With stocks soaring to even higher new record highs again on Thursday, there's little doubt over the levles of irrationality and exuberance being displayed by the hoi poloi investing elite, their magic money spigot at the Fed and their marvelous algorithms which interpret all news as positive for stocks.
It is precisely in conditions such as these (the Dow Jones Industrial Average has vaulted over 29,000 with ease and is up a stunning 3,219 points since October 3rd, a 12.3% gain in just three-and-a-half months. The time period in question coincides neatly with the Federal Reserve's stoking engagement into the repo market, pumping, by some estimates, over $1.5 trillion into the hands of primary dealers and hedge funds, ramping the Fed's own balance sheet by more than $413.7 billion since the end of August.
The Fed's particular brand of irrational exuberance is at a pace reminiscent of prior bouts of QE in 2009, 2010-11, and 2012-14, even though the Fed cutely insists this is "not QE." Balderdash.
Normally, nobody gets alarmed over gigantic gains in stocks, giving their overall pleasant scent (go ahead, you know you want to sniff your currency) and beneficial purchasing power, but this severe repricing of stocks is beginning to look Weimar-like, when stocks in 1920s Weimar Germany rose by obscene percentages, but cashing in hundreds of shares could only purchase a day's worth of food due to the overarching hyperinflation of the currency.
Not to say that the same is or will be happening in the United States, though signs of runaway inflation are prevalent, but something may go wrong at some point that tears the social construct and eventually affects stocks and currency.
Consider that a confluence of events are about to take place between now and Tuesday, January 21. Equity and security markets will be closed over the weekend and on Monday, Martin Luther King Day, a national holiday. In the meantime, there's already a state of emergency declared in Richmond, Virginia with concern over the gun rights rally set up for Lobby Day on Monday.
On Tuesday, the impeachment trial of President Trump begins in the Senate.
Also on Tuesday, Peter Schweizer's new book, Profiles in Corruption drops. On the book's cover are the faces of Elizabeth Warren, Joe Biden, Bernie Sanders and others. Uh, Oh, it's already at #3 on Amazon's Best Sellers list.
Tuesday may be too late to get out of positions, so if there's some quiet pullback on Friday, it could be a tell.
At the Close, Thursday, January 16, 2020:
Dow Jones Industrial Average: 29,297.64, +267.44 (+0.92%)
NASDAQ: 9,357.13, +98.43 (+1.06%)
S&P 500: 3,316.81, +27.52 (+0.84%)
NYSE Composite: 14,141.78, +88.58 (+0.63%)
Friday, January 17, 2020
Thursday, January 16, 2020
SNAFU Market Thrives On Chaos As China Deal Signed, Trump Impeached (again)
Since it's probably naive to believe that US equity markets are anything other than "fair and open," Wednesday's solid gains - record highs all around - have more to do with internal tinkering than any outside effects. Algorithms that apparently think sending articles of impeachment against President Donal J. Trump from the House of Representatives over to the Senate (after a month-long delay) is not as important an event as the signing of Phase 1 of the US-Chaina trade accord, both of which occurred almost simultaneously.
One can wonder exactly what traders are thinking these early days of 2020, but the algos may be on the right track given that the impeachment drama has been and ought to have been discounted as bad theatre, whereas the trade deal might turn out to be a big deal for global commerce.
No matter the details, stocks continue to soar, practically every day notching new record highs, without as much as a superfluous pullback every few weeks or so. The driver of this irrationals madness has recently been the Fed's easy money via daily repo injections, with the Federal Reserve providing ready cash in exchange for treasury bills, notes, and bonds they sold to primary dealers just days prior.
It's an open secret that the Fed's balance sheet is growing by monstrous proportions again, having begun in September and continued to burgeon through the holidays and into the new year. The Fed has plans to cease such onerous operations sometime in April, though there's ample consideration that such a move might prompt a dipsy-doo on the order of the ones that accompanied rate tightening in October and again in December of 2018.
For now, the bloom is on the rose and for all intents manages to stay blushing through impeachments, royal defections, plane crashes, Middle East noise, and all other hyperbolic geopolitical events. If nothing is done to stop the SNAFU (Situation Normal, All F--ked Up) 2020 could end up being a lot like 2019, replete with outsized gains for everybody, despite chaos all around.
At the Close, Wednesday. January 15, 2020:
Dow Jones Industrial Average: 29,030.22, +90.55 (+0.31%)
NASDAQ: 9,258.70, +7.37 (+0.08%)
S&P 500: 3,289.29, +6.14 (+0.19%)
NYSE Composite: 14,053.23, +16.10 (+0.11)
One can wonder exactly what traders are thinking these early days of 2020, but the algos may be on the right track given that the impeachment drama has been and ought to have been discounted as bad theatre, whereas the trade deal might turn out to be a big deal for global commerce.
No matter the details, stocks continue to soar, practically every day notching new record highs, without as much as a superfluous pullback every few weeks or so. The driver of this irrationals madness has recently been the Fed's easy money via daily repo injections, with the Federal Reserve providing ready cash in exchange for treasury bills, notes, and bonds they sold to primary dealers just days prior.
It's an open secret that the Fed's balance sheet is growing by monstrous proportions again, having begun in September and continued to burgeon through the holidays and into the new year. The Fed has plans to cease such onerous operations sometime in April, though there's ample consideration that such a move might prompt a dipsy-doo on the order of the ones that accompanied rate tightening in October and again in December of 2018.
For now, the bloom is on the rose and for all intents manages to stay blushing through impeachments, royal defections, plane crashes, Middle East noise, and all other hyperbolic geopolitical events. If nothing is done to stop the SNAFU (Situation Normal, All F--ked Up) 2020 could end up being a lot like 2019, replete with outsized gains for everybody, despite chaos all around.
At the Close, Wednesday. January 15, 2020:
Dow Jones Industrial Average: 29,030.22, +90.55 (+0.31%)
NASDAQ: 9,258.70, +7.37 (+0.08%)
S&P 500: 3,289.29, +6.14 (+0.19%)
NYSE Composite: 14,053.23, +16.10 (+0.11)
Wednesday, January 15, 2020
Stocks Stumble After Mnuchin Trade Remarks; JPM, Citi Earnings Solid
After Treasury Secretary Steven Mnuchin remarked that tariffs on many Chinese goods would remain in place until later in the eyar and possibly beyond, only the Dow Jones Industrial Average managed to remain positive, as the major indices erased solid gains from earlier in the day, sending stocks sliding through the afternoon.
Mnuchin maintained that import tariffs would remain in place until the US and China agree on Phase 2 of their trade arrangement. His remarks came a day before the leaders of the world's two largest economies are set to sign a Phase 1 deal on Wednesday.
Washington and Beijing agreed to suspend tariffs on $160 billion in Chinese-made cellphones, laptop computers and other goods that were due to take effect on Dec. 15, and to cut in half existing tariffs on $120 billion of other goods to 7.5%. The Phase 1 deal keeps 25% tariffs on $250 billion of other Chinese goods in place. Mnuchin did not offer a timetable for when Phase 2 would be worked out, but the consensus believes such a deal would not be fully negotiated until after the November US elections.
A formal signing of Phase 1 documents is slated for 11:30 am ET, Wednesday at the White House.
Trade and tariffs continue to be the hot topic by which to move stocks and it seems likely that trend will continue through most of - if not all of - 2020, though with lesser impact. The Chinese representatives are sure to engage in some foot-dragging, hedging that President Trump may not be around for the completion of Phase 2. For its part, the administration will be busy with the politics of a presidential election, which will divert resources and attention away from trade dealings.
Those are positive developments in the larger scheme of things. The public is weary of Democrat attempts to weaken the president or impeach him. Business leaders largely view the entire political spectrum with jaded skepticism, believing that the poorly-managed impeachment proceedings initiated by the House of Representatives is a waste of time.
Right on cue, the House will debate and then vote on a resolution to advance articles of impeachment - which were passed nearly a month ago (December 18) - on Wednesday. Normally, no such vote is needed, though this impeachment process has been anything but normal. Another vote in the House gives Democrats another opportunity to bad-mouth the president while taking attention away from the signing of the trade accord. The measure is likely to sail through along party lines, with a Senate trial to begin on Tuesday of next week (January 21).
House Majority Leader, Nancy Pelosi's stalling of the process seems to have benefitted nobody except possibly President Trump. By not immediately handing over the articles of impeachment and naming managers, Pelosi comes off looking petty, conflicted, and frankly, ridiculous.
It is widely considered that President Trump will be acquitted by the Senate in short order, allowing democrat presidential candidates Elizabeth Warren, Amy Klobuchar, and Bernie Sanders to get back on the campaign trail before the Iowa caucuses the first week of February.
Until then, some market surprises could come in the form of earnings from various companies. Mega-banks JP Morgan Chase and Citigroup reported on Tuesday, with JPM showing EPS of $2.57, which smashed expectations for $1.98. Citi boosted revenues above consensus to over $18bn while EPS came at $1.90, beyond expectations for $1.83. Wells Fargo bucked the trend, reporting earnings below consensus. Share prices for JPM and Citi were up +1.17% and +1.56%, respectively, but Wells Fargo closed lower, down -5.39%.
Prior to the opening bell Wednesday morning, Bank of America said earnings for the fourth quarter were 74 cents per share, up 5.7% from the same period last year and better than the 68 cent consensus forecast.
Goldman Sachs (GS) reporting on Wednesday morning, showed quarterly earnings of $4.69 a share, trailing the $5.56 average of estimates from analysts surveyed by Refinitiv. Net income tumbled 24 percent to $1.92 billion. Those results sent stock futures tumbling further into the red.
The FOMC is scheduled to meet the last week of January. Their meeting is scheduled for the 28th and 29th.
At the Close, Tuesday, January 14, 2020:
Dow Jones Industrial Average: 28,939.67, +32.57 (+0.11%)
NASDAQ: 9,251.33, -22.60 (-0.24%)
S&P 500: 3,283.15, -4.98 (-0.15%)
NYSE Composite: 14,037.13, -5.47 (-0.04%)
Mnuchin maintained that import tariffs would remain in place until the US and China agree on Phase 2 of their trade arrangement. His remarks came a day before the leaders of the world's two largest economies are set to sign a Phase 1 deal on Wednesday.
Washington and Beijing agreed to suspend tariffs on $160 billion in Chinese-made cellphones, laptop computers and other goods that were due to take effect on Dec. 15, and to cut in half existing tariffs on $120 billion of other goods to 7.5%. The Phase 1 deal keeps 25% tariffs on $250 billion of other Chinese goods in place. Mnuchin did not offer a timetable for when Phase 2 would be worked out, but the consensus believes such a deal would not be fully negotiated until after the November US elections.
A formal signing of Phase 1 documents is slated for 11:30 am ET, Wednesday at the White House.
Trade and tariffs continue to be the hot topic by which to move stocks and it seems likely that trend will continue through most of - if not all of - 2020, though with lesser impact. The Chinese representatives are sure to engage in some foot-dragging, hedging that President Trump may not be around for the completion of Phase 2. For its part, the administration will be busy with the politics of a presidential election, which will divert resources and attention away from trade dealings.
Those are positive developments in the larger scheme of things. The public is weary of Democrat attempts to weaken the president or impeach him. Business leaders largely view the entire political spectrum with jaded skepticism, believing that the poorly-managed impeachment proceedings initiated by the House of Representatives is a waste of time.
Right on cue, the House will debate and then vote on a resolution to advance articles of impeachment - which were passed nearly a month ago (December 18) - on Wednesday. Normally, no such vote is needed, though this impeachment process has been anything but normal. Another vote in the House gives Democrats another opportunity to bad-mouth the president while taking attention away from the signing of the trade accord. The measure is likely to sail through along party lines, with a Senate trial to begin on Tuesday of next week (January 21).
House Majority Leader, Nancy Pelosi's stalling of the process seems to have benefitted nobody except possibly President Trump. By not immediately handing over the articles of impeachment and naming managers, Pelosi comes off looking petty, conflicted, and frankly, ridiculous.
It is widely considered that President Trump will be acquitted by the Senate in short order, allowing democrat presidential candidates Elizabeth Warren, Amy Klobuchar, and Bernie Sanders to get back on the campaign trail before the Iowa caucuses the first week of February.
Until then, some market surprises could come in the form of earnings from various companies. Mega-banks JP Morgan Chase and Citigroup reported on Tuesday, with JPM showing EPS of $2.57, which smashed expectations for $1.98. Citi boosted revenues above consensus to over $18bn while EPS came at $1.90, beyond expectations for $1.83. Wells Fargo bucked the trend, reporting earnings below consensus. Share prices for JPM and Citi were up +1.17% and +1.56%, respectively, but Wells Fargo closed lower, down -5.39%.
Prior to the opening bell Wednesday morning, Bank of America said earnings for the fourth quarter were 74 cents per share, up 5.7% from the same period last year and better than the 68 cent consensus forecast.
Goldman Sachs (GS) reporting on Wednesday morning, showed quarterly earnings of $4.69 a share, trailing the $5.56 average of estimates from analysts surveyed by Refinitiv. Net income tumbled 24 percent to $1.92 billion. Those results sent stock futures tumbling further into the red.
The FOMC is scheduled to meet the last week of January. Their meeting is scheduled for the 28th and 29th.
At the Close, Tuesday, January 14, 2020:
Dow Jones Industrial Average: 28,939.67, +32.57 (+0.11%)
NASDAQ: 9,251.33, -22.60 (-0.24%)
S&P 500: 3,283.15, -4.98 (-0.15%)
NYSE Composite: 14,037.13, -5.47 (-0.04%)
Monday, January 13, 2020
WEEKEND WRAP: Nearing Mid-Month, Stocks Higher
Just time for the figures this week.
At the Close, Friday, January 10, 2020:
Dow Jones Industrial Average: 28,823.77, -133.13 (-0.46%)
NASDAQ: 9,178.86, -24.57 (-0.27%)
S&P 500: 3,265.35, -9.35 (-0.29%)
NYSE Composite: 13,957.97, -39.73 (-0.28%)
For the Week:
Dow: +188.89 (+0.66%)
NASDAQ: +158.09 (+1.75%)
S&P 500: +30.50 (+0.94%)
NYSE Composite: +40.92 (+0.29%)
At the Close, Friday, January 10, 2020:
Dow Jones Industrial Average: 28,823.77, -133.13 (-0.46%)
NASDAQ: 9,178.86, -24.57 (-0.27%)
S&P 500: 3,265.35, -9.35 (-0.29%)
NYSE Composite: 13,957.97, -39.73 (-0.28%)
For the Week:
Dow: +188.89 (+0.66%)
NASDAQ: +158.09 (+1.75%)
S&P 500: +30.50 (+0.94%)
NYSE Composite: +40.92 (+0.29%)
Friday, January 10, 2020
January Effect In Force; US Adds 160,000 Jobs In December
Stocks rallied once again, with the Dow jones Industrials popping for a gain of over 200 points. The Dow closed higher for the fourth time in six 2020 sessions for a total rise of 418 points, or about 1.4%.
The Dow, S&P 500, and NASDAQ set new all-time highs on a closing basis, while the NYSE Composite index finished just shy of a record, ending the session at 13,997.65. The prior high of 14,001.13 was achieved on January 2. Any kind of positive return Friday should push the Composite into record territory.
Investors should get their "Dow 30,000" hats ready, because the world's most-watched stock index is about to surge beyond that number, quite possibly today right at the open after the Bureau of Labor Statistics (BLS) reported an additional 145,000 jobs created in December according to the just-released non-fram payroll report for December, 2019.
Even though there's some seasonality to the figures due to holiday hires and a fall-off after November's gains were boosted by striking GM workers returning to their jobs, the number is another sign of strength in the underlying US economy, now, more than ever, the main driver of global growth. As Europe struggles with deflationary trends, negative interest rates, and high unemployment (especially among youths), and China increasingly seems to be bowing to pressure on tariffs and trade from the US, America's clout has become paramount.
Among developed nations, the United States continues to set the agenda, as President Trump's "America First" strategy has emboldened employers and workers alike to share in the positivism of the current environment. While wage growth is still sluggish, job creation in the private sector continues strong. Wednesday's ADP private payroll report found 202,000 new jobs created in December.
While the 145,000 jobs in the non-farm payroll report did come in below estimates of 160,000, the miss was not significant. October was revised 4,000 lower, to 152,000, and payrolls in November were revised down 10,000 to 256,000.
Unemployment remained steady at 3.5%, as expected. By sector, retail and leisure/hospitality led the gains, with bricks and mortar stores adding 41,000 jobs while restaurants, hotels and such added 40,000. Health care was another gainer, picking up 28,000 jobs in December. Construction trades added 20,000 new positions, but manufacturing and transportation declined, by 12,000 and 10,000, respectively. For all of 2019, manufacturing added 46,000, while transportation gained 57,000.
Those two sectors are offering indications that the expansion may have run its course, or at least is slowing significantly. In 2018, manufacturing added 264,000 jobs, transportation gained 216,000. While those figures may cause some anxiety, they also can be interpreted as a sign that these segments of the economy are still integrating the additional employees and that this period is merely a lull, following a robust hiring round.
Overall, despite the small miss and reductions from prior months, the report still comes in as positive for the US economy. Perhaps not the robust growth expected by the most bullish, but stable hiring is a sign that, in such a mature economy, nothing troubling lies directly ahead.
The jobs report was good enough to keep the rally humming along. The major indices should continue their path through record highs for time being.
At the Close, Thursday, January 9, 2020:
Dow Jones Industrial Average: 28,956.90, +211.81 (+0.74%)
NASDAQ: 9,203.43, +74.18 (+0.81%)
S&P 500: 3,274.70, +21.65 (+0.67%)
NYSE Composite: 13,997.65, +63.21 (+0.45%)
The Dow, S&P 500, and NASDAQ set new all-time highs on a closing basis, while the NYSE Composite index finished just shy of a record, ending the session at 13,997.65. The prior high of 14,001.13 was achieved on January 2. Any kind of positive return Friday should push the Composite into record territory.
Investors should get their "Dow 30,000" hats ready, because the world's most-watched stock index is about to surge beyond that number, quite possibly today right at the open after the Bureau of Labor Statistics (BLS) reported an additional 145,000 jobs created in December according to the just-released non-fram payroll report for December, 2019.
Even though there's some seasonality to the figures due to holiday hires and a fall-off after November's gains were boosted by striking GM workers returning to their jobs, the number is another sign of strength in the underlying US economy, now, more than ever, the main driver of global growth. As Europe struggles with deflationary trends, negative interest rates, and high unemployment (especially among youths), and China increasingly seems to be bowing to pressure on tariffs and trade from the US, America's clout has become paramount.
Among developed nations, the United States continues to set the agenda, as President Trump's "America First" strategy has emboldened employers and workers alike to share in the positivism of the current environment. While wage growth is still sluggish, job creation in the private sector continues strong. Wednesday's ADP private payroll report found 202,000 new jobs created in December.
While the 145,000 jobs in the non-farm payroll report did come in below estimates of 160,000, the miss was not significant. October was revised 4,000 lower, to 152,000, and payrolls in November were revised down 10,000 to 256,000.
Unemployment remained steady at 3.5%, as expected. By sector, retail and leisure/hospitality led the gains, with bricks and mortar stores adding 41,000 jobs while restaurants, hotels and such added 40,000. Health care was another gainer, picking up 28,000 jobs in December. Construction trades added 20,000 new positions, but manufacturing and transportation declined, by 12,000 and 10,000, respectively. For all of 2019, manufacturing added 46,000, while transportation gained 57,000.
Those two sectors are offering indications that the expansion may have run its course, or at least is slowing significantly. In 2018, manufacturing added 264,000 jobs, transportation gained 216,000. While those figures may cause some anxiety, they also can be interpreted as a sign that these segments of the economy are still integrating the additional employees and that this period is merely a lull, following a robust hiring round.
Overall, despite the small miss and reductions from prior months, the report still comes in as positive for the US economy. Perhaps not the robust growth expected by the most bullish, but stable hiring is a sign that, in such a mature economy, nothing troubling lies directly ahead.
The jobs report was good enough to keep the rally humming along. The major indices should continue their path through record highs for time being.
At the Close, Thursday, January 9, 2020:
Dow Jones Industrial Average: 28,956.90, +211.81 (+0.74%)
NASDAQ: 9,203.43, +74.18 (+0.81%)
S&P 500: 3,274.70, +21.65 (+0.67%)
NYSE Composite: 13,997.65, +63.21 (+0.45%)
Subscribe to:
Posts (Atom)
Posts
