Market Talk

You know, I'm kind of ahead here...

US stocks fall in a sleepy session ahead of this week’s FOMC meeting, amid a lot of chatter about corrections and tops.

DJIA slips 32 to 9338, S&P 500 loses 3 to 1007, Nasdaq Comp drops 8 to 1992. A mini bull-run at the end smooths some of the rough edges off the session. Big Board volume’s about what you’d expect for August, 5.2B shares changing hands. The dollar gains, as do Treasurys, and crude takes a breather.

We’re not going to get ourselves too worked up about a half-percent pullback, but with the major indexes up about 50% from their March lows, the talk is about what could be an inevitable correction, and maybe some folks decided today was as good as any to lock in some profits.

In today’s video segment, we discuss Maguire Properties, which posted a wide loss on write-downs, as well as the market-correction talk, and the problems down in Jefferson County, Ala.

That Jefferson County situation is bad. Besides being on the verge of the biggest municipal default in history, the county sheriff’s budget was cut, and he’s so strapped for manpower he says he’s thinking about asking the National Guard for help maintaining order.

FOMC’s two-day confab begins tomorrow, with the official communique coming Wednesday. While nothing much is expected out of the FOMC, the Fed always gets the market’s attention. Investors will take the proverbial fine-toothed comb to the statement, looking for any hints as to the Fed’s future monetary path. And while a lot of the focus will be on interest rates, look for hints as to the Fed’s inclinations toward its purchase of Treasury debt.

The July jobs report garnered much praise for the diminishing rate of monthly job losses, prompting many market observers to proclaim the recession’s in its final stages, if not already over.

In case you haven’t noticed, we here at Market Talk are skeptical, to say the least.

The market’s run-up from panic lows isn’t surprising, although the magnitude of the gains has certainly been shocking. But today’s Abreast of the Market column in the Journal highlights the main reason preventing the economy from showing real signs of recovery: debt.

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Buy it now!

GM’s deal to start selling cars on eBay is part of the auto maker’s renewed focus on customers and products, although skeptics wonder why it took GM so long to develop a presence on the online auction site.

Deal allows consumers to place online bids for new vehicles from most of California’s GM dealers. Trial will run through Sept. 8 at gm.ebay.com, but WSJ reports GM may ultimately expand the pilot program across the US. The site also allows consumers to compare pricing models as well as get more information about trade-in values and the cash-for-clunkers program.  

“It allows a convenient alternative if you’re in the market for a new car but either can’t get to a showroom or want to shop from home,” Mark LaNeve, VP of vehicle sales and marketing, writes on GM’s FastLane blog. He argues the plan also helps dealers because it allows them to put showrooms and available inventory on the Internet.

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Long in the tooth? Who? Me?

A correction? No, no, no, we don’t do corrections anymore. 

The DJIA is up 43% from its March lows, even after four straight quarters of declining GDP and eight straight quarters of contracting corporate profits. But the market, in it’s wonderfully optimistic way, is pricing in a big recovery; last fall’s near-death experience suddenly is ancient history.

Don’t be surprised when the market finally corrects; it’s coming and it’s overdue. But don’t be surprised if it doesn’t come on time, because there are major forces holding this thing together.

Investors have been bidding everything higher, Barron’s Mike Santoli notes, and while a pullback might seem logical, there are reasons to believe the S&P 500 can churn its way up to 1200.

Conventional wisdom says stocks are due for a correction. But just as this hasn’t been a normal recession, it’s not a normal recovery. So normal doesn’t apply here, and if the particular currents driving the market remain in place – more on that in a minute – then a normal, even healthy, correction may not occur, at least not soon.

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Weakness in European stock markets so far today seems to be working its way west, with premarket US stock futures suggesting a slightly softer open.

Early focus this week likely lands on the Fed, with a two-day FOMC meeting getting underway tomorrow.

There’s a smattering of economic data to digest this week, but the real meaty stuff doesn’t arrive until late in the week with July retail sales set for Thursday; CPI and industrial production/capacity utilization out Friday.

S&P futures down 2.10; DJ futures down 18. Ten-year a smidgen lower, yield at 3.86%.