Abbondanza!
Worries about Greece and additional evidence of a troubled labor market hampered stocks this morning. The Dow fell as much as 53, on the heels of yesterday’s 72-point decline, suggesting profit-taking was setting in after this recent run-up.
And just as quickly as we started to digest the declines, stocks reversed course and now sit comfortably in positive territory. Strong same-store sales as well as optimism about the beginning of earnings season are being cited for the turnaround.
Hmm, weren’t those catalysts present early this morning? And unless I’m missing something, Greece’s problems haven’t been solved in a few hours and the weak labor market is, well, still weak.
Perhaps investors are merely ignoring external factors, while following a specific playbook. Buying the morning dips as well as going all-in on Friday afternoons in anticipation of Monday rallies has been the recipe for success in recent months, the Pragmatic Capitalist points out. And that’s exactly what’s taking place today.
“Apparently, the stock market has turned into an easy game,” Pragmatic Capitalist says. “Whether that is comforting or the absolute most frightening thing in the world is beyond my realm of knowledge, but history has proven that when one strategy or mindset starts to dominate it always breaks down in horrific fashion.”
Dow reversed earlier losses and was recently up 50.
Investors are focused on this morning’s strong retail sales, you say. Keep in mind, this morning’s retail sales data looks good on paper. But they come against horrible comps from March 2009, arguably the height of the recession when major stock indexes were hitting decade-plus lows. Gap (GPS), Aeropostale (ARO), Nordstrom (JWN) and Saks (SKS) all experienced at least 12% same-store sales gains compared to a year earlier.
“The bulls will make the case that this is the pent-up consumer coming out of the woodwork for good,” Joshua Brown writes at The Reformed Broker. “The bears will remind us that Easter weekend came early this year and was wedged into the month’s tally. We’ll see what April says.”
And initial jobless claims rising 18,000 last week to 460,000 highlights the general sideways trend this data point has exhibited through much of 2010, James Picerno writes at The Capital Spectator. The sideways action contrasts the declining trend exhibited that occurred through most of last year.
“Continuing claims are still quite high — too high to assume that the labor market is in full-bore recovery,” Picerno says. “As the latest uptick in initial claims suggests, job creation is still touch and go at this point. The healing process has begun, but the numbers strongly suggest that the mending will be long and slow, and subject to setbacks.”
So, this morning’s news doesn’t look so cheery now, does it?
We’ll leave you with some morning comments from Ticonderoga strategist John Stoltzfus, who slaps investors with a harsh dose of reality plaguing the stock market as well as the economy in the near and long term.
“For now, sovereign risk abroad and at home, the jobless nature of yet another recovery, foreclosures, consumer activity, bank reform risk and inflation risk along with a host of other items that furrow the brow and keep a good number of people around the world up at night are prominent on investors’ market radar screens once again,” Stoltzfus says. “Their prominence is likely to keep pressure on riskier assets at least near term until some unexpected positive piece of economic data or earnings-related development graces the radar screen.”
(John Shipman contributed to this post.)
