Market Talk

Ben Bernanke’s not keeping rates low because the economy’s firing on all cylinders, folks. And maybe Jamie Dimon is optimistic about the economy, you would be too if the Fed was tailoring the economy toward your profitability, but there are some red flags out there (they’re just being lost amid the sea of red, white and blue ones.)

Go ahead, boys, it's your day.

What a day to be a bull. US stocks rise as all the news breaks for the risk trade, from earnings out of Intel and JPMorgan to another cautiously optimistic beige book report to data.

DJIA rises 104 (0.94%) to 11123, its biggest percentage jump in about three weeks (biggest point gain since March 5.) S&P 500 jumps 13, finally crossing over the 1200 mark, settling at 1211. Nasdaq Comp rises 39 to 2505. NYSE volume is high. The market has now been up 21 of the past 26 sessions.

Bernanke tells Congress the “extended period” of low rates is still in order (although he warns the job market is weak.) JPMorgan and Intel both had strong earnings report that really sparked some enthusiasm over 1Q earnings.

Retail sales for March came in stronger than expected, bolstering the notion that the consumer, as they say, is back. And the Fed’s beige book said activity continued to rise across the country. What more could a bull want?

The red flags were completely ignored. Consumer prices barely showed a pulse, which means consumer demand is weak, no matter what that retail report said. And the BLS reported that average hourly wages in March fell, and average weekly wages rose slightly on more hours worked. Those two things do not speak to a sustainable surge in consumer spending.

Another red flag is that crude rose again, and is near $86/barrel. Wait and see that puppy cross the $90 level, and see how “back” the consumer really is.

- S&P 500 posts biggest gain in more than a month. But keep an eye on the index at these levels as it may face sturdier chart resistance ahead, Bill Luby cautions.

- US Dollar’s uptrend hits a bit of a rough patch this week.

- The economy’s still too lame for Bernanke to hint at rate changes.

- It’s hard to ignore that Elevation Partners has invested about 25% of its $1.8 billion fund in Palm. “Basically, if you invest 15% or more of your portfolio in a single company, you are just begging to be knocked to the ground,” Dan Primack notes at PE Hub.

- Spending more on prescription-drug commercials doesn’t necessarily mean TV viewers will remember your ads.

- Abercrombie’s wacky 8-K raises some eyebrows.

- Google (GOOG) offers small fix for Twitter Search, allowing users to sift through archived tweets and pull results from a particular time period. “That’s not nearly enough to fix Twitter search, but it is cool,” Peter Kafka says. “And probably useful, in some situations.”

- “We got into this mess because we had an over-financialized economy, with finance making a share of profits out of all proportion to its actual economic contribution,” Paul Krugman writes. “And now it’s baaack.”

- S&P 500 year-to-date gains bode well for the remainder of 2010.

- Greece’s tedious tale needs an ending. “Markets are officially bored of Greece — and that’s a bad place for it to be right now,” FT”s Alphaville says.

“It is entirely intuitive, but a sustained economic expansion relies on growth in household income,” Smith Breeden writes.

Better find something else to rely on for economic expansion because there’s little sign of any wage growth, based on the anecdotal data in today’s Fed Beige Book.

The report says wage pressures “were characterized as minimal or contained.” Good for businesses, and the inflation outlook, perhaps, but not great for consumers.

In the Boston district, most firms said to be instituting or planning “modest wage increases,” 2%-3% this year; performance bonuses in services sector “generally down.”

Richmond: average wages edged higher in March in the services sector, but declined slightly in manufacturing. Meanwhile, most companies hiring in Kansas City district “were not offering higher salaries to attract qualified applicants.”

Dallas district reported “just a handful of firms” planning on partially reinstating employer matches to retirement plans or giving small pay increases. Chicago: wage pressures “minimal.”

Smith Breeden adds:

To date, jump starting household income with US government policy has not succeeded, and the private sector has cut jobs relentlessly. Consequently, we have yet to observe changes in aggregate hours worked, wages, or disposable income that would lead to self-sustaining growth in economic activity.

(Paul Vigna contributed to this post.)

I wasn’t going to comment on this, because it’s just so stupid it defies description, but after thinking about it a bit more, I have to. What in God’s name were the geniuses at Abercrombie & Fitch thinking by offering the CEO a $4 million bonus for not using the corporate jet?

Yes, the board of directors of Abercrombie & Fitch promised to pay CEO Michael Jeffries $4 million for flying commercial.

The company divulged this information in an SEC filing yesterday, and while probably just about everybody in corporate America has been trying to come up with new ways to save money, this one takes the cake. Jeffries will get a $4 million check cut to him if he lowers his use of the jet to $200,000 a year. Because last year he blew $1.1 million on the jet for personal use.

“The 8-K that teen retailer Abercrombie & Fitch filed yesterday has to be one of the wackiest we’ve ever seen,” Michelle Leder wrote at footnoted, and she’s seen a lot of filings.

If there is anybody who can make the math work on this one, please write or call me. I want to start a hedge fund with you. Why wouldn’t they just let him blow the $1 million on ferrying his kids to soccer practice, very, very quickly, and save themselves $3 million? How does this possibly make sense?

I must be missing something, because ANF shares are up this morning, albeit less than 0.5%. Why aren’t shareholders screaming? Why would anybody bid up this company today? Did I miss some glowing CEO profile?

Listen, I haven’t used the Dow Jones jet once in the nearly 13 years I’ve been here. At the Abercrombie rate, that’s a $52 million bonus check I should be expecting this Christmas. Heck, sometimes I even walk to the cafe on the third floor, rather than taking the elevators. What’s that worth? How about paying me eight bucks every time I don’t use the coffee machine?

(Steven Russolillo contributed to this post.)

(Photo: wikimedia commons)

We may have to change that sign again.

Consumer prices edged slightly higher last month and core prices held steady, which can mean only one thing: the economy isn’t likely to ignite inflation anytime soon.

That provides more fuel for the Fed to keep interest rates near zero for the time being. And Fed chairman Ben Bernanke even signaled as much today in his testimony, saying he anticipates low interest rates will be needed “for an extended period” of time given current economic conditions.

Consumer prices rose only 0.1% in March, while core prices, which excludes food and energy prices, remained unchanged. Unrounded, prices were up only 0.063% and core prices were up 0.039%. And keep in mind core prices are up only 1.1% from a year earlier, which marks the smallest annual increase since January 2004.

“The bottom line is that inflation as measured by the government is going nowhere but down,” writes Dan Greenhous, chief economic strategist at Miller Tabak.

More pointedly, Paul Ashworth of Capital Economics notes the annual rate of core inflation dropped to 1.1% last month, from 1.3% in February and 1.8% at the end of last year. The decline in core inflation reflects more than just the deflationary pressure seen in housing costs.

“The disinflationary forces unleashed by the recession are only now beginning to have their full effect on the consumer price figures, even as the real economy shows signs of springing back to life,” Ashworth says.

Let's cheer up the bears, shall we?

Apparently pessimism, much like confidence, can be a self-fulfilling kind of thing, as the pessimists are being pessimistic only because there’s a general tone of pessimism in the air. At least, that’s what I got out of Floyd Norris’ blog post last night, in which he takes a blogger (ahem!) from Dow Jones to task, as well as the 800 some-odd people who ripped him online for his column last week, for being pessimistic.

It seems to me such pessimism merely reinforces the central point of the column: There is a general air of pessimism around.

Couldn’t have anything to do with the 15M unemployed Americans, almost half of whom have been out of work for more than six months, and about a quarter of whom have now been out of work for a year. Nope. Or the fact for the rest of us who are employed, real wage growth is stagnant. Average hourly earnings fell 0.2% in March, average weekly earning rose 0.1% (on an increase in hours) the BLS reported today. Nah, that couldn’t be it. Record foreclosures? Record bankruptcies? Nope. Nope.

Any of this ringing a bell? A pessimistic bell, maybe? You really want to claim it’s just the nattering nabobs of negativity?

East Shore Partners’ strategist Joan McCullough pretty well summed it up yesterday in her daily comments. “Okay, so no good-paying jobs, tight credit, sub-par wages, record foreclosures, delinquencies and bankruptcies. And now add on top of all that good stuff, a y/y 39% increase in the cost of a gallon of gasoline. Yet retail sales are said to be moving along nicely.”

Holy cow, we forgot about gas! Add that to the pessimistic pile.

Continue reading…

US stock futures carrying a positive premarket vibe following Intel’s strong quarterly results and outlook, as well as upside in JPMorgan’s 1Q report.

Keep in mind, though, we saw a similar setup in January after these two companies reported 4Q results, and the Dow Industrials fell nearly 150 points intraday and closed down about 100.

Busy day for data, with March retail sales and CPI due at 8:30 a.m. ET; February business inventories at 10:00 a.m.; and Fed’s Beige Book at 2:00 p.m. Bernanke testifies on the economic outlook this morning, and three other Fed officials set to speak at separate engagements, too.

US dollar index recently at 80.46. S&P futures up 5.40, DJ futures up 41. Ten-year lower, yield at 3.83%.