- The Dow has posted four-straight days of gains and sits at a 10-week high, all while Treasurys fall on supply; 2-year auction hits record low yield. “Suddenly, investors live in a perfect world: There’s enough money out there to push the stock market higher and keep bond yields down,” Tom Petruno writes at LA Times’ Money & Co blog. “Enjoy it while it lasts.”
- “I really don’t think people appreciate the huge dangers posed by a weak response to 9.5% unemployment, and the highest rate of long-term unemployment ever recorded,” Paul Krugman says. “The point is that while policy makers may think they’re being prudent and appropriately cautious in their responses to unemployment, there’s a good chance that they’re prudenting and cautiousing us into a long-term jobs catastrophe.”
-After a couple of failed attempts, the S&P 500 has finally broken through its downtrend from the April highs, Bespoke Investment Group points out. “The next level of potential resistance now lies just below the 1130 level, which is where the June rally fizzled as well as the flash crash closing low on May 6.”
- BP’s plans to sell about $30B in assets. “The sales could be the best response possible to the spill’s legacy — as could the company’s debt reduction and increased cashflow,” FT’s Alphaville says. “Well, great — BP is turning into a well-functioning litigation-offset machine. That comes at the expense, though, of knowing how it’s actually going to function in the future as a successful — and safe — oil company.”
- Average age of completed but unsold new homes was 12.4 months at end of June, historically high but well off peak levels hit earlier this year. “Like so much else about this recovery, this is an area where the data says things are improving, but remain at bad levels,” NYT’s Floyd Norris notes.
- The second-half slowdown is here, Calculated Risk writes. “I still think we will avoid a technical double dip recession, but that won’t matter to the people impacted by the slowdown.”
- “Q2 earnings for American companies have been remarkable for how disconnected they seem from from the actual economy,” Joe Weisenthal says at Money Game. “Now it could be that these good earnings will soon translate to hiring, and everything will be great. But watch out if the divergence occurs, because that will mean fresh anger and scorn from politicians, and everyone else.”
- Michael Schuman asks if the euro crisis is really over. “Europe may be able to patch up investor confidence by acting like problems are getting solved without actually solving them,” he says. “But that will only get Europe so far.”
- “The Boston Red Sox may have beaten the New York Yankees to the punch to become the first billion-dollar baseball club in history,” Brett Arends writes at MarketWatch.
US stocks closed mixed as a weak reading on consumer sentiment offsets another strong dose of earnings reports.
Dow closes up 12 to 10538, its highest close since May 17. The index has posted four straight days of gains and is up 7.8% month-to-date. Nasdaq Comp falls 8 to 2288. S&P 500 drops 1 to 1114 and remains perched right at its 200-day moving average.
Investors lack conviction on another day of light trading volume. DuPont rises 3.6% after its 2Q profit almost triple and it raised its full-year earnings outlook.
In after-hours, Buffalo Wild Wings (BWLD) 2Q results exceed expectations and remains optimistic about full-year growth goals. BWLD up 7.2% in late trading. Panera’s (PNRA) results not as optimistic; bakery cafe chain says same-store sales growth will slow as the year progresses. PNRA shares drop 0.8% after-hours.
For tomorrow, Fed’s beige book expected to be released as well as data on June durable goods.
Posted by Steven Russolilloon July 27, 2010 Economy, Markets, S&P 500 /
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US stocks see-sawing between small gains and losses as a strong batch of earnings reports combine with weak consumer-confidence to bring the market to a standstill.
S&P 500 sitting right at its 200-day moving average as both bulls and bears haven’t been able to make a move with any conviction. Dow up 9 to 10534, S&P 500 off 2 to 1113 and Nasdaq Comp down 9 to 2287.
DuPont (DD) pulling DJIA higher, up 3.7% to $40.42, after its 2Q profit almost tripled and it boosted its full-year earnings view. But consumer discretionary is the S&P 500′s worst-performing sector after a report on consumer confidence raised concerns about 2H consumer spending trends.
Percentage of S&P 500 stocks trading above their 50-day moving averages is up to 72%, especially as the stock market has rallied significantly over the last few trading sessions. That’s quite the rise, considering the percentage dropped down to single digits just a few months back, Bespoke Investment Group points out.
“Peak readings during short-term rallies are usually around 85%-90%, so there is still a little bit of room to run before this indicator gets overbought,” firm says.
That’s a good sign on the technical front, but when analyzing the fundamentals behind the recent run-up, Gluskin Sheff’s David Rosenberg says don’t look at fundamentals for a driving force behind the rally.
“Now Bernanke may not be the world’s best forecaster; I don’t know who is,” Rosenberg writes. “But he has the deepest rolodex, more than any CEO. And when he deliberately says ‘unusually uncertain’ to describe the economic outlook, I find it irrational to ascribe anything fundamental to this rally.”
Rising profits amid so-so sales is a common theme this earnings season, especially as companies are cost-cutting their way to profitability while consumer demand has yet to make a comeback.
Trimmed work forces and higher productivity are generating profits, proving to be a successful short-term formula, but certainly one that can’t last forever. From Free Exchange blogger Ryan Avent:
It’s difficult to avoid the conclusion that low demand is responsible for the chasm between where the American economy is and where we’d all like it to be.
That’s basically the long and short of what’s plaguing the economy. The lack of demand is why consumer spending remains depressed. And consumer spending is depressed because the unemployment rate remains stubbornly high. The unemployment rate is high because companies aren’t willing to hire. And companies don’t hire because they aren’t seeing enough demand. It’s a viscous cycle that doesn’t have an easy solution.
But as corporate profits keep rising, one would think companies would have more incentive to start rehiring. Unfortunately that notion hasn’t come to fruition during this recovery.
Fomer labor secretary Robert Reich explains how higher profits are no longer boosting employment. “We’re witnessing a great decoupling of company profits from jobs,” he says. “The next supply-side economist who tells you companies need more incentive (i.e. lower taxes) before they’ll hire is living on another planet.”
There’s a theme emerging here: corporate earnings still look good, but the consumer doesn’t look much better. That separation (Josh Brown characterizes it far more forcefully) is what we’re talking about on the Markets Hub today.
Also, we didn’t get into this on the video (only three minutes, don’tcha know) but it’s interesting to see that both the Dow and S&P 500 over the past week or so ran strongly right up to their 200-day moving averages – and are stuck there today. Given the very light volume that’s attended this rally, it’s a sign that what we’ve got here once again the traders are just having a bit of fun.
The lousy jobs market is good for one group: staffing agencies. Big temp agencies are seeing strong demand for their services as companies, despite rising profits, remain reluctant to hire full-time staffers, as we note in today’s Upshot:
Despite rising profits, big businesses remain hesitant to hire permanent employees, a reluctance that is fueling demand and higher profits for the companies providing temporary staffing services.
Manpower, TrueBlue Inc. and Robert Half International reported second-quarter gains in their businesses as employers continue to prefer the flexibility that temporary workers provide while awaiting more tangible signs that the budding recovery won’t stall.
TrueBlue, a Tacoma, Wash., blue-collar temporary staffer that operates Labor Ready, Spartan Staffing and other staffing outfits, last week said profits more than doubled, aided by a 15% rise in revenue and an income tax benefit.
Chief Executive Steven Cooper said manufacturers are hiring more temps now than during similar points in prior economic recoveries. “It feels like they’re hiring back full shifts full of temps,” he said during an call with analysts.
US stocks continue to benefit from the positive vibe thrown off by solid 2Q earnings, stronger growth in other parts of the world (like Asia and Latin America) and a more impassive tone on European sovereign debt challenges — which incidentally keeps a good bid behind the euro.
Is the cheerier feeling toward Europe and euro showing an implicit faith in promised austerity measures? That may be a hasty bet, as austerity’s full-bore bite’s still a long way off. Banks leading gains now in Europe, euro pops above $1.30. No surprise US stock futures aimed higher.
S&P/Case-Shiller May home price index due at 9:00am; July Conference Board consumer confidence, Richmond Fed manufacturing index set for 10:00am. S&P futures up 5.70, DJ futures up 55. Ten-year lower, yield at 3.02%.
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 […]
