Markets Respond Suddenly to Structural Deficiencies in Global Economy

In case anybody was not noticing, stocks haven't exactly been on fire through the first few sessions of 2014 (eight of them, including today), but, apparently, a solid number of investors have been taking note and today decided to take action.

Friday's non-farm payrolls report may have been the initial impetus to really kick off today's selling spree, which accelerated throughout the session with stocks ending near the lows of the day on the major indices, sending all of the major exchanges into the red for the year.

Beyond the horrifying labor situation outlined by the aforementioned December payroll report, retail holiday sales figures have been coming in at well below anybody's best guesses and many retailers are now forecasting less-than-optimistic projections for January and beyond.

A few of today's highlights from the retail field (in addition to the meltdowns already underway via Sears and JC Penny) are Express (EXPR 18.15, -0.87(4.57%)) and Lululemon (LULU 49.70, -9.90(16.61%)), bot of which lowered their guidance on Monday. Others on the retail decliners' hit list include Coach (COH 54.30, -1.78(3.17%)), Gap (GPS 38.25, -1.59(3.99%)), and Michael Kors (KORS 76.67, -3.13(3.92%)).

Multi-faceted are the reasons for poor performances in stocks, from a stalled-out labor market to continued de-leveraging by consumers to the Obamacare fiasco to rising college tuition costs, these are just a few of the market-roiling scenarios playing out in the US and global economy.

There's more to today's selling than meets the eye, however, because there are serious cracks in the facade that is the US government, the status of the dollar as the world's reserve currency and the generally-frayed fabric of the Federal Reserve. Those in the know realize that time may be running short on fiat currency, of which all of the world's currencies are concurrently backed by nothing more than people's blind willingness to accept paper money in exchange for real goods and services.

That's at the root of the world's worries, but it is gaining prominence because individuals and businesses continue to shed debt, while the Fed, the Bank of Japan and the Eu monetary masters continue in their vain attempts to create more debt, which is, after all, their lifeblood. The only entities continuing to create debt are governments, making theirs and the days of their central bankers, numbered and in decline.

Losing faith completely in a particular government, national currency or system of exchange takes time, and when it comes to global currencies, such as the US dollar, even more time, but, as the events of 2007-2009 showed with sensational alarm, when faith becomes frayed in the minds of investors and speculators, events can spiral out of control, and, while that may not be precisely what's happening at present, it sure has the allure and feel of a full-blown currency/competency/confidence crisis in the making, one which actually started five to seven years ago, depending on which aspect one assigns as the starting point.

Demographically, the planet's population is aging and retiring; the current crop of up-and-coming youths don't inspire much in terms of leadership skills and a world dependent on handouts from government programs when the government itself is the main culprit and cause of the deterioration of global society is not a model upon which any sentient, thinking being would wager to last very long.

Gloom and doom scenarios such as this have roots in reality, though the psychological paradigms of cognitive dissonance and normalcy bias keep the general population in a state of suspended stupidity, though even the dullest among us can see the writing on the wall. Acceptance of such a harsh reality is not ready-made. It takes time, fear, and eventually, lots and lots of pain.

The time is growing short, the pain increasing (Have your wages gone up lately, while your costs continue higher and government regulations gain in stupidity, complexity and lack of enforceability?) and the fear, finally making a grand appearance at Wall Street, is beginning to spread.

Best to be prepared, and keep one's head while all about are panicking, because the panic is about to go mainstream.

As for the Fed, and how they create debt-money out of thin air, this brief, four-second clip should sufficiently explain:


DOW 16,257.94, -179.11 (-1.09%)
NASDAQ 4,113.30, -61.36 (-1.47%)
S&P 1,819.20, -23.17 (-1.26%)
10-Yr Note 99.20, +1.15 (+1.17%) Yield: 2.83%
NASDAQ Volume 2.17 Bil
NYSE Volume 3.58 Bil
Combined NYSE & NASDAQ Advance - Decline: 1526-4234
Combined NYSE & NASDAQ New highs - New lows: 325-42
WTI crude oil: 91.80, -0.92
Gold: 1,251.10, +4.20
Silver: 20.38, +0.162
Corn: 434.50, +1.75

Recovery? BLS Reports Just 74,000 New Jobs in December

It's tough to wrap one's head around numbers like the BLS released prior to the opening bell Friday morning, but they reported a paltry 74,000 jobs created in December of last year, the lowest print in nearly three years and magnitudes lower than consensus estimates of 200,000.

The number was fabulously rejected by Moody's economist Mark Zandi, who, live on CNBC, said the number should be "thrown out." Oddly enough, Zandi helps create the monthly private payroll report by ADP, which reported 238,000 December jobs on Wednesday.

The markets didn't take Zandi's advice, especially the bond market, as the 10-year note ripped higher, the yield dropping to 2.88%, the lowest since mid-December. Stocks spent most of the week's final session in the red, before rallying slightly into the close. The NASDAQ and S&P finished with gains on the day, though the Dow was down once again, though only slightly.

For the week, the Dow lost 32.94 points, the S&P gained 11.00 points and the NASDAQ was ahead by 42.76 points, so, depending on one's perspective, the lack of new job creation in the US just doesn't seem important to the valuation of equities, a judgement nuanced by the fact that the labor force participation rate fell to its lowest level in 35 years, at 62.8%.

Because so many people dropped out of the work force, the unemployment rate magically dropped to 6.7%, the lowest since the onset of the recession, in October, 2008.

The numbers belie what's really happening in the real world. Jobs are just not being created with any kind of rapidity, at least not at the rate one would associate with a falling unemployment rate.

But, as the saying goes, it's "good enough for government work," which is always shabby and usually falls apart before long.

The facade promoted over the past five years by the government and the media, that we're in the midst of a recovery, just met a reality that competes with the accepted propagandized narrative.

Just a note: the huge jump in corn prices (up $20.75) was due to the January crop report, which showed corn stocks at just a shade under 14 million bushels. The rise in price was largely due to short covering. Prices are expected to stabilize near 415-435 cents per bushel over the near term.

DOW 16,437.05, -7.71 (-0.05%)
NASDAQ 4,174.66, +18.47 (+0.44%)
S&P 1,842.37, +4.24 (+0.23%)
10-Yr Note 98.86, +0.81 (+0.83%) Yield: 2.88%
NASDAQ Volume 2.01 Bil
NYSE Volume 3.31 Bil
Combined NYSE & NASDAQ Advance - Decline: 3708-1994
Combined NYSE & NASDAQ New highs - New lows: 390-23
WTI crude oil: 92.72, +1.06
Gold: 1,246.90, +17.50
Silver: 20.22, 0.54
Corn: 432.75, +20.75

Stocks Finish Flat to Lower; Alcoa, Sears Roil Markets After-Hours

2014 is not starting out the way 2013 ended. Stocks spent most of the day in the red, with only the S&P finishing with a fractional gain of 0.64 points.

Focus was on initial unemployment claims prior to the opening bell, as those seeking unemployment benefits fell 15,000 last week to a seasonally adjusted 330,000, but the numbers failed to ignite any fire under stocks. Investors are still largely on the sidelines, awaiting Friday's non-farm payroll report for December from the BLS.

Stocks languished throughout the sluggish session, though after the close a number of important earnings reports generated a good deal of fear.

Alcoa (AA), traditionally the first company to report, said per share earnings for the fourth quarter were below estimates of .06 per share, coming in at .04 after extraordinary items, including $384 million to settle allegations that one of its units bribed members of Bahrain’s royal family and officials at a state-owned company to win business in 2004. The company, outside of arcane and often absurd bookkeeping rules, experienced a massive loss.

The net loss was $2.34 billion, or $2.19 a share, compared with net income of $242 million, or 21 cents, a year earlier, New York-based Alcoa said today in a statement. Profit excluding a settlement in a bribery case and other one-time items was 4 cents a share, trailing the 6-cent average of 16 estimates compiled by Bloomberg. Sales declined to $5.59 billion from $5.9 billion.

Shares of the world's largest aluminum manufacturer were down nearly four percent in after-hours trading.

Sears Holdings (SHLD), operators of Sears and K-Mart stores, was equally disappointing, maybe moreso, when it reported same-store sales declines of 7.4% during the quarter ended January 6. Amid the depressing holiday season miss, the company projected losses of between $2.35 and $3.39 for the quarter ending Feb. 1.

Shares of Sears Holdings were down more then 14% after-hours.

If those economic stories weren't enough to turn one's stomach, New Jersey governor and leading 2016 Republican presidential candidate, Chris Chistie, proved today that he is not only an overbearing, obnoxious, obese bully, but a terrible liar and scapegoater, capable of throwing even his highest-ranking administrators under any fast-approaching bus, as well.

DOW 16,444.76, -17.98 (-0.11%)
NASDAQ 4,156.19, -9.42 (-0.23%)
S&P 1,838.13, +0.64 (+0.03%)
10-Yr Note 97.87, +0.57 (+0.59%) Yield: 2.96%
NASDAQ Volume 2.10 Bil
NYSE Volume 3.56 Bil
Combined NYSE & NASDAQ Advance - Decline: 2878-2807
Combined NYSE & NASDAQ New highs - New lows: 415-42
WTI crude oil: 92.00. -0.33
Gold: 1,229.40, +3.90
Silver: 19.68, +0.144
Corn: 412.00, -5.00

Stocks Down Again, Failing at Second 2014 Benchmark

Amid economic cross-currents, the major indices failed at the second benchmark for the year, that being the first five days of trading, which turned out to be negative and indicative of a sub-par performance for stocks throughout 2014. The first benchmark was also negative, as stocks were sharply lower on the first trading day of the new year.

After the banner year that was 2103, in which the indices were ahead by anywhere from 26-30%, a pullback is, however, more likely than not.

Putting numbers to the reality, here's the performance for the first five trading days of 2014:
Dow: -114 points
S&P: -11 points
NASDAQ: -11 points
NYSE: -79 points

While these figures aren't anything dramatic, they are negative, suggesting that investors are taking a very cautious approach to stocks even as financial data appears to point toward a strengthening of the general economy.

ADP reported that 238,000 jobs were created in December, ahead of forecasts and predictive of an equally-strong number from the BLS when they report Friday on December non-farm payrolls.

On the flip side, retail traffic for the just-ended holiday shopping season was down 14%, though sales were still ahead by 2.7%, and, just ater the bell, Macy's (M) reported same-store sales gains in the 3.6% range but announced that they would be laying off 2500 employees and closing five stores. Shares of the company were up sharply on the news in after-hours trading.

Overall, markets were down throughout most of the day, especially the Dow Jones Industrials, which suffered the most. The NASDAQ was higher through most of the session and hit the unchanged mark with just about 20 minutes left in the trading day, but returned to slightly positive territory at the close.

Tomorrow, the first earnings report will be come to the markets as Alcoa (AA), a former Dow component, reports full-year and fourth quarter results.

DOW 16,462.74, -68.20 (-0.41%)
NASDAQ 4,165.61, +12.43 (+0.30%)
S&P 1,837.49, -0.39 (-0.02%)
10-Yr Note 97.94, -0.17 (-0.18%) Yield: 2.99%
NASDAQ Volume 2.20 Bil
NYSE Volume 3.47 Bil
Combined NYSE & NASDAQ Advance - Decline: 2585-3071
Combined NYSE & NASDAQ New highs - New lows: 336-29
WTI crude oil: 92.33, -1.34
Gold: 1,225.50, -4.10
Silver: 19.54 , -0.248
Corn: 417.00, -9.00

Wall Street Gets First Rally of 2014, Right on Queue

It took a few days (four to be exact), but Wall Street had its first rally of the new year, and it was kind of a big deal.

With two-thirds of the country under the deep freeze and the data streams of economic reports and corporate earnings in a kind of limbo, a little confidence boost was exactly the tonic needed, because, after all, Wall Street would largely cease to exist without a healthy dose of confidence.

Call it any way one likes, stocks needed to rally, and they did. If this is the way efficient markets work, or, how rigged, gamed, manipulated markets operate, so be it.

All is well... until it isn't, unless it's not real, then it doesn't really matter.

DOW 16,530.94, +105.84 (+0.64%)
NASDAQ 4,153.18, +39.50 (+0.96%)
S&P 1,837.88, +11.11 (+0.61%)
10-Yr Note 98.33, +0.27 (+0.27%) Yield: 2.95%
NASDAQ Volume 2.12 Bil
NYSE Volume 3.51 Bil
Combined NYSE & NASDAQ Advance - Decline: 2876-1841
Combined NYSE & NASDAQ New highs - New lows: 304-17
WTI crude oil: 93.67, +0.24
Gold: 1,229.60, -8.40
Silver: 19.79, -0.316
Corn: 426.00, -1.75