US stocks little changed, with investors making a stab at 1200 on the S&P 500 before being repelled, and the DJIA closing over 11000 for the first time since September 2008 after briefly hitting the mark on Friday.
DJIA adds 9 to 11006. S&P 500 inches ahead 2 to 1196. Nasdaq Comp gains 4 to 2458. News of a Greek bailout, of sorts, doesn’t get anybody too jazzed. After all, it really seems like a just more jawboning from Europe. With Greece auctioning off some short-term debt tomorrow, we’ll see whether jawboning can be as effective as cold, hard cash.
Meanwhile, with indexes perched around these big, round numbers, earnings season is about to get symbolic launch, with Alcoa’s after the bell report. The blue-chip’s numbers just hit the tape, and it looks like it lost $194M compared to $266M a year ago (from continuing operations,) and if you ignore $300M worth of charges, it appears the company met the ever-important “Street views.”
Yes, as far as Wall Street’s concerned, Alcoa made money.
- Rober Shiller’s op-ed in yesterday’s NY Times highlights some dicey prospects facing the the housing recovery. Calculated Risk weighs in: “Momentum only goes so far. And I think it is likely that prices will fall further in many bubble areas later this year as more distressed properties hit the market.”
- Now that Greece appears to have been saved, former IMF chief economist Simon Johnson wonders if Portugal is next. “We are still lurching from crisis to crisis in Europe.”
- As the stock market grinds higher, there are two distinct groups of market observers developing: “vacillating bulls and dogmatic bears,” according to Josh Brown at The Reformed Broker.
- Dow Jones Industrial Average taking its time treading higher. “As is typically the case, the market’s declines were a lot swifter than the subsequent advances,” Bespoke says. Dow closes up 8 at 11006.
- “The strongest sectors of late have been the consumer-related ones,” Howard Simons notes at Minyanville, and every dollar “out of the consumer’s pocket for higher energy costs is a dollar unavailable to support the great national pastime of spending money like there’s no tomorrow.”
- “When you don’t require the reported value of assets to have a clear and tangible link to the value that the assets would have in liquidation, bad things happen,” John Hussman says. “Yet this is what regulatory and accounting rules are allowing for the banking system at present.”
- Declaring bailout costs may look less expensive than initially feared may be a bit premature, FusionIQ CEO Barry Ritholtz says.
- “The only systemic risk the VC business is creating for the financial system is attempting to put the current out of business,” writes Fred Wilson, principal of Union Square Ventures. “To suggest that small venture funds of $30mm could possibly be creating systemic risk to the global financial system is ludicrous.”
- Google’s buying spree continues, this time acquiring Plink, a four-month-old UK outfit that specializes in “visual search” and has 50,000 users, Jay Yarow reports at Silicon Alley Insider.
- Twitter’s doing some deals of its own, purchasing Tweetie – an app that runs on the iPhone and iPod Touch. “Given the rumblings that have been coming from Twitter in recent days, this is likely to be followed by more deals down the line,” Peter Kafka says.
On the same day the NBER Business Dating Committee Cycle announced it’s still too soon to declare the recession over, yet another dissenter from the committee comes forward.
This time, Robert Gordon of Northwestern University and a member of the committee says he “strongly disagrees” with the committee’s decision.
“It is obvious that the recession is over,” he says, noting he believes it ended in the second quarter of 2009.
“The American economy is enjoying strong upward momentum that is evident every day in the announcements of retail sales, service sector production, and almost everything else,” he adds. “There are no negatives in the actual data, but rather the negatives reside in doomsayer worries that consumers are too weak to spend or that the economy will collapse after the Obama stimulus dollars have been spent.”
He also finds the prospects for the economy double-dipping back into recession “extremely implausible.”
Gordon’s dissent comes one week after Harvard economist and fellow committee member Jeffrey Frankel said the recession was over. Frankel based his opinion off the labor market, which was showing signs of life last July before finally experiencing job growth last month.
It seems reasonable, of course, to assume other committee members aren’t so convinced.
The recession isn’t actually over, although it may be, and Greece’s problems are over, although they actually may not be. Confused? No need to be, just give us three minutes to explain.
When New York Times columnist Floyd Norris put on his rose-colored glasses last week and wondered why so many folks were doubting the economic recovery, we immediately thought his front-page piece could be the perfect contrary indicator, representing a market top.
Now, he’s got competition.
BusinessWeek joins the party, claiming the Obama plan is working and markets are clearly showing the economy’s back on track. (Hey BusinessWeek, what were the markets saying in October 2007 when the Dow crossed 14000? Weren’t exactly predicting the worst financial collapse since the Great Depression, were they?)
Robert Samuelson of Washington Post also declares in an op-ed today that the “glumness may be overdone, just as the optimism of the Goldilocks Economy was overdone.”
Not to be outdone, Newsweek’s upcoming cover story – titled “America’s Back! The Remarkable Tale of Our Economic Turnaround” – tops them all. Dan Gross describes how “America is coming back stronger, better, and faster than nearly anyone expected.”
This morning’s statement from the NBER struck me as something of an outlier. The committee, after all, isn’t a particularly garrulous group, officially at least. They generally make official statements only to mark the turning points in the economy. Seeing as recessions don’t come along every day, that means years can pass between committee statements. They don’t offer midterm reports.
So I asked Harvard’s Jeffrey Frankel, a member of the dating committee, how common it was for the committee to issue statements like the one today. “Announcements that are not findings of turning points come along less frequently, but they do come along,” he wrote in an email. “The closest parallel to this morning’s release that I can think of happened in 1981, I think it was; an announcement that the committee was not yet certain enough to call the turning point.”
So these kinds of statements are very rare; the last one was nearly 30 years ago. Now, lest you need reminding, scroll down this table to the early 1980s. The economy was coming out of a recession that ended in July 1980, and entering another one that started in July 1981.
The dreaded “double-dip,” if you will. Conspiracy theorists, tin-foil hat types, bears, doubters, tea-partiers, Mark Levin, have at it. Personally, I find it an eyebrow raiser, too. Frankel, however, isn’t very concerned.
In case you’re still not sure what the NBER is looking at, Gluskin Sheff’s David Rosenberg puts it all into perspective:
Based on the few voiceblasts from Wall Street research departments we have received so far today, strategists are becoming more cyclical in their equity allocations and economists are treating the latest private payroll rebound as gospel (even if at odds with the ADP survey) and revising up both Q1 and Q2 real GDP estimates for the USA. Having worked on the “sell side”, we can assure you that the pressures to be bullish at all times is intense, and the vast majority of the “bulls” who managed to get it right over the past year never saw the credit downturn coming and most of the economists began to call for recession long after it occurred.
It is very interesting to see that the arbiters at the National Bureau of Economic Research are still very wary about even declaring that we are in a recovery despite the 70%+ rally off the lows (see “Arbiters of Recessions Wary of Certifying an Upturn” on page B1 of today’s NYT). While much of the focus is in real GDP, it is not clear that GDI (income) is signaling anything more than a one-quarter blip right now. The government release of private payrolls is showing gains but the rival ADP survey just flagged a new all-time low. Outside of government transfers, personal income is still on a downward path. Housing is showing no sign of recovery. What we have is modest consumer growth aided by intense government support and an arithmetic contribution from inventories.
As it stands, everything from shipments to orders to auto sales to output to employment to housing starts to home sales are still nowhere near their pre-recession levels. And it should not be lost on anyone that the S&P 500 is still down 24% from the highs and has gone nowhere now for over a decade and so unless you are a gifted day-trader, all we are left with is three bull markets, two bubbles, two collapses and a heck of a lot volatility – and nothing to show for it except a lot of red ink and a lot of sleepless nights.
You know what, Al? Let's just leave these down here for now.
So the bulls are poised, or at least they think they’re poised, to decisively declare victory. The Dow is dancing with 11000, another stellar earnings season is here, and Greece is getting bailed out, again (but only if they actually need a bailout, and as we all know they haven’t actually asked for anything, right?)
The economy is rebounding smartly, jobs are back, the clouds have parted, Floyd Norris is confident enough to pay retail again.
But the bulls can’t quite put the recession to sleep now, can they? This morning, the National Bureau of Economic Research, the private shop that is the official arbiter of dating recessions, came out and saidit’s too early to call the recession over.
“Many indicators are quite preliminary at this time and will be revised in coming months. The committee acts only on the basis of actual indicators and does not rely on forecasts in making its determination of the dates of peaks and troughs in economic activity.”
Of course, this won’t change the minds of the Kudlows out there, who called the recession over a year ago (and also, incidentally, only allowed as that there even was a recession about a year and a month ago; recessions are extremely short-lived in Kudlowian circles.) And to be fair, the committee didn’t say the recession was definitively still on, only that it didn’t have enough information to say it was over.
What it means, though, is that the risks are still on the table, no matter what the stock market is saying, no matter what the VIX is flashing. When you see trees in front of you, it’s usually because you’re still in the forest.
Brace for a busy week as 1Q earnings season gets underway, full calendar of economic data queued up and parade of Fed officials step up to the mike on at least a dozen occasions.
Alcoa reports results after today’s closing bell; Intel reports late tomorrow; JPMorgan, GE and BofA also due later this week. Data highlights include March retail sales; Fed’s Beige Book; NY, Philly Fed manufacturing reports; industrial production; and housing starts. Mix of data, earnings, Fedspeak should make for some interesting cross-currents. No data today.
US dollar beat up overnight but recovering, USD index recently at 80.57. Greece “rescued” for about the fifth time in six weeks. That act’s getting old.
S&P futures flat, DJ futures up 7. Ten-year lower, yield at 3.91%.
Oh, and the National Bureau of Economic Research, the outfit that dates recessions and expansions, is out this morning with a statement that it’s too early to call the recession over. Add that to the pile.
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 […]
The bridge that collapsed on Interstate 5 bridge over the Skagit River in Washington was listed as “functionally obsolete” and “fracture critical,” which means the whole sha-bang could come tumbling down if one major part fails. Click here to read the details from USAToday. This sort of thing shouldn’t be happening in a modern, developed nation. Barry LePatn […]
