Market Talk

Spring is in the air, gains are in the markets, and that pending-home sales thing isn’t all it’s cracked up to be.

US stocks rise on the back of some cheery economic data and amid a general optimistic tone that lifts a number of assets – and lowers the dollar.

DJIA rises 47 to 10974, coming with 12 points of 11000 early; S&P 500 gains 9 to 1187, Nasdaq Comp jumps 27 to 2430.

ISM’s services index rose in February, still trailing manufacturing but moving in the right direction (albeit jobs subindex is still below 50.) NAR reports pending-home-sales index rose. Dollar falls while crude jumps to near $87/barrel, and that won’t be good for any recovery.

- As stocks edge higher, the 10-year Treasury yield nicks 4%. “While 4% is a nice round number, the more important level is probably 4.3%,” Bespoke notes. “A break of that level would be more indicative of a meaningful uptick in rates.”

- Apple says it sold 300,000 iPads on Saturday. Some were expecting a larger figure, but for the most, that’s an impressive first-day total.

- Tech bloggers are giddy over Apple’s (AAPL) iPad. “Two-word review: It’s great,” Dan Frommer says. Only negative is some folks still aren’t sure why they actually need the device.

- Amid all the iPad hype this weekend, Amazon (AMZN) wants to remind everyone it also has a popular gadget. On its homepage, Amazon boldly states the Kindle’s still its No. 1 best-selling product.

- CEO pay is still way too high and something needs to be done about it. Unfortunately, the solutions are “as simple as they are unlikely,” Barry Ritholtz writes.

- Four industries hit hardest during the recession — construction, durable goods manufacturing, professional & business services, and retail trade — had jobs gains in March. Certainly a positive sign, David Beckworth notes, but the financial sector is still losing jobs.

- Looking for the next crisis? Keep an eye on the municipal market, Rick Bookstaber writes.

- “If the current recovery was similar to the earlier recessions, the economy would recovery the 8+ million lost payroll jobs over the next two years,” Calculated Risk says. “I think that is very unlikely.”

- Google’s (GOOG) buying spree continues, acquiring Episodic, a new video hosting start-up. Episodic’s co-founders announced the deal late last week, noting its employees will be folded into the GooglePlex in San Bruno, Calif. “This clearly seems to be another milestone in Google’s campaign to beef up YouTube’s capabilities,” Chris Thompson says.

- Bank of Mom and Dad shuts amid white-collar struggle

I'm tellin ya, economy's recovering...slowly recovering.

It should come as no secret that we here at Market Talk are skeptical, to say the least, of this purported economic recovery.

Seems like nothing can prevent the stock market from continuing its gradual rise these days, even as the unemployment rate is perched at 9.7%, consumer spending remains tepid, at best, and foreclosures are on the rise.

But, as UC San Diego economics professor James Hamilton points out, it’s hard to ignore the fact that some real signs of recovery are starting to manifest. Between improving monthly auto sales data, impressive manufacturing figures and the March employment report, “finally we’re starting to see some convincing indications of economic recovery,” he says.

Today’s housing data also vastly exceeded expectations. NAR’s index for pending home sales in February soared 8.2% to 97.6, well ahead of the 0.5% decline economists were expecting.

Additionally, the Conference Board said its March employment trends index increased 0.7% to 94.4. And ISM’s index of non-manufacturing activity moved to 55.4 in March, from 53 a month earlier. The index had been expected at 53.5.

As for last week’s jobs data, it’s safe to say the report was a step in the right direction. While it wasn’t a “good” report by any stretch of the imagination — long-term unemployment remains a huge drag on the labor market — the fact that 162,000 jobs were created last month is a welcome change amid all the months of declines throughout the recession.

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Our BFFs over at MarketBeat picked up something John wrote for the wire this morning:

Despite a solid first quarter advance for the S&P 500, “many investors remain skeptical,” says Oppenheimer strategist Brian Belski, calling this “the most reluctant bull market” he’s seen in his career.

Bullish sentiment is up in the past few months, but “trading volumes and equity flows remain tepid,” he notes. “For our part, we still see the US economy in its early stages of recovery and we expect market strength to persist in coming months as prospects for corporate earnings continue to improve.” He also doesn’t “envision a scenario that takes the market significantly below current levels over the near term.”

While the March nonfarm payrolls report should be cause for celebration Monday in the stock market – it was closed Friday – others think it may be already baked into prices.  “Based on last week’s gains ahead of the Easter Holiday, we’d expect that any celebration over Friday’s non-farm payroll number will be relatively modest, as the market will consider the good news already priced into equity prices,” says Ticonderoga strategist John Stoltzfus.

“Job creation is the best remedy for what currently ails our economy, and we’d expect that even as prior stimulus packages are removed from the system that helped revive the financial sector and the capital markets, further rounds of stimulus will likely be needed and developed to address the needs of an economy that can’t afford another jobless recovery,” he adds.

It reminds me of the famous Chuck Prince quote: “As long as the music is playing, you’ve got to get up and dance.”

Of course, one should keep in mind that after the music stopped, Prince lost his job, his company collapsed and quite nearly disappeared, and the economy collapsed and quite nearly fell into the abyss. So some attention should be paid to the song being played, too.

Definitely the dude in the upper right hand; got to get rid of him.

Are we on Wall Street, or Sesame Street? Because the markets today are like a big game of “One of These Things is Not Like the Others.” See if you can guess which doesn’t belong:

- Ten-year Treasury yield rising toward 45, lately at 3.99%.

- Crude oil over $86/barrel.

- The Fed having a “discussion” about interest rates.

- The DJIA up 55 at 10981, rising to its levels from September 2008.

Did you guess?

Stock traders have been laser-focused on two goals lately: 11000 on the Dow and 1200 on the S&P 500. The march toward these goals has been relentless; the general thinking seems to be that crossing those barriers will finally force the proverbial sidelines back into the game.

To the extent, mind you, that Mr. Market has a game plan. While the media often characterize the market as a singular entity, it obviously is nothing more than a large collection of subjective players, each focused on their own goals rather than any collective goal.

Yet it certainly seems  in the last month or so the market has moved in lock-step. This march higher has taken on a life of its own, in the press at least, where it’s being painted as bona fide evidence that the economic recovery is here. After all, the market is the world’s greatest predictive machine, as we’re so often told (except for, say, in 2007; but never you mind that.)

I’ve said a few times, however, that this is an insider’s market. I’m not so sure the market is telling us anything about the wider economy. Profit growth has been more a function of cost-cutting than top-line growth. Despite Friday’s jobs report, the economy is not adding jobs at any kind of rate that will drive real, lasting growth. The market reflects mainly the cheery optimism of the sell-side crowd.

Volume has been meager. The wider populace, many of whom got flat-out crushed, has not come back to the stock market, leaving it to the pros. This, of course, makes it easier to drive the market where the sell-side wants it, higher. And it’s not like they’re even really trading their own money: the Fed pumped more than $1.5 trillion into the marketplace. At least a couple of bucks worth of that “found money” found its way into the stock market.

So who’s driving the tape? Gluskin Sheff’s David Rosenberg said he suspects it’s the pig farmers. “Who are they pray tell? They are the prop desks at the five large banks. They buy and sell securities, with leverage … to each other.” But there are ramifications to this kind of thing, he pointed out:

Of course, it is always difficult to predict the future, but so many investors are caught in the moment and are being told “not to fight the tape” and simply play the momentum game. They do not see that the current rebound in the economy is a statistical mirage orchestrated by record amounts of monetary and fiscal stimulus that are simply unsustainable and actually risk precipitating a very unstable financial and economic backdrop in coming years.

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Investors in US stocks get their first chance this morning to react to Friday’s March jobs report, and the premarket tone so far seems fairly reserved.

Equity futures aimed modestly higher, though that may just as easily be an influence of a slightly lower US dollar index. Oil and gold both moderately higher.

Skimpy week for US economic data, though this morning we’ll see March ISM services index and February pending home sales, both due at 10:00 a.m. Overnight Japan’s Nikkei 225 closed at a fresh 18-month high. Markets in Europe are closed today.

Dollar index recently at 81.23. S&P futures up 4.70. DJ futures up 40. Ten-year slightly lower, yield at 3.95%.