Market Talk

US stocks slide sharply into the close for a second straight day, up against the same problems that have bedeviled them the past week-plus, and the bears are making it clearer by the day who controls the market now.

DJIA slips 3 to 10194, after rising as much as 88 early. S&P 500 falls 5 to 1092, Nasdaq Comp eases 7 to 2204. The major indexes have all been down four of the past five sessions. Yesterday, the Dow rose as much as 84 early, too. And interestingly, the S&P has been holding above support at 1091, a level it tested pretty hard in November before bouncing higher. Well, we’re back there now. The 100-day moving average is 1090.

And tomorrow’s setting up to be one loopy day, between Apple fanboy-fest, the FOMC meeting, the President’s speech, earnings from Boeing and Caterpillar and new home sales.

This morning, traders seize early on consumer confidence report; Conference Board reported confidence rose for a third straight month. But it remains well below even its average over the long-term.

“Confidence remains unusually depressed,” Capital Economics wrote. “This all suggests the legacy of the recession will live long in the mindset of consumers.”

And Verizon, which posted a big 4Q loss on a severance charge, says it’s not seeing the boost from the economy it expected, which will lead to it axing another 13,000 staffers.

“The economy won’t help us as much as we thought,” CEO Ivan Seidenberg said.

Elsewhere, markets were rattled overseas by China’s banks curb lending, for the rest of the month, and S&P’s unusually blunt warning to Japan about its debt. CBO pegs federal budget deficit at $1.3 trillion.

- Populist outrage has turned Ben Bernanke’s confirmation as Fed chairman into anything but a slam dunk, Tom Petruno writes at LA Times’ Money & Co blog, as everything changed after Scott Brown’s Senate victory. “Suddenly, populism is raging — and Bernanke is a convenient target for Democrats, Republicans and Independents alike,” he says.

- Lots of speculation on when Apple (AAPL) will end its iPhone exclusivity deal with AT&T (T). But Apple was pretty vocal in its defense of the carrier on yesterday’s conference call, Digital Daily blogger John Paczkowski says.

- Stop blaming Glass-Steagall’s repeal for the crisis. “I am all for better regulation of the financial services sector, but many of the ideas floating around do not really address the core issues the industry faces,” says Chad Brand, founder and president of Peridot Capital.

- Similar to the strong earnings beat rate this quarter, the percentage of companies boosting guidance as opposed to cutting their long-term views is also strong, Bespoke reports. But the question remains: is good news already baked into stock prices?

- Expect strong spring buying season for the housing market followed by a weaker middle and end of 2010 as “weak seasonal trends and the lack of government stimulus are likely to show housing’s true colors,” the Pragmatic Capitalist says.

- Don’t expect a Facebook IPO in 2010, according to two major investors in the social networking site. PaidContent has the details.

- Put FusionIQ CEO Barry Ritholtz on the growing list of folks who think Tim Geithner’s days as Treasury Secretary may be numbered. NPR also publishes a column saying Geithner must go. But Mark Thoma would still be surprised if the administration actually removed Turbo Tim.

- Control of Stuyvesant taking center stage, WSJ reports. Creditors and potential buyers are scrambling for control after Tishman relinquished control to creditors.

- For all the recent volatility, the S&P 500 still hasn’t closed below 1091. The index has found support their four times since November. S&P 500 closed down 5 at 1092.

- Blogosphere’s buzzing about “Fear the Boom and Bust: a Hayek vs. Keynes Rap Anthem.” (Hat Tip Abnormal Returns)

Consumer confidence is rising (although still well, well below even its long-term average,) but one company that isn’t confident is Verizon, and nobody’s confident the government will ever balance a budget again.

Two prominent liberals aren’t exactly fans of President Obama’s proposed three-year budget freeze.

Princeton economist Paul Krugman and Robert Reich, former labor secretary in the Clinton administration, ripped Obama’s plans for limiting government spending amid high unemployment and not doing enough for middle class America.

WSJ says Obama’s proposal is “a move meant to quell rising concern over the deficit but whose practical impact will be muted.” From the Journal:

To attack the $1.4 trillion deficit, the White House will propose limits on discretionary spending unrelated to the military, veterans, homeland security and international affairs, according to senior administration officials. Also untouched are big entitlement programs such as Social Security and Medicare.

The freeze would affect $447 billion in spending, or 17% of the total federal budget, and would likely be overtaken by growth in the untouched areas of discretionary spending. It’s designed to save $250 billion over the coming decade, compared with what would have been spent had this area been allowed to rise along with inflation.

The administration officials said the cap won’t be imposed across the board. Some areas would see cuts while others, including education and investments related to job creation, would realize increases.

Obama proposing a three-year spending freeze is “appalling on every level,” Krugman writes at Conscience of a Liberal. “It’s bad economics, depressing demand when the economy is still suffering from mass unemployment,” he says.

Continue reading…

In the aftermath of Apple’s (AAPL) blowout results and on the eve of its “major new product” announcement, the stock’s getting a nice bump up as investors are relishing in the results and soaking in all the hype surrounding the expected tablet announcement.

Apple shares were up as much as 5.2% (but currently remain off the highs) after the company posted record results. Its fiscal first-quarter profit rose 50% from a year ago and revenue increased 32%, fueled by strong Mac and iPhone sales as well as a key accounting change. The company’s $3.38 billion profit and $15.68 billion revenue were both all-time highs. And in typical fashion, Apple’s guidance wasn’t much to celebrate. From WSJ:

Apple, which is typically conservative about its financial forecasts, said it expects a seasonal decline in demand for its Macs, iPods and iPhones. For the current quarter, Apple projected revenue of about $11 billion to $11.4 billion, compared with $9.1 billion a year ago.

“A subscriber to the underpromise-and-overdeliver school of guidance theory, Apple is renowned for issuing almost comically conservative revenue outlooks and then exceeding them,” Digital Daily blogger John Paczkowski says. “This quarter was no different.”

Increasing anticipation about the expected unveiling of the tablet as well as the positive results have driven the stock, which is up more than 20% throughout the last four months.

Continue reading…

An email from Challenger Gray & Christmas hit our inbox that we’ll take as a very positive sign:

Start-Up Activity Jumps to Four-Year High in 2009

Start-up activity among jobless managers and executives reached a four-year high in 2009, as early signs of a recovery in the second quarter led to a summer surge in entrepreneurship. The hope is that the momentum established in the second half of 2009 will carry into 2010, since new business development is considered critical to a sustainable recovery.

The percentage of unemployed workers starting their own business rose to an average of 8.6 percent in 2009, according to the latest Challenger Job Market Index released Tuesday by global outplacement consultancy Challenger, Gray & Christmas, Inc. The 2009 average is up 69 percent from 2008, when the start-up rate was just 5.1 percent, the lowest annual average in the history of the Index.

Good luck all you entrepreneurs!

One day soon after Sept. 11, 2001, I was in an empty warehouse in Jersey City, N.J., helping unload supplies for the rescue crews over at Ground Zero. Big 18-wheelers were coming from all over the nation, crammed with stuff. Some was being loaded onto tugboats and hauled across the Hudson, and some was being stored in that warehouse.

Dozens of people were there. A young marine. A father with his even younger son. Men, women, I can’t remember them all. We made a  human conveyor belt and and passed boxes and crates and palates from the trucks into and through the warehouse.

I was never more proud of this country than that day. From the people who donated the supplies on those trucks to the rescue crews in the burning pit of Ground Zero, Americans came to the aid of their nation. Everybody wanted to do something, absolutely anything, to help. E pluribus unum. Out of many, one.

When I compare the response to Sept. 11 in those first chaotic days to the response to the financial crisis, I’m dismayed to the point of anger. If there’s been one selfless act since this whole sordid drama started unwinding two years ago, I’ve missed it. Instead, it’s been one long series of self-serving, back-room handshake deals to save a precious few at the great expense of the vast many. The good faith and credit of the United States has been put on the line to save a handful of private actors.

President Obama says he gets the message sent by the voters of Massachusetts? With all due respect, he has no idea what the message is. The administration thinks that if it just creates a bunch of jobs (or saves them, or saves and creates them, or whatever it’s calling it,) then its job will be done. Yes, the economy is a major issue. But that isn’t what’s got people in a lather.

It’s the fairness, stupid.

Bailing out private companies like AIG was not fair. Bailing out the auto makers, and the banks, and  paying AIG’s counterparties 100 cents on the dollar for their terrible bets was not fair. It was not fair for the Fed to buy all those soured loans off the banks’ hands, and relieve them of the burden, placing it on the citizenry’s shoulders. Bankruptcy is fair. The FDIC seizing failed banks and selling them off is fair. But fairness went out the window two years ago.

Continue reading…

With the average American still trying to whittle down and cut up their credit cards, corporate America is placing a lot of hope in the idea that it can export its way out of this morass. The evidence so far is mixed as to the success of that, and that’s what John and I focused on in today’s “Upshot” column in the Journal:

So far, fourth-quarter earnings season is offering some indications to support that hope, though similar to the ups and downs in the housing recovery, the evidence on exports remains uneven. Yes, the rebound is progressing, but the export engine is sputtering and isn’t firing on all cylinders just yet.

The most recent U.S. data showed exports rose 0.9% to $138.2 billion in November, and are up $16.5 billion since last April. Leading the way in November were food, grains and beverages exports, most notably soybeans, which increased $979 million, compared with October.

Of course, agriculture represents a far smaller chunk of the American economy than manufacturing. Strength in agriculture exports won’t have any direct impact on the government’s monthly non-farm payrolls report, due out Feb. 5. Exports are going to need support from manufacturing.

Some interesting comments out of Verizon’s conference call, as reported by Newswires’ Roger Cheng, that I wanted to share with you.

NEW YORK (Dow Jones)–Verizon Communications Inc. (VZ) continues to face economic pressure, specifically hurting the company’s enterprise segment, according to Chief Financial Officer John Killian.

“We were somewhat surprised by the continued level of economic pressures impacting our enterprise and wholesale markets,” Killian told analysts during the company’s fourth-quarter conference call Tuesday. Verizon still faces a “very challenging environment,” he added.

In addition, Verizon’s largest customers haven’t indicated a significant pick-up in capital or IT spending, he said.

While Verizon is still seeing success in the consumer end, particularly with wireless and its FiOS services, the telecommunications company continues to struggle on the business end.

Chief Executive Ivan Seidenberg said he doesn’t see a pick-up until at least the end of the year, but added he was more bullish for 2011. “The economy won’t help us as much as we thought,” Seidenberg said.

Now that last one there is your money quote for the day.

Weakness in Asian stocks overnight and declines currently in Europe, along with a stronger US dollar, contribute to a slightly weaker premarket tone for US stocks, although the futures have been whittling away their overnight losses.

Apple posts another powerful quarter, but again, as we’ve noted with other earnings recently, the strong results seem mostly priced in. AAPL up 1.9% premarket. DuPont’s 4Q better than expected, shares up 1.5% premarket. Yahoo reports after the bell.

Dow components Johnson & Johnson and Verizon both reported earnings this morning, with J&J topping Street views and Verizon matching them; of course, “Street views” exclude a $3B charge Verizon took to cover layoffs, but nonetheless, the two reports are helping put a little steam back in the Street’s stride.

But both are down a bit premarket, so it’s hard to say they’re driving futures higher.

(Addendum: Verizon is now higher, J&J isn’t. And we forget to mention DuPont, which swung to a stronger than expected 4Q profit; shares are up about 0.5%.)

China cast another pall over the markets, with reports coming out of the country that some of the nation’s banks have ordered some branches to stop making loans for the rest of the month. It would appear to be another step in China’s attempts to halt the frenetic bank-lending that’s been going on over there, and which people worry could fuel a bubble (or has fueled a bubble,) although officials say it won’t have any effect.

November Case-Shiller home price index due at 9:00 a.m.; Conference Board’s January consumer confidence reading, Richmond Fed’s Jan manufacturing index both set for 10:00 a.m. Two-day FOMC meeting also gets underway this morning.

US dollar index up 0.4%; S&P futures, down 5.50 earlier, now down just 1.40; DJ futures up 3. Ten-year higher, yield at 3.57%.