After reaching record highs in each of the last three sessions, the Dow Jones Industrials took a breather on Monday as investors mulled economic data instead of quarterly corporate reports. The other indices followed suit, led by the NASDAQ, which suffered a 1.26% decline, by far the largest percentage loss of all the exchanges.
Dow 13,062.91 -58.03; NASDAQ 2,525.09 -32.12; S&P 500 1,482.37 -11.70; NYSE Composite 9627.73 -77.63
Once again, the Dow stocks held their own as investors fled more speculative issues in favor of the blue chips, though 20 of the 30 Dow stocks were in retreat. The losses could have been worse, if not for the strong showing of Proctor & Gamble (PG), which rose by 1.42 (2.25%) in anticipation of what is expected to be a solid quarterly report on Tuesday. Volume of PG was more than double its average.
Market internals showed a significant shift in perspective as the week began and the month of April ended. The advance-decline line was the worst in over a month, with declining issues swamping advancers by a better than 7-3 margin. Many more new lows made an appearance as well on Monday, with 137 (also the highest figure in the past 4 weeks) new lows to 300 new highs.
It remains to be seen whether these metrics are going to prove prophetic or just axiomatic of general profit-taking. With the Dow gaining more than 700 points in April alone, some pullback was expected and probably overdue, though longer term issues - such as consumer spending (up a mere 0.2 in March), burgeoning federal deficits and the continuing malaise in residential housing - persist. Recessionary forces are present and the ongoing high price of gas is also a contributor to sour moods and souring predictions.
Speaking of oil, the price of a barrel of light sweet crude also took a short hiatus, losing 75 cents to end the trading day at $65.71. The price of oil and gas continues to be a thorn in the side of American businesses of all sizes, affecting the purchasing power of consumers and driving up the cost of doing business everywhere.
The oil companies may be getting an unwelcome reminder of how upset people are on May 15. An email is making its rounds on the internet urging consumers to boycott gas stations nationwide on that date and forward the email to others so that they may participate. There will be more on that effort in this space tomorrow.
Gold gained $1.70 and silver was unchanged.
Monday, April 30, 2007
Friday, April 27, 2007
Storm Clouds Gather: Dollar Down, GDP 1.3%
There's a palpable disconnect between what's hot on Wall Street and the realities of the US economy. While the Dow makes new highs day after day, extending one of the longest bull markets (55 months and counting) without a 10% correction.
Corporate profits are the drivers of the current rally which has taken the Dow on a 1000-point ride upwards over the past two months and the reports have been solid, if not spectacular. The other side of the equation is comprised of economic indicators, the value of the currency, credit markets and mood, may be more forward-looking than a string of corporate pluses and rising indices. Those indicators are forecasting more pain than pleasure, but the market has yet to buy into the argument.
So, is this the last hurrah? Are investors wringing every last cent out of stocks in anticipation of a dramatic reversal, or are investors just confident that US businesses are sufficiently globalized that they will not be largely affected by suffering in the US market alone. At the end of the day, the major indices registered a ho-hum split decision.
Dow 13,120.94 +15.44; NASDAQ 2,557.21 +2.75; S&P 500 1,494.07 -0.18; NYSE Composite 9,705.36 -10.13
While these investors should be applauded for their optimism, the decline of the US economy should have some ripple effect across the spectrum, though the extent of the decline (we may already be in recession) and the impact on various industry sectors is difficult to calculate, much the less correlate.
First quarter 2007 GDP showed a feeble 1.3% growth rate according to the Commerce Department, the lowest quarterly rate since the first quarter of 2003, which closely coincides with the beginning of both the current bull market and the start of the war in Iraq.
It should come as no surprise to anyone that this bull may be on its last legs, especially with the public discontent and debate to end the war sooner rather than later. Bull markets don't last forever, just as recessions aren't the end of the world. As a matter of fact, recessions are necessary and vital parts of a properly-functioning market economy. Expansions build excess and excesses must be wrung out to put the system back on a functional footing.
And who can say that the economy wasn't full of excess? Witness the housing and credit boom of the past five years. That rocket fuel has been spent and house prices are plummeting back to earth while credit qualifications by banks and finance companies ratchet up the pressure. The stock market - especially the Dow - looks like the last refuge for safe money.
Make note of this number: 13,197.50. That's the all-time intraday high (April 26, 2007). We may go past it, but if the market doesn't continue climbing past it over the next week, the summer and fall could be very trying seasons for US equity investors.
Another of the reasons the markets may soon struggle is the high price of oil and gasoline. Crude was up again on Friday, with a barrel for June delivery set at $66.46 after traders tacked another $1.40 to the price. Keeping with the tone, Chevron posted 1st quarter profits of $2.18 per share (net $4.7 billion), compared with $1.80 per share ($4 billion), during the same period last year, an 18% gain, or roughly the same percentage deeper US motorists dug into their pockets to fuel their transports. Lovely.
In currency trading, the Euro reached an all-time high against the greenback of $1.3682, before closing slightly lower, at $1.3650. Barely noticed by the general public, the dollar buys less overseas, driving up import prices on just about everything. The dollar weakness has been evident for years. Easy credit, loose fiscal policy by the government and a huge - and growing - federal debt have made the US dollar lose respect in world markets. The dollar's decline is gradual, but surely it is killing us.
Gold closed at $682.50, up 3.80, while silver ended the day at $13.58, a gain of 12 cents.
Earnings will continue to make headlines next week, but so could some serious profit-taking. Expect a roller coaster.
Corporate profits are the drivers of the current rally which has taken the Dow on a 1000-point ride upwards over the past two months and the reports have been solid, if not spectacular. The other side of the equation is comprised of economic indicators, the value of the currency, credit markets and mood, may be more forward-looking than a string of corporate pluses and rising indices. Those indicators are forecasting more pain than pleasure, but the market has yet to buy into the argument.
So, is this the last hurrah? Are investors wringing every last cent out of stocks in anticipation of a dramatic reversal, or are investors just confident that US businesses are sufficiently globalized that they will not be largely affected by suffering in the US market alone. At the end of the day, the major indices registered a ho-hum split decision.
Dow 13,120.94 +15.44; NASDAQ 2,557.21 +2.75; S&P 500 1,494.07 -0.18; NYSE Composite 9,705.36 -10.13
While these investors should be applauded for their optimism, the decline of the US economy should have some ripple effect across the spectrum, though the extent of the decline (we may already be in recession) and the impact on various industry sectors is difficult to calculate, much the less correlate.
First quarter 2007 GDP showed a feeble 1.3% growth rate according to the Commerce Department, the lowest quarterly rate since the first quarter of 2003, which closely coincides with the beginning of both the current bull market and the start of the war in Iraq.
It should come as no surprise to anyone that this bull may be on its last legs, especially with the public discontent and debate to end the war sooner rather than later. Bull markets don't last forever, just as recessions aren't the end of the world. As a matter of fact, recessions are necessary and vital parts of a properly-functioning market economy. Expansions build excess and excesses must be wrung out to put the system back on a functional footing.
And who can say that the economy wasn't full of excess? Witness the housing and credit boom of the past five years. That rocket fuel has been spent and house prices are plummeting back to earth while credit qualifications by banks and finance companies ratchet up the pressure. The stock market - especially the Dow - looks like the last refuge for safe money.
Make note of this number: 13,197.50. That's the all-time intraday high (April 26, 2007). We may go past it, but if the market doesn't continue climbing past it over the next week, the summer and fall could be very trying seasons for US equity investors.
Another of the reasons the markets may soon struggle is the high price of oil and gasoline. Crude was up again on Friday, with a barrel for June delivery set at $66.46 after traders tacked another $1.40 to the price. Keeping with the tone, Chevron posted 1st quarter profits of $2.18 per share (net $4.7 billion), compared with $1.80 per share ($4 billion), during the same period last year, an 18% gain, or roughly the same percentage deeper US motorists dug into their pockets to fuel their transports. Lovely.
In currency trading, the Euro reached an all-time high against the greenback of $1.3682, before closing slightly lower, at $1.3650. Barely noticed by the general public, the dollar buys less overseas, driving up import prices on just about everything. The dollar weakness has been evident for years. Easy credit, loose fiscal policy by the government and a huge - and growing - federal debt have made the US dollar lose respect in world markets. The dollar's decline is gradual, but surely it is killing us.
Gold closed at $682.50, up 3.80, while silver ended the day at $13.58, a gain of 12 cents.
Earnings will continue to make headlines next week, but so could some serious profit-taking. Expect a roller coaster.
Thursday, April 26, 2007
Broken Record: Dow Makes Another High Mark
The stock market continues to dazzle and amaze amid a flurry of spectacular earning reports from American corporations, the latest being computer software behemoth Microsoft, which blew away estimates on Thursday.
Reporting after the final bell on Thursday, Microsoft reported earnings for the quarter ended March 31 rose to $4.93 billion, or 50 cents per share, up from $2.98 billion, or 29 cents in same period last year, a gain of 65%. Analysts were seeking 46 cents, so expect the company that Bill built to get a boost at tomorrow's opening.
Elsewhere, ExxonMobil reported its best 1st quarter ever, earning a staggering $9.3 billion, or 1.62 per share, up from $8.4 billion, or $1.37 per share for the same period of 2006.
Despite the generally good news, the indices were split, as both the NYSE Composite and S&P 500 suffered losses while the Dow and NASDAQ gained.
Dow 13,105.50 +15.61; NASDAQ 2,554.46 +6.57; S&P 500 1,494.25 -1.17; NYSE Composite 9,715.49 -31.08
Volume was once again strong, though profit-takers kept the markets in check throughout the session. Declining issues held a slight 11-10 edge over advancers. There were 513 new highs to just 93 new lows.
Oil slipped 78 cents to close just a shade above $65 per barrel, but precious metals suffered hefty losses as the dollar strengthened against the Euro and Pound. Gold lost $9.40, closing at $678.00. Silver lost 44 cents to end the day at $13.46.
Despite Thursday's lackluster performance, all indices should show gains for the week as a whole, mostly attributable to Wednesday's blowout performance.
Reporting after the final bell on Thursday, Microsoft reported earnings for the quarter ended March 31 rose to $4.93 billion, or 50 cents per share, up from $2.98 billion, or 29 cents in same period last year, a gain of 65%. Analysts were seeking 46 cents, so expect the company that Bill built to get a boost at tomorrow's opening.
Elsewhere, ExxonMobil reported its best 1st quarter ever, earning a staggering $9.3 billion, or 1.62 per share, up from $8.4 billion, or $1.37 per share for the same period of 2006.
Despite the generally good news, the indices were split, as both the NYSE Composite and S&P 500 suffered losses while the Dow and NASDAQ gained.
Dow 13,105.50 +15.61; NASDAQ 2,554.46 +6.57; S&P 500 1,494.25 -1.17; NYSE Composite 9,715.49 -31.08
Volume was once again strong, though profit-takers kept the markets in check throughout the session. Declining issues held a slight 11-10 edge over advancers. There were 513 new highs to just 93 new lows.
Oil slipped 78 cents to close just a shade above $65 per barrel, but precious metals suffered hefty losses as the dollar strengthened against the Euro and Pound. Gold lost $9.40, closing at $678.00. Silver lost 44 cents to end the day at $13.46.
Despite Thursday's lackluster performance, all indices should show gains for the week as a whole, mostly attributable to Wednesday's blowout performance.
Wednesday, April 25, 2007
Another Banner Day as Dow Crashes through 13,000
Wednesday was just another day on Wall Street in this exceptionally energetic earnings season. Apple reported outstanding numbers and stocks soared on a wave of unbridled optimism.
It's becoming so routine to the point of boredom, just watching everything go up, up, up all the time, day after day, la dee da...
If you're in the right stocks it's a marvelous time to be invested. The question is why, if all is so damn wonderful in the world of high finance and corporate profitability, did only 22% of respondents to a new NBC/Wall St. Journal poll say that America was moving in the right direction. There seems to be a high level of dissatisfaction afoot, but none of it could be found on Wall Street.
Still, the mood of the public raises an interesting question. Are these anonymous poll respondents seeing something we're missing? Are the profits on Wall Street more fleeting and illusory than we have been led to believe? Or are the investment returns isolated to an emerging, small class of wealthy individuals who reap most of the gain from soaring stocks?
Food for thought, which we're not going to bite on right now.
Dow 13,089.89 +135.95; NASDAQ 2,547.89 +23.35; S&P 500 1,495.42 +15.01; NYSE Composite 9,746.57 +98.07
Apple was the key driver for the day, reporting profits of $770 million, or 87 cents per share, up from $410 million, or 47 cents per share, in the year-ago period. The stock breached the $100 mark on the news, up 2.11 on the session. Analysts were looking for 64 cents per share, so they, like everyone else, were absolutely shocked at Apple's incredible performance.
Corporate news took precedence over the scourge of the street, crude oil, which jumped back up to $65.84/bbl., up $1.26 on the NY Mercantile Exchange. In what continues to be a counter-trade, gold and silver both lost ground again, though gold at $387.40 and silver at $13.90 are close to the higher end of the range. There may be some consolidation at this level, anticipating a break out. However, there have been a number of false flags like this, so it could just turn out to be more of the same as no catalyst seems capable of taking the metals to new highs.
Speaking of new highs, there were an astounding 602 of them, versus only 69 new lows, the bulk of those on the NASDAQ.
Volume was exceptionally strong, one of the top 5 volume days this year and advancing issues drubbed decliners by nearly a 2-1 margin.
The question for tomorrow and the succeeding sessions leading up to the May 9 FOMC meeting is, how high is up?
It's becoming so routine to the point of boredom, just watching everything go up, up, up all the time, day after day, la dee da...
If you're in the right stocks it's a marvelous time to be invested. The question is why, if all is so damn wonderful in the world of high finance and corporate profitability, did only 22% of respondents to a new NBC/Wall St. Journal poll say that America was moving in the right direction. There seems to be a high level of dissatisfaction afoot, but none of it could be found on Wall Street.
Still, the mood of the public raises an interesting question. Are these anonymous poll respondents seeing something we're missing? Are the profits on Wall Street more fleeting and illusory than we have been led to believe? Or are the investment returns isolated to an emerging, small class of wealthy individuals who reap most of the gain from soaring stocks?
Food for thought, which we're not going to bite on right now.
Dow 13,089.89 +135.95; NASDAQ 2,547.89 +23.35; S&P 500 1,495.42 +15.01; NYSE Composite 9,746.57 +98.07
Apple was the key driver for the day, reporting profits of $770 million, or 87 cents per share, up from $410 million, or 47 cents per share, in the year-ago period. The stock breached the $100 mark on the news, up 2.11 on the session. Analysts were looking for 64 cents per share, so they, like everyone else, were absolutely shocked at Apple's incredible performance.
Corporate news took precedence over the scourge of the street, crude oil, which jumped back up to $65.84/bbl., up $1.26 on the NY Mercantile Exchange. In what continues to be a counter-trade, gold and silver both lost ground again, though gold at $387.40 and silver at $13.90 are close to the higher end of the range. There may be some consolidation at this level, anticipating a break out. However, there have been a number of false flags like this, so it could just turn out to be more of the same as no catalyst seems capable of taking the metals to new highs.
Speaking of new highs, there were an astounding 602 of them, versus only 69 new lows, the bulk of those on the NASDAQ.
Volume was exceptionally strong, one of the top 5 volume days this year and advancing issues drubbed decliners by nearly a 2-1 margin.
The question for tomorrow and the succeeding sessions leading up to the May 9 FOMC meeting is, how high is up?
Tuesday, April 24, 2007
Dow Resumes Rally After One Day Hiatus
US equities mostly returned to the plus side after taking a day off on Monday. The Dow nearly erased yesterday's decline and closed within 47 points of 13,000, though the NYSE Composite and S&P 500 experienced marginal declines.
Dow 12,953.94 +34.54; NASDAQ 2,524.54 +0.87; S&P 500 1,480.41 -0.52; NYSE Composite 9,648.50 -12.06
The fuel for the rally (pun intended) was a dip in the price of crude, which slipped $1.31 to close at $64.58. While the relief was welcome, it was hardly enough to move gas prices or the pessimism felt by most drivers in the US who are paying close to - and in some cases, such as on the West coast, more than - $3.00 per gallon for regular unleaded.
In a related story, British Petroleum (BP) reported first quarter profits 17% lower than in the same period a year ago. The British concern saw 1Q profits of $4.66 billion, or 1.35 per share. BP made $5.62 billion or 1.54 per share in the first quarter of 2006. There was nary a tear shed for the still-exceedingly profitable company.
Other commodities were effected as well, with gold and silver taking tumbles. Gold lost $6.50 while silver declined 27 cents. The metals have stymied investors with more than a year of rangebound trading. Both recently closed near benchmarks but failed to sustain the momentum and have pulled back considerably.
Declining issues once again surpassed advancers by a 5-4 margin, and there was a slight shift in the new high - new low ratio. A total of 373 issues recorded new highs while 97 (the most in more than a week) companies set new low marks. While the high-low mantra may be more tail wagging the dog than vice versa, the indicator could be signaling that the recent run-up in stocks has lost momentum and another correction mechanism is about to be put into play.
Stocks are, as it is, near record levels and the sustainability of high share prices is still in doubt in some circles. While the indices may not immediately react, especially in the middle of a pretty good earnings season, but within weeks (and possibly coinciding with the Fed meeting of May 9) there could be a pullback of some consequence.
Most of the movement will be a function of sentiment rather than fundamentals, however, as the market has shown great resiliency in the face of some troubling trends, most notably in the housing sector, which continues to suffer.
According to CNN.com, Sales of existing homes fell 8.4% to an annual rate of 6.12 million in March from February's 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989.
Lower prices for homes may be a problem for sellers, but it has to be good news for buyers, though there aren't many out there. With banks tightening their qualifications, fewer Americans can afford to buy a home today than last year. The other side of the equation is that of forced selling at a price lower than one paid in the previous six boom years.
The entirety of the housing and finance sector may be somewhat of a conundrum for the Fed, alternatively weighing higher energy and food prices (inflation) with lower base housing costs (deflation). There may still be some pressure for the Fed to ease rates in order to spur the housing industry, though that kind of thinking is more wishful than practical.
Bernanke and friends will probably take the easy route of holding the course and keeping rates unchanged at the next meeting as hiking rates could send stocks into a tailspin. Of course, there are many who contend that the Fed is in denial over inflationary pressure and that a short series of rate hikes would be the best medicine.
In the meantime, corporate profits continue to pour in mostly on the positive side providing plenty of rationale for continuation of the rally.
Dow 12,953.94 +34.54; NASDAQ 2,524.54 +0.87; S&P 500 1,480.41 -0.52; NYSE Composite 9,648.50 -12.06
The fuel for the rally (pun intended) was a dip in the price of crude, which slipped $1.31 to close at $64.58. While the relief was welcome, it was hardly enough to move gas prices or the pessimism felt by most drivers in the US who are paying close to - and in some cases, such as on the West coast, more than - $3.00 per gallon for regular unleaded.
In a related story, British Petroleum (BP) reported first quarter profits 17% lower than in the same period a year ago. The British concern saw 1Q profits of $4.66 billion, or 1.35 per share. BP made $5.62 billion or 1.54 per share in the first quarter of 2006. There was nary a tear shed for the still-exceedingly profitable company.
Other commodities were effected as well, with gold and silver taking tumbles. Gold lost $6.50 while silver declined 27 cents. The metals have stymied investors with more than a year of rangebound trading. Both recently closed near benchmarks but failed to sustain the momentum and have pulled back considerably.
Declining issues once again surpassed advancers by a 5-4 margin, and there was a slight shift in the new high - new low ratio. A total of 373 issues recorded new highs while 97 (the most in more than a week) companies set new low marks. While the high-low mantra may be more tail wagging the dog than vice versa, the indicator could be signaling that the recent run-up in stocks has lost momentum and another correction mechanism is about to be put into play.
Stocks are, as it is, near record levels and the sustainability of high share prices is still in doubt in some circles. While the indices may not immediately react, especially in the middle of a pretty good earnings season, but within weeks (and possibly coinciding with the Fed meeting of May 9) there could be a pullback of some consequence.
Most of the movement will be a function of sentiment rather than fundamentals, however, as the market has shown great resiliency in the face of some troubling trends, most notably in the housing sector, which continues to suffer.
According to CNN.com, Sales of existing homes fell 8.4% to an annual rate of 6.12 million in March from February's 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989.
Lower prices for homes may be a problem for sellers, but it has to be good news for buyers, though there aren't many out there. With banks tightening their qualifications, fewer Americans can afford to buy a home today than last year. The other side of the equation is that of forced selling at a price lower than one paid in the previous six boom years.
The entirety of the housing and finance sector may be somewhat of a conundrum for the Fed, alternatively weighing higher energy and food prices (inflation) with lower base housing costs (deflation). There may still be some pressure for the Fed to ease rates in order to spur the housing industry, though that kind of thinking is more wishful than practical.
Bernanke and friends will probably take the easy route of holding the course and keeping rates unchanged at the next meeting as hiking rates could send stocks into a tailspin. Of course, there are many who contend that the Fed is in denial over inflationary pressure and that a short series of rate hikes would be the best medicine.
In the meantime, corporate profits continue to pour in mostly on the positive side providing plenty of rationale for continuation of the rally.
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