Stocks Post Down Week With Irma, FOMC Approaching

Since topping out in late July and early August, stocks have gyrated sideways to lower, with the Dow Jones Industrial Average finishing the week with a marginal (0.06%) gain Friday, enduring a losing week for all the major indices.

The losses were not great, the NASDAQ taking the brunt of the declines, down 1.17 percent for the week, while the NYSE composite was off just a quarter of a percent.

Facing a FOMC meeting in two weeks (Sept. 19-20) and the aftermath of yet-undetermined damages from hurricane Irma in Florida, Wall Street probably won't need much cheerleading to forge upward since the potential damages from Irma have been wildly overstated and the tone from the Fed continues to be accommodative. What may be worrying will come Thursday morning, when initial unemployment claims are announced prior to the opening bell.

Last week's spike of 62,000 of the 298,000 total, was largely attributable to Hurricane Harvey, as Texans sought government assistance. Similar spikes were seen after major hurricanes Katrina in 2005 and Sandy in 2012. However, the surge may be masking a breakdown in hiring and staffing as the US economy plods its way toward the important holiday season.

Full employment, a mandate of the Federal Reserve, is as close as its going to get, with unemployment nationally being reported at under five percent, historically the level understood to be full employment. Such a level - even if, as the case may be, many of the jobs are part-time - is not sustainable over the long haul. Companies will trim when profits are threatened, as has been the case throughout multiple trips through the business cycle.

Whether the government statisticians will provide true figures of the employment condition is another matter altogether. The Labor Department is congested with assumptions and adjustments which often distort the true picture.

Unless the FOMC goes rogue at their next meeting and actually raises the federal funds rate (highly unlikely), there's little to keep stocks from making a rebound, though it's probably going to be short-lived and thinly traded. The overall trend remains slightly to the downside.

At The Close, 9/8/17:
Dow: 21,797.79, +13.01 (+0.06%)
NASDAQ: 6,360.19, -37.68 (-0.59%)
S&P 500: 2,461.43, -3.67 (-0.15%)
NYSE Composite: 11,887.98, +8.37 (+0.07%)

For the week:
Dow: -189.77 (-0.86%)
NASDAQ: -75.14 (-1.17%)
S&P 500: -15.12 (-0.61%)
NYSE: -30.13 (-0.25%)

Stocks Have Nowhere To Go, Set Up For Losing Week

As dull a session as there has been for many months, Thursday's action was muted and indecisive, with stocks trading in very tight ranges.

There's some concern over the coming effects of hurricane Irma, the disaster of the week that has captured the attention of people who are afraid of shadows and dark rooms.

With the media, with help from Florida's Governor, officials from FEMA and other officious morons panicking the entire population of the Sunshine State, the expected destruction had better be significant or stocks will spend Monday of next week making up for lost time and lost profits.

In the meantime, there's ample evidence exhaustion in the equity markets, while significant action in bonds and precious metals with gold and silver scoring large gains on the day and the 10-year note yield plummeting back to levels not seen in ten months, below 2.06%.

All of this points toward a potential bloodbath Friday and the first losing week in the past three for the main indices.

With minutes until the opening bell on Friday, futures are down significantly, with the Dow futures trending lower by some 60 points.

Keep you stops close, this could get ugly.

At The Close, 9/7/17
Dow: 21,784.78, -22.86 (-0.10%)
NASDAQ: 6,397.87, +4.55 (+0.07%)
S&P 500: 2,465.10, -0.44 (-0.02%)
NYSE Composite: 11,879.61, +6.69 (+0.06%)

Stocks Bounce, but Fail to Erase Previous Losses; Congressional Republicans in Shock

Stocks rebounded from Tuesday's drubbing, but not nearly enough to erase the damage done, a classic dead cat bounce.

News was heavy, most of it coming out of Washington, where President Donald Trump reportedly reached agreement with congressional democrats on not only a debt ceiling increase but funding for hurricane Harvey victims and at least the outline of a continuing resolution. The proposed legislative deal would fund the government through December 15, upsetting - only in Washington - Republicans, who hoped for a longer debate on all of the issues.

Obviously, Trump has determined that with friends like his fellow Republicans in congress, he doesn't need enemies, thus making compromises with Democrats. It's actually - for a fellow who's supposedly not a politician - pretty smart politics. Republicans, included Senate majority leader, Mitch McConnell and House leader, Paul Ryan, were reportedly angered over the development.

Wall Street was immediately impressed, though stocks tailed off noticeably into the close.

Trump also tamped down recent bellicosity toward North Korea, hoping that China would do more to keep leader Kim Jong-un on a short leash.

Federal Reserve vice-chairman, Stanley Fischer announced that he would retire from his position on October 13, a surprise leaving open one of the most prestigious seats in Washington and a puzzler for Fed watchers. Fischer cited personal reasons for his decision, but speculation is that the departure has more to do with health than money, but suspect that Janet Yellen will be out at the culmination of her term in February.

Hurricane Irma continued to barrel towards Florida, the Fed's beige book revealed that members thought the economy was showing signs of improvement, though the continuing bemoaning over a lack of inflation was prominent.

While stocks improved modestly, the effect was greater on fixed income and precious metals. Gold and silver halted their recent advances and bond yields rose, with the 10-year note increasing to 2.11%

Overall, nothing was settled, except that Washington might actually avoid the drama that usually surrounds debt ceiling and budget debates, which is actually quite a positive development.

Trump making deals? Who knew?

At the Close, 9/6/17:
Dow: 21,807.64, +54.33 (+0.25%)
NASDAQ: 6,393.31, +17.74 (+0.28%)
S&P 500: 2,465.54, +7.69 (+0.31%)
NYSE Composite: 11,872.92, +45.77 (+0.39%)

Bonds Don't Lie As Risk Rears Ugly Head At Stocks

Sooner or later, all good things come to an end, and it appears that the 101 month bull run in US equities is just about over.

All things considered, from global uncertainty (think North Korea, and immigration, currently) to underfunded pensions (about half of the states' public retirement funds) to the upcoming debate over the debt ceiling and nothing looks really positive about the American economy, the same one that has limped along at less than three percent annual growth for almost nine years.

Last Friday's miss on the non-farm payroll data certainly didn't help matters on Monday as once-giddy speculators were morose and confused, many seeking the safety of bonds.

While a somewhat ugly day for stocks, bonds were bid with gusto, the 10-year note getting so much action it hit its lowest yield since two days after Trump's election, crashing to 2.06%, on what turned out to be the best day for bond bulls since Brexit (June, 2016). It's fairly obvious by now that the benchmark 10-year will be yielding below two percent soon, the level it was occupying prior to the surprise presidential election of Donald J. Trump.

In an odd way, stock pickers may have an opening or two. Since bond yields are horrible, stocks, though vastly overvalued, may be worthwhile investments for those willing to take the risk. On the other hand, there may not be many stocks which are able to perform well through a prolonged recession, possible debt defaults around the world and a demographic nightmare that makes all other metrics pale by comparison.

Spoken of before in this space, the demographic dilemma cannot be understated. All of the developed nations are aging, starting with Japan and Germany, and older people simply do not spend as much or with as much frequency as younger folks. Aging populations are settled in their ways, move slowly (if at all) and are very conscious of their spending habits, many of them on fixed incomes.

That said, inflation is virtually impossible, pricing power for companies difficult if at all attainable. All that's left is financial engineering, cooking the books and keeping the creditors in the dark or off the doorstep.

Even the mighty Dow Industrials slipped again, for the ninth time in the last 20 sessions. The popular index is down more than 500 points over that span.

Precious metals also had a solid day, again, continuing the trend begun mid-August.

Stocks have crossed the rubicon.

At the Close, 9/5/17:
Dow: 21,753.31, -234.25 (-1.07%)
NASDAQ: 6,375.57, -59.76 (-0.93%)
S&P 500 2,457.85, -18.70 (-0.76%)
NYSE Composite: 11,827.15, -90.93 (-0.76%)

Was September 1st a Market Reality Check? Gold Hits One-Year High

On Friday, after it was announced that August non-farm payrolls had increased by a less-than-expected 156,000, stock futures ramped higher heading into the opening bell on Wall Street.

Stocks did indeed gain, on the twisted hope that a soft labor market would chill Fed ambitions to raise interest rates and/or begin to wind down their massive, $4 trillion balance sheet when the FOMC meets September 12 and 13.

Those were the thoughts of traders in the morning, but, when the NASDAQ fell briefly into the red mid-morning, sentiment seemed to take on a more sober tone, as the reality of a stuttering recovery over the past eight years - fueled primarily by massive infusions of freshly-created cash by central banks and historically-low interest rates - might actually be - rather than good news - bad news.

All of the major indices finished with gains, but they were hardly of the kind that one could take comfort in as the long Labor Day weekend commenced.

Rather, the afternoon session was mild, largely belonging to fixed assets, as precious metals traded briskly. Gold went into the weekend trading at a one-year high, $1320.40 the ounce, silver, while it didn't make any historic high marks, gains 16 cents, ending at $17.50, a mid-point range advantageous to speculation on both sides of the trade.

The 10-year note firmed up at a 2.15% yield and crude oil, in the aftermath of hurricane Harvey, regained its footing, trading higher in the afternoon to $47.35 per barrel.

Was this a wake-up call for equity traders and general market participants?

Doubtful. But, it is somewhat instructive to take into account that the second-longest bull market in history has been built on promises, fallacies, distortions, and the conjuring of more than $14 trillion worldwide.

Bull markets all end. And this one, 101 months old, is more likely to end sooner than later.

At the Close, 9/1/17:
Dow: 21,987.56, +39.46 (+0.18%)
NASDAQ: 6,435.33, +6.67 (+0.10%)
S&P 500: 2,476.55, +4.90 (+0.20%)
NYSE Composite: 11,918.08, +42.39 (+0.36%)

For the Week:
Dow: +173.89 (+0.80%)
NASDAQ: +169.69 (+2.71%)
S&P 500: +35.50 (+1.37%)
NYSE Composite: +106.05 (+0.90%)