Market Talk

What's got these guys all jazzed up, huh?

The stock market has been recording pretty strong gains so far in September, all the more notable since September is historically such a lousy month. The proverbial double-dip fears are receding – on the Street, at least (if you’re on that other street, Main Street, it doesn’t matter whether or not it’s called a double-dip. It’s lousy and it’s been lousy.)

Okay, so what’s doing it, right? That’s the question. Have the economic tea leaves shifted that significantly? We could write a 1,000-word post deconstructing the various data points, the ISM, the August jobs report, the weekly jobless claims, the housing numbers, the GDP report. But there’s not much point. We’ve been over that ground before. I think losing 54,000 jobs overall in August – the third consecutive losing month – is more significant than the 67,000 private sector jobs that were added. You agree or you don’t.

But make no mistake, the Street has seized on the “better-than-expected” data points to help it climb from the bottom of the trading range it was about to break through in August. But the numbers haven’t been good enough to take the market above the trading range, either (and we’re broadly calling this range between 1040 and 1130 on the S&P 500.)

Then there’s this notion floating around that the Republicans are definitely going to take back either one or both chambers of Congress in the mid-terms, and since the GOP is perceived as more business-friendly, that’s good for business and the stock market. That is definitely a second cause.

But, once again, we have to wonder if it’s the Fed again, trying to goose the wealth effect.

Continue reading…

Irish eyes are not smiling this morning.

So equities traders here in the old USA aren’t worried about European debt today, it seems judging by stock futures, whereas yesterday they were all in a tizzy about it. Does that make sense? No, it doesn’t, so you should ignore the stock moves (unless, of course, you’re actively trading, in which case, all that matters are the numbers,) and focus on, you know, the news. And the news is still coming out of Europe.

The cost of credit default swaps on Irish debt hit a record today on increasing worries over the state of Irish banks. This after the government extended its blanket guarantee of private banking debt (was supposed to run out the end of this month, now they’re extending it to the end of the year. Just seems like nobody can get those exit strategies kicking in, can they?)

Neil Shah reports over at MarketBeat:

Ireland, which is grappling with an increasingly costly bailout for troubled lender Anglo Irish Bank, isn’t alone. Concerns about the health of Europe’s banking system have unleashed a wave of risk aversion that is engulfing other countries on Europe’s fringe too. Portugal’s credit-insurance costs have jumped to $342,000 from $330,000, while Greece’s costs have hit $916,000 from $895,000.

It’s not just Irish CDS, either. Spreads on bond yields between Germany and some of the so-called periphery countries are rising. The spread between Greek bonds and German bonds is at a four-month high of 948 basis points, very close to the record 973 it was sitting at before the Europeans unveiled their grand bailout plan.

That tells you that despite the near trillion dollar safety net the Europeans threw at their collective economies, investors are still worried. It’s not at panic levels, but beads of sweat of forming on the collective European brow.

US stocks rise for a second session, albeit not as sharply as during yesterday’s rally, as another batch of economic data gives some hope to the bulls.

DJIA rises 51 (0.5%) to 10320, S&P 500 gains 10 (0.9%) to 1090, Nasdaq Comp up 23 (1.1%) to 2200. NYSE volume’s low.

Today, it was a better-than-expected report on pending home sales that the bulls seized on. Jobless claims remain disturbingly high as 472,000, but no matter there’s a rally on. Dell bows out of 3Par sweepstakes after H-P raises its bid to $33/share.

Of course, what really matters is tomorrow morning’s monthly jobless report.

US stocks burst out of the gate in September, with the DJIA posting its best one-day gain since early July after a key gauge of the manufacturing sector shows surprising strength.

DJIA surges 255 (2.5%) to 10269, its biggest one-day gain percentage-wise since July 7. S&P 500 jumps 31 (3%) to 1080, Nasdaq Comp rises 63 (3%) to 2177. NYSE volume is 4.5B shares traded, not bad volume for a session a couple days ahead of Labor Day.

Stocks rose sharply early, as traders were apparently emboldened after the S&P held the 1040 level again yesterday. But the ISM reading, coming in not just better-than-expected but actually better, was like rocket fuel. September has a reputation for being a bad month for stocks, but it also often starts off well. It did today.

Now, that lede (newspaper jargon for “lead,” the top of the story, not  be confused with lead, the material they used to use to fill the letter blocks when printing the paper,) I wrote is without a doubt a concise, accurate assessment of today’s session, if I do say so myself. However, I find it hard to believe this rally was built on anything more lasting that Friday’s rally, which had just about completely melted away by yesterday’s closing bell.

Briefly, let’s look at some of the news today. There was that Chinese PMI story. China’s official PMI rose to 51.7 from 51.2. That sparked the global stocks rally. Now, that’s a very minor move, one that still leaves the index too close to the 50 level for comfort in a diffusion index that measures not actual change but the rate of change.

Still, with the proverbial new money pouring into the market, that was enough to get things going. The market totally ignored a trio of private-sector takes on the jobs market, the ADP, TrimTabs and Challenger Grey reports. ADP said private-sector jobs fell 10,000, TrimTabs said it was down 65,000. The Challenger report was actually bullish, they said job cuts fell to a decade low. Still, those first two do not presage a good number Friday when the BLS reports the nonfarm payrolls. But no matter, because the ISM’s take on US manufacturing came in at 56.3, up from 55.5, when it was expected to slide to 52.

What makes it so surprising is that absolutely everybody expected it to fall, given that the regional Fed surveys have been uniformly depressing. So, is the ISM number a one-off or some counter-trend? I just don’t know yet, but I’m very suspicious of the ISM number. It just doesn’t fit in with anything else we’ve been seeing.

Lastly, we’ll leave you with this, a tidbit that John pointed out to me just now. As bad as August was for stocks, May was that much worse, with the DJIA losing better than 8%. What’d the Dow do on the first trading day in May? It rose, about 143 points. Over the next four sessions, it lost 771 points, a time frame that included the now-infamous Flash Crash.

US stocks finish little changed, after an erratic session that sees the S&P 500 once test the key 1040 level, and watches a little more of Friday’s rally ease off.

DJIA adds 5 to 10015, down about 4.4% on the month, the worst August since 2001. S&P 500 adds less than 1 to 1049, after falling as low as 1040.83. Nasdaq Comp slips 6 to 2114. Volume again is low.

With most of Friday’s rally gone, and that 1040 number still looming out there, the market is set-up for a tense standoff tomorrow when that ISM manufacturing report hits the tape at 10 a.m.

So much for Friday’s rally.

US stocks fall sharply, with a sharp late sell-off as that anxiety over the state of the economy returns. DJIA falls 141 (1.4%) to 10010. S&P 500 loses 16 (1.5%) to 1049, with the key 1040 level coming back into view. Nasdaq Comp slides 34 (1.6%) to 2120. Treasurys, as you might expect, rallied, with the 10-year yield falling to 2.53%

Keep in mind, it’s one of the lowest (if not the lowest, I don’t have the settlement data yet (although it seems like it’s going to be the lowest)) volume days of the year, and Wall Street this whole week is likely to be a virtual ghost town. Still, the investors who are around don’t seem very impressed with jawboning coming from central bankers lately. A spate of M&A news doesn’t excite investors either.

With almost all of Friday’s rally already off the board, it’ll be interesting to see if the rest comes off this week. We’re already thinking about Wednesday morning’s ISM manufacturing index, which is expected to come in around 52.5, according to latest Dow Jones survey. Keep in mind that the index is a diffusion index, meaning it measures direction, not an actual level (like the Dow, for instance.) So if the ISM slips to 52 from 55, well, that’s all the direction you need to know.

With one day left in the month, incidentally, the DJIA is down 4.4% this August. It’s also, incidentally, off 4% on the year. So it’s safe to say it’s been a pretty bad August, no matter what happens tomorrow, and fully nine months into 2010, equities have been a minor disappointment (to investors at least, Tyler.) Whether they become a major disappointment will depend largely upon what happens in the real world. We certainly aren’t optimistic.

US stocks rally sharply, after the Fed chairman pledges to do “whatever it takes” to pull the economy out of any tailspin, which is a nice reassurance since that’s exactly where the economy seems to be headed.

DJIA surges 165 (1.7%) to 10151; even with the rally, the index lost 0.6% on the week. S&P 500 jumps 17 (1.7%) to 1065, importantly after bouncing hard off support at 1040 – which may point to short covering. Nasdaq Comp gains 35 (1.7%) to 2154.

Stocks rally even after 2Q GDP gets revised down to 1.6% – and the 3Q isn’t looking so hot either, by the way. By now, you know the parade of bad news that was ignored today: Intel cut its 3Q revenue outlook, consumer confidence slipped, Boeing delayed the Dreamliner again, the ECRI’s weekly leading index showed no improvement and remains mired at recessionary levels.

The market is apparently taking Fed Chairman Bernanke at his word that he will do “whatever it takes” to pull the economy out of any tailspin – the infamous Bernanke (nee Greenspan) put. This is giving a big boost to the risk trade – heck Boeing was the Dow’s third-best component today, after risk-trade darling Caterpillar and IBM.

So, the market rallied either because of a massive short-covering surge, a belief in the Fed’s ability to arrest the economy’s slide, we’ll be polite and refrain from calling it a misguided belief, or the market just has absolutely no idea what’s going on. We’d put our money on either number one or number two, but neither is particularly inspiring.

Beats me why the stock market is up.

This may be the silliest trading session Wall Street has seen in a while. Stocks are up when every piece of news out there is pretty awful, exemplifying how screwy market psychology can be.

Here’s a snip Vigna just published on the wire:

GDP gets revised down sharply, although not as sharply as feared. Intel cuts its revenue outlook, although apparently everybody expected it. Boeing delays the Dreamliner, again. Ben Bernanke says the Fed’s ready to go all in, although it’s not going all in now and doesn’t really expect to need to go all in. That all may sound confusing, but not to the market: to Wall Street that’s all positive. The major indexes are higher, Intel is higher, Boeing is higher. If you want to know just how, well, weird that all is, consider this: Boeing right now is actually the Dow’s top dollar gainer.

What’s worse, the consumer outlook regarding the economy remains pretty bleak. Reuters/University of Michigan consumer sentiment index for August dropped again and fell below economists’ expectations.

Not enough for you? Try this on for size: growth in the ECRI weekly leading index remained little changed, edging up to -9.9% from -10.1%.

Add it all up and, surprisingly, the stock market is significantly rallying. The Dow was recently up 115 at 10101, S&P 500 gains 11 at 1058 and Nasdaq Comp up 21 at 2139.

“What do you get when you flood the market with an Intel downward guidance update, a disappointing money printer dictate, and a drop on consumer confidence?” Zero Hedge ponders. “In a word — total market insanity.”

US stocks skid into the close, snuffing out a nascent rally that got some lift this morning from a decline in weekly jobless claims, and sending the Dow back under 10000 for the first time since July 6. Nerves may be a bit frayed, what with the revision to 2Q GDP on tap for tomorrow morning, as well as Bernanke’s Jackson Hole speech.

The questions for tomorrow are two: how bad will the GDP revision be? Will Bernanke signal in his usual opaque way that the Fed’s about to go “all in” to the full-time, big-time money-printing business. I’ll tell you this, I would not be surprised tomorrow to see GDP tank and the market rally, because traders think that will force Bernanke to really crank up the quantitative easing (i.e., debasing the currency.)

As for today, DJIA drops 74 (0.7%) to 9986, S&P 500 down 8 (0.8%) to 1047, Nasdaq Comp loses 23 (1.1%) to 2119. While the Dow’s fall back under 10000 will likely get all the headlines (we headlined it on the wire,) the real index to keep and eye on is the S&P. At 1047, it is within hailing distance of its closing year-low of 1022, and within distance of the intraday low of 1011.

Jobless claims fall by 31,000, but are still at a distressing level at 473,000. All today did was get us back to the upper end of the range the market has been in this year. It all still points to precious little hiring by companies, and in fact, do not doubt for a second that companies will start shedding workers if the economy really does come unglued again.

It may not be the horrendous losses of late 2008/early 2009, but it most certainly won’t be the job creation that we so desperately need. One thing that came out of this last earnings season is that these companies are going to remain obsessively fixed on costs, and if they need to cut, they will find places to cut.

US stocks once again seemed on the precipice, but investors pulled them back from the edge. How far they were pulled back, and how long it lasts, is another question.

DJIA rises 20 to 10060, after falling as much as 103 (to 9937) in the morning. S&P 500 gained 3 to 1055, Nasdaq Comp rose 18 to 2142.

Equities were reeling after two more bad economic reports, on durable goods and new home sales. It’s the second day in a row where equities seemed on the verge of a really big sell-off. Treasurys meanwhile were surging, with the yield on the 10-year falling as low as 2.418%, the lowest point since January 2009.

But the two assets reversed direction in the afternoon. Equities hit session lows late in the morning, and Treasurys started fading after the 1 p.m. auction of five-year notes, which was well subscribed, but didn’t really get anybody very excited (and the yield on the new notes was slightly higher than the yield on the existing notes, meaning Uncle Sam had to pay up a bit to get people to take them, even though the yield was still a record low for an auction.)

That started folks all over apparently getting to thinking that enough was enough, and bonds starting sliding while stocks started rising.