- AIG and Treasury reportedly discussing an accelerated sale of the government’s stake. WSJ reports Treasury’s likely to convert $49B in AIG preferred shares to common and gradually sell its stake.
- “In case you lost track of this sorry affair, AIG, the biggest ward of the state in human history, continues to get the kid glove treatment,” Yves Smith writes at naked capitalism. “Funny, isn’t it, how creative and accommodating the Treasury can be when dealing with large distressed firms, and its skill seems to evaporate when contending with underwater homeowners.”
- This is not a typical stock picker’s market. Far from it. Since the May 6 “flash crash,” correlation of S&P 500 stocks to the overall index has reached its highest level since the 1987 crash. “The stock market has turned into a schizophrenic herd of sheep,” the Pragmatic Capitalism blog says. “Currently, the herd is grazing happily with not a care in the world. But don’t be fooled — when something spooks them you’ll get trampled if you don’t run with them.”
- Retail sales rise for second straight month and the 0.4% rise in August is the highest percentage gain since March. “If we look at the monthly trend of late, there’s an upside bias,” James Picerno writes at The Capital Spectator. “It’s hardly definitive or strong enough to close the book on worries, but considering what might have been it’s okay and more than welcome.”
- Microsoft’s (MSFT) Bing has overtaken Yahoo (YHOO) as the No. 2 search engine in the US, at least according to Nielsen’s August report. Firm says Bing had 13.9% search share last month, compared to Yahoo’s 13.1%. This will “will surely cause a firestorm of controversy in the search arena today,” Kara Swisher says at All Things D. Regardless, Google (GOOG) still dominates as it holds 65.8% of search, up 0.9% month-over-month and 0.5% from a year earlier.
- The outcome from Basel III has been critiqued left and right, but Reuters blogger Felix Salmon finds some positives, calling Basel III a “quiet victory” and saying the banking restraints are fairly constructive. “The Basel committees did a masterful job of depoliticizing the process as much as possible,” he says. “If politicians and the media had got involved, that might have made the process more democratic, but it would also have made it much more chaotic and quite possibly would have derailed any chance of an agreement at all.”
- Couch potatoes rejoice! Google TV, the new Internet television product Google (GOOG) is rolling out, will hit stores in the middle of October, possibly on Oct. 17, Engadget reports. Citing an internal memo from Best Buy (BBY), the blog says BBY had originally planned to begin selling Google TV on Oct. 3 but the launch has been pushed back by two weeks.
- Investors who try to time the market may be better off sticking with a buy-and-hold strategy. Barry Ritholtz posts a chart at The Big Picture looking at how investors would do if they bought the S&P 500 in 1993 and how their performance would be dictated if they missed the 10 best days or avoided the 10 worst days.
- Rimarkable blog wonders why the BlackBerry Curve 3G doesn’t run on BlackBerry 6 out of the box. Research In Motion (RIMM) says BlackBerry 6 will be available for the Curve 3G upon network certification in the coming months. And RIMM notes the device, which will sell initially through Verizon Wireless, is BlackBerry 6 ready. But for now, it will run on BlackBerry 5, prompting Rimarkable to wonder why RIM would release a device with an “old deprecated OS” a month after the debut of its next-generation operating system.
The tide's turning against the good ship Stock Market.
Today was an interesting day. There’s definitely something floating in the air again. Stocks had an easy run from the August lows right through to yesterday, no matter how shaky the data looked. But now that stocks are hitting up on technical resistance again, you’re seeing them fall back.
The lack of volume isn’t helping; the markets need a critical mass to pop through some of these things (I’m thinking here 1130 on the S&P, roughly the top of its recent trading range) and the low volume isn’t providing it.
But it’s not just that. Today was an interesting day. Gold hit a record. The yen strengthened to a 15-year high against the dollar (again.) Treasurys continued their rally. The euro hit some buying tripwire and surged. Stocks tried to follow, but got caught up in their own issues. But what stands out is the move to safe havens: the yen, gold, Treasurys.
I still think that equities markets are going to hold through the mid-term elections, barring some big change in the tea leaves, but once again, we may be looking at a rally that’s nothing more than a temporary rebound, to be met by renewed selling (and possibly fierce selling) once some unpublished but generally understood by the markets number, like 1130, is met and not catapulted over.
In other words, the market has once again just been playing games.
US stocks snap a four-day winning streak as investors shied from risky assets, instead vying for safe havens such as Treasurys and gold.
DJIA drops 18 to 10526, S&P 500 falls 0.8 to 1121, but Nasdaq Comp rises 4 to 2290. Financials, which led the market yesterday, were today’s worst performers. Gold hits a fresh record high and Treasurys rallied as investors turned risk averse.
Retail sales posted a second-straight month of gains. But troubles abroad resurfaced as a closely-watched survey on expectations for Germany’s economy fell well short of expectations.
Attempting to divine the message from the markets is a constant preoccupation. Most times the clues are subtle, and easily dismissed. Other times, like yesterday and today, the signals seem more bold and definable, suggesting a clear direction or strong sentiment may be about to emerge.
As we noted earlier, it was curious yesterday to see both stocks and Treasurys rally, as if investors couldn’t decide if they wanted to embrace risk or run from it. That action has continued today, with a more pronounced rally in Treasurys, even as stocks earlier pulled off a sharp turnaround, loping higher in a chase after the sprinting euro. The Dow Industrials’ about-face produced an 89-point spread from session low to high so far.
Today it’s a duel between the safety and the risk trade. Stocks and the euro have rallied, US dollar has sold off sharply on the risk side of the ledger. Meanwhile, gold surges to fresh highs, Treasurys and the yen rally, while oil declines in a skew toward safety.
So what’s it going to be, safety or risk?
Maybe a clue from technician Walter Murphy, via Art Cashin at UBS, in his morning comments. Murphy noted the S&P 500 has rallied 9 of the last ten sessions, Cashin said, which has only happened 11 times since 2002. “In every case, it was followed within a day or two by a meaningful pullback. Stocks are overbought “and vulnerable,” he says.
Posted by Paul Vignaon September 14, 2010 Economy, Markets /
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Gluskin Sheff’s chief economist David Rosenberg gets a ton of grief for his bearish leanings, which really says a lot more about the people giving the grief than it does about Rosenberg, because if more people had listened to him over the past few years, fewer people would’ve gotten wiped out.
Anyhow, here’s an interesting comment from Rosenberg, his criteria for bullishness. Not surprisingly, it’s comes from a completely different angle than the typical Wall Street bull, whose main arguments always seems to conclude that now’s the best time to buy stocks. Also Rosenberg, as usual, actually makes sense.
If I was going to publish a bullish report on the U.S. economy, it certainly wouldn’t be based on consumption, employment or housing. It would be based on innovation, patents, and the likelihood that the U.S. is embarking on a manufacturing renaissance of sorts — partly reflecting the new permanently higher level of energy prices, which has negatively affected globalization, years of U.S. dollar depreciation, which has helped act as a protective tariff for local producers as well as a major competitive boost.
Remember how aviation technology accelerated dramatically in the 1930s depression? Nothing is to say that we can’t see major advances in coming years in energy, medical and transportation technologies even as the economy continues to struggle with expunging all the debt and spending excesses of the last cycle. I have no problem with reports that are bullish on specific themes but at the same time I strongly feel that we should treat reports that shamelessly attempt to downplay the very serious and complex headwinds in the U.S. labour and housing markets, with the utmost of skepticism.
Stocks are struggling to keep the rally going (interestingly enough, they’re still posting some gains here even as gold, the yen and Treasurys are rallying as well, more on that later.) Equities are getting help from retailers today, even as bank stocks, yesterday’s darlings, take a breather. Also, keep an eye on currencies; there’s a lot going on there today.
It’s hard to yank our attention away from the disaster that was the New York Jets last night in the Meadowlands, but this is Market Talk, not the Sports Guy report, so we’ll try and focus (but it really is hard.)
The latest evidence of the state of the economy crossed the Tape this morning in the form of Best Buy’s quarterly earnings and the Commerce Department’s report on August sales. In both cases, there were the proverbial upside surprises that get the Street boys so excited, but in both cases as well, a read past the headlines contains useful and cautionary information.
Best Buy’s big headline was, to be sure, an eye opener. The company, the nation’s largest electronics retailer, posted profit growth of 61%, well above Street views of 40% (and even that would’ve been pretty eye opening.) The shares immediately jumped, and you could almost hear the bulls snorting in their pens. I mean, 61% profit growth is a big number. Really big. Unusually big when you consider that sales, you know, sales, were up only 2.9%. Do those two numbers seem at all related?
They don’t, and they aren’t. A host of factors helped Best Buy produce that gaudy profit-growth, but real, actual, old-school sales wasn’t one of them. Stock buybacks helped, as did a sharply lower tax rate, as did higher margins. US sales rose only about 2%, and US same-store sales actually slid. That should tell you something about the relative strength of the US consumer (albeit, full disclosure here, I did buy a new flat-screen TV at Best Buy this quarter, but, as you’d expect these days, it was on sale (and, of course, we waited as long as possible, until our old set was lost in a sea of purple tint.))
Christopher Whalen over at Institutional Risk Analytics is one of the sharpest banking critics out there. This is his succinct take on this weekend’s Basel III capital-ratio rules. Notice, too, he harps on a point some others have made as well: the changes to accounting rules in the wake of the credit crisis, and accounting rules in general, mean far more than capital ratios.
“Basel III is entirely irrelevant to the economic situation and even to the banks,” notes Christopher Whalen of Institutional Risk Analytics, which publishes stress ratings for all US banks. “Through things like minimum capital levels, the Basel II rules provided the illusion of intelligent design in the regulation of banking and finance. In fact, Basel II made the subprime crisis possible and the subsequent bailout inevitable. Now Basel III is being criticized as hurting the economic recovery. In fact, Basel III is a sideshow and is dwarfed in terms of its economic impact by changes in accounting rules and securities laws in the U.S. and EU. The only people who care about Basel III are the economists and regulators who are employed to support this ridiculous process.”
Indecisive session for stocks in Asia overnight, and European markets appear to be waffling as well, leaving US stocks without much direction premarket.
The euro has relinquished overnight gains that saw EUR/USD tick above $1.29; recently at $1.284. An interesting contour to yesterday’s action was the rally in Treasurys even as stocks rallied, an indication that not everyone jumped on the risk-trade bandwagon. Gold futures are surging higher this morning, oil backing down.
August retail sales data due at 8:30 a.m., economists see a gain of 0.3% overall; July business inventories at 10:00 a.m., estimates peg inventories up 0.8%.
S&P futures down 1.70, DJ futures down 11. Ten-year note higher, yield at 2.71%.
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 […]
It doesn’t look like George Zimmer is going to be able to guarantee it, anymore. The founder of Men’s Wearhouse has been fired from his own company, the clothier announced today. Click here to read the announcement. “The Board expects to discuss with Mr. Zimmer the extent, if any, and terms of his ongoing relationship […]
