US stocks rise slightly, but slide into the close in a fairly erratic session that will do little to dispel the jitters created by last week’s selloff.
DJIA rises 24 (0.2%) to 10197, after rising as much as 84 early. S&P 500 adds 5 (0.5%) to 1097, Nasdaq Comp gains 6 (0.3%) to 2211. The bulls show themselves today, but selling pressure is still pushing the market.
Home resales took their biggest ever one-month plunge in December, as the home-buyer tax-credit hangover finally shows up. Obama reveals some of the themes for Wednesday’s State of the Union address.
Speaking of that, you know how screwy Wednesday is going to be? First off, there’s Apple’s press conference, where they’re going to announce some new product that absolutely everybody knows is a tablet computer but which the company won’t talk about. Nobody plays the crowd better than Steve Jobs.
Then there’s the FOMC meeting statement. Again, absolutely everybody knows what’s going to happen — the Fed’s going to sit on its hands again — but until that statement comes out, you don’t know for sure. And even with them sitting on interest rates, any tweaks to the language in the statement could send the market careening, higher or lower.
Then Wednesday night we’ll get the President’s State of the Union address. If he recent tilt toward populism is any hint, this speech is going to be a barn burner.
And, of course, it’s still the middle of earnings season.
- Obama unveiling the “Volcker Rule” last week was encouraging, but there are still reasons to be skeptical, Simon Johnson says. “There are very real indications that the conversation is either superficial (on the economic side of the White House) or entirely a marketing ploy (on the political side),” he says.
- A tablet may not be Apple’s (AAPL) only major announcement at Wednesday’s event. Reports are circulating that Apple could announce the end of its AT&T (T) iPhone exclusivity deal later this week.
- Speaking of Apple, the buzz surrounding Wednesday’s event and expected unveiling of the tablet is reaching epic proportions. WSJ’s Digits blog looks at some of the bizarre tablet rumors. NYT’s David Carr is amazed at how Apple can drum up so much buzz without saying anything. And David Pogue says “The only thing we know for sure about the Apple tablet is that we don’t know anything for sure.”
- Are stocks ignoring earnings? Or has the market already priced in a strong earnings season? Bespoke weighs in.
- Disappointing existing home sales data this morning, but new home sales is what really matters for the economy, Calculated Risk says.
- Journalists, economists, bloggers and others weigh in on the troubles facing Ben Bernanke’s confirmation as Fed chairman. WSJ’s Real Time Economics has the details.
- Insider buying falls to a new low for week ending Jan. 20, while insider selling remains high. Not surprising corporate insiders are expressing little faith in their own shares. “As of now, signs of a sustained rebound in earnings and revenues remain mixed,” the Pragmatic Capitalist blog says.
- Sun Micro (JAVA) CEO Jonathan Schwartz is set to resign, leaving JAVA in hands of new owner Oracle (ORCL), Digital Daily blogger John Paczkowski reports, citing sources close to Sun.
- Tishman gives up Stuyvesant Project to its creditors in the collapse of one of the most high-profile deals of the real-estate boom, WSJ reports.
- StockTwits acquires the financial news aggregator Abnormal Returns, which is great all-around for the econoblogosphere and one-man blogs in particular, Felix Salmon says.
Posted by Paul Vignaon January 25, 2010 Economy, GM, Housing /
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Will Ed Whitacre need to buy a new home now that he’s going to be GM’s full-time CEO? If he does, he’d be doing the housing market a solid, because home resales took their biggest ever plunge in Decebmer. Also, beware Greeks bearing bonds (didn’t we make that joke already?)
Busy week on the housing front with three major releases, including this morning’s disappointing existing home sales data.
December existing-home sales plunged 16.7%, the largest decline on record, to a 5.45M annual rate, National Association of Realtors reported. Economists were expecting an 11.6% drop to 5.78M. The decline comes after three consecutive months of gains fueled by the government’s first-time home-buyer tax credit.
But the drop isn’t surprising as many expected the declines after home buyers rushed to purchase homes before the tax credit was supposed to end in November. It has since been extended.
The decline is “a clear hangover” from the summer and fall increases due to the tax credit, Miller Tabak equity strategist Peter Boockvar says.
“Both through the artificial suppression of mortgage rates and the home buying tax credit, the industry has lifted off the mat,” Boockvar says. “But we’re left with the distortions where the true equilibrium between supply and demand won’t be realized until the summer when both have run its course.”
In addition to existing home sales, the S&P Case-Shiller home price index is due tomorrow and new home sales data expected on Wednesday.
“I expect the trio will show that housing remains weak, that we are not seeing much in the way of any structural improvement in the real estate market; but that the pace of the overall collapse has moderated,” Barry Ritholtz writes at The Big Picture.
Home sales are also a “seasonal phenomena,” as growth shouldn’t be expected until February or March.
“For each of the past several springs, we have seen overly optimistic discussions of a housing recovery that never was,” he says. “In the final analysis, what was heralded as a recovery turned out to be little more than seasonality.”
The upshot of the Great Recession has been that corporate America has gotten smaller. This has allowed companies to cut costs and operations, and get back to providing investors with that thing they expect above all others, even accounting scandals: profit growth.
The dilemma, though, is that while corporate America is getting smaller, America isn’t, and that’s setting up a situation where companies are creating enough jobs to cope with even population growth, forget about the millions who’ve been fired the past two years. That’s something of a problem.
If you missed it because, oh, I don’t know, your blog crashed overnight or some such disaster, check out “The Upshot” in today’s WSJ:
Since the start of the recession two years ago, corporate and consumer balance sheets have been engaged in a forced bout of cutbacks that figure prominently in fourth-quarter earnings reports coming out now.
Of course, cutbacks of staff, assets and inventories have helped the bottom line. Earnings for companies in the Standard & Poor’s 500-stock index are running above last year’s disastrous fourth quarter, which marked the first time the S&P 500 as a group lost money. With about a quarter of the 500 companies having reported fourth-quarter results, profits are up 154% over a year ago.
But the shrinking has had broad impact. If you’re already unemployed, it’s harder to find a new job. Nearly 40% of the unemployed have been jobless for 27 weeks or more. And if you’re lucky to still have a job, your wages aren’t growing enough to keep pace with even meager inflation. Bureau of Labor Statistics data show seasonally adjusted average hourly earnings up 2.2% last month versus a 2.3% rise in consumer prices. Companies enjoying the fruits of profit growth with a slimmer silhouette evidently aren’t in a hurry to start hiring again.
Interesting day for the stock market following last week’s beat-down. Stocks have recovered a sliver of their losses, but a cautious tone lingers ahead of some key events later this week.
Stocks are looking to overcome a streak of triple-digit losses as the major indexes recorded their worst three-day stretch since early March when the market bottomed out. Dow industrials hit a 15-month high on Tuesday, but promptly dropped 5.2% over the next three days. S&P 500 also fell 5.1% in same time span.
The bearish case also seems to be gaining steam amid concerns surrounding China, Greece, Ben Bernanke and President Obama’s bank plan. Check out Josh Brown’s post detailing the growing amount of double-dip believers making their voices heard. Not a good sign, especially with stock prices still up more than 60% from the March lows.
“Investors who’ve been riding the 10-month-old rally, and who haven’t sold anything along the way now have plenty of excuses to take money off the table,” Tom Petruno writes at LA Times’ Money & Co. blog.
Posted by Paul Vignaon January 25, 2010 Economy, Financials /
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Back in the summer of 2007, while the housing market was imploding but apparently nobody knew it (certainly not the chairman of the Federal Reserve Board, the Treasury Secretary or Jim Cramer,) a number of shadowy hedge funds suddenly started melting down. It happened very quickly. Billions were lost amid the first tremors of what would become the housing implosion and credit crisis, and people started to hear a new phrase to describe these shadowy firms: the Quants.
Scott Patterson, a veteran Wall Street Journal reporter, explains these firms, the power they amassed and the damage they did, in his new book, “The Quants.” It comes out Feb. 2, although Amazon is taking orders now.
In the interest of full disclosure, I should mention I’ve know Scott since I first arrived at Dow Jones in 1997, so he’s an old friend. He’s also one of the sharpest guys in the newsroom, and a first-rate writer as well. The guy’s smart enough to get to the heart of the story and honest enough to tell the plain truth.
At Morgan Stanley’s investing powerhouse Process Driven Trading on Monday, Aug. 6, founder Peter Muller was AWOL, visiting a friend near Boston. Mike Reed and Amy Wong manned the helm, PDT veterans from the days when the group was nothing more than a thought experiment, its traders a small band of young math whizzes tinkering with computers like brainy teenagers in a cluttered garage.
On Wall Street, they were all known as “quants,” traders and financial engineers who used brain-twisting math and superpowered computers to pluck billions in fleeting dollars out of the market.
So much for all the uncertainty surrounding Ben Bernanke’s re-confirmation.
The White House went on an all-out blitz over the weekend, endorsing the Fed chairman for a second term and pushing for the necessary 60 votes needed in the Senate.
Confirmation, of course, isn’t a certainty. But a recent Dow Jones Newswires survey shows 31 senators were publicly committed to Bernanke whereas 17 were opposed. WSJ has the details:
“He’s going to have bipartisan support in the Senate and I would anticipate he’d be confirmed,” Sen. Mitch McConnell of Kentucky, the Republican leader, said Sunday on NBC’s “Meet the Press.” But he wouldn’t say which way he would vote. The No. 2 Senate Democrat, Dick Durbin of Illinois, also predicted that Mr. Bernanke would prevail.
The debate over a second term for the 56-year-old Mr. Bernanke is eclipsing party affiliations in the Senate, drawing liberals and conservatives into unusual alliances. It has also reinforced the Fed’s weakened standing with the public and Congress, and the threat to its long-cherished posture as independent from elected politicians.
Even though Bernanke likely has enough support for another term, a fresh debate’s brewing in the blogosphere over whether he’s the best man for the job. “I’m agonizing – which isn’t a place I ever expected to be,” Princeton economist Paul Krugman writes at Conscience of a Liberal.
Posted by Paul Vignaon January 25, 2010 Technology /
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As you can see, the blog is back up and running. Apologies for the radio silence; it had nothing to do with Chinese hackers, the Guild of Calamitous Intent or the Illuminati. I crashed it last night trying to install a plug-in for Facebook.
Never leave a writer to do something a techie should do.
Anyhow, as you can tell, the market ran up early, as the bulls recovered over the weekend, but they’re having trouble maintaining any momentum. Nasdaq’s turned negative and the Dow was fleetingly in the red as well.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
Michael Dorff, a professor at Southwestern Law School in Los Angeles, says CEOs are paid for performance – but it’s usually not their own performance. They’re paid millions for the performance of the economy, their industry, their employees, and sometimes just for having good luck. For years boards of directors – often made up of CEOs who believe in […]
