13, +67.31(0.76%)
NASDAQ Volume 2,150,602,500
NYSE Volume 3,859,714,750
Combined NYSE & NASDAQ Advance - Decline: 4674-1828
Combined NYSE & NASDAQ New highs - New lows: 386-22
WTI crude oil: 96.64, +0.47
Gold: 1,673.50, -2.90
Silver: 31.88, +0.159

Dow Clears 14,000; Money is Cheap, Markets on Fire

In the immortal words of The Great One, Jackie Gleason, "...and away we go!"

Stocks leapt out of the gate on a modest January non-farm payroll report, which showed the US economy created 167,000 new jobs in the month, but it was the revisions which really inspired a great deal of confidence going forward and propelled the Dow Jones Industrial Average above 14,000 for the first time since October of 2007.

While the headline number was nothing special, but hardly a disappointment, the revision to November - from from 161,000 to 247,000, and December - from 155,000 to 196,000 - were massive, the November revision of 86,000 alone worth roughly a half-month's worth of payroll gush.

The Dow flirted with the 14,000 mark repeatedly throughout the session, but finally pushed higher in the final thirty minutes of trading, leaving the benchmark average less than 150 points from its all-time high.

Other major indices responded in like manner, most up roughly in the range of one percent on the day.

Skeptics abound, many calling for a correction soon, others deriding the rally as nothing more than the natural outcome of relentless stimulation via zero interest rates and massive bond buying by the Federal Reserve. Still others point to the sluggish real economy, barely doddering along at two percent per annum.

Like it or not, the stock market is not the general economy, which, incidentally, is not faring all that badly. Bankruptcies are not at alarming levels, small business creation is beginning to find legs and consumer spending (much of it on credit and through government transfers) has been remarkably solid.

Though headwinds abound, Wall Street continues to sail forward. January was absolutely boffo - the best since 1997 - and February got off with a bang.

One final note heading into Super Bowl weekend: Fearless Rick says lay the points and go with the 49ers, a win will produce great delight to younger brothers worldwide.

Dow 14,009.79, +149.21(1.08%)
NASDAQ 3,179.10, +36.97(1.18%)
S&P 500 1,513.17, +15.06(1.01%)
NYSE Composite 8,966.79, +83.00(0.93%)
NASDAQ Volume 1,968,694,250
NYSE Volume 4,053,908,500
Combined NYSE & NASDAQ Advance - Decline: 4846-1644
Combined NYSE & NASDAQ New highs - New lows: 668-33 (remarkable!)
WTI crude oil: 97.77, +0.28
Gold: 1,670.60, +8.60
Silver: 31.96, +0.607

Red Alert: Markets Leak Lower Second Straight Session

The 0.1% decline in fourth quarter 2012 GDP appears to have been taken a bit more seriously than first expected, as stocks fell for the second consecutive session on Thursday. Adding to the dour sentiment on the US economy, initial unemployment claims spiked to 368,000 after last week's multi-year low of 330,000 was seen as initially buoyant but now looks to be more of an aberration than a harbinger of things to come.

Stocks were higher in the morning, but drifted through the day, eventually ending lower despite a furious, failed attempt to paint the tape in the final ten minutes of trading. Of the major indices, only the NASDAQ was close to the break even mark, closing down fractionally.

Chicago PMI for January was a major surprise, coming in at 55.6 on expectations of 50.0%, but even this was not enough to bolster the markets.

The real story came in terms of personal income, which sported a gain of 2.6% in December, a boon for the average consumer, a bane for business, but overall, likely a wash, as the reading was prior to government's decision to roll back the temporary cut in Social Security deductions. Wage earners are seeing less in their paychecks while oil, fuel and food are beginning to show signs of ramping up in price, a formula not apparently anticipated by by the Fed/government/business brian trust which wants to control everything from guns, to stock prices to health insurance premiums.

There's an eventuality about all of this control-orientation that reeks of collapse, anarchy and non-compliance from the general populace. If not for food stamps, rent subsidies and other socialist mechanisms polluting the formerly-free markets, the economy would have been dead and buried long ago.

As for the skimmers on Wall Street, their attempts to manage the markets lower amid weakening expectations are, for now, succeeding, though on this final day of trading in January - one of the best months ever for stocks - there was little in the way of window dressing, the usual ritual of fund managers seeking to impress clients.

With non-farm payroll data due out prior to Friday's opening bell, everything is on hold, though sentiment seems to be turning a bit more negative than usual. Estimates are for a net increase of 200,000 jobs created in December, after ADP reported a gain of 192,000 on Wednesday, counting only the private sector.

Washington's been eerily silent of late, supposedly getting down to work on immigration and possibly other pressing issues, but debate will soon liven over a budget, something congress and the president has failed to address for four years.

A big discrepancy in the Advance-Decline line - 3546-2897 - the opposite of what one would expected on a negative trading day, indicates that investors were busily unloading losers and scrambling for safety. Consumer stocks, in addition to energy, healthcare and transportation were the largest sector losers, with utilities and services the only sectors slightly positive.

Wall Street's tea leaves will tell more tomorrow, and if hiring was less than expected in December, downward pressure will remain in charge and perhaps be amplified.

Dow 13,860.58, -49.84 (0.36%)
NASDAQ 3,142.13, -0.18 (0.01%)
S&P 500 1,498.11, -3.85 (0.26%)
NYSE Composite 8,892.59, -11.73 (0.13%)
NASDAQ Volume 2,134,474,750
NYSE Volume 4,027,212,000
Combined NYSE & NASDAQ Advance - Decline: 3546-2897
Combined NYSE & NASDAQ New highs - New lows: 316-39
WTI crude oil: 97.10, -0.84
Gold: 1,663.80, -16.10
Silver: 31.42, -0.60