- “The global financial system continues to be unsound in the same way that a Ponzi scheme is unsound,” John Hussman writes. “There are not enough cash flows to ultimately service the face value of all the existing obligations over time.”
- On an essentially flat day yesterday, CBOE’s VIX volatility index fell 8.5% to 18.96, lowest levels since April. “If there’s one point I would emphasize when VIX watching, it’s to pay the most attention when it does something unusual,” says Adam Warner, as VIX is exhibiting “clear signs of complacency.”
- Growth of Chinese and Brazilian credit-card balances from 2008 to 2009 “can be a source of either encouragement or worry — or both,” FT’s Alphaville says. “A sustained run-up in debt can be ultimately destabilizing,” blog notes. “So can a burst of capital inflows. And this is all playing out rather quickly against a background of currency wars, central bank interventions, and expected quantitative easing in the US.”
- Remember when the critics came out in droves when Apple (AAPL) released its first versions of iOS without cut-and-paste functionality? “It’s hard to imagine any company launching a new mobile OS would take a similar tack,” John Paczkowski writes. “Yet that’s exactly what Microsoft has done with Windows Phone 7, which will arrive at market next month without that feature.”
- Amazon’s (AMZN) attempting to carve a niche market for Kindle, with plan to launch “Kindle Singles” — essentially works that may be longer than a magazine article but shorter than typical books. MediaMemo blogger Peter Kafka raises some obvious questions: What will pricing look like? How will wholesale pricing work? And is this directed at conventional publishers, or self-published by the authors? AMZN didn’t immediately comment to Kafka.
- Windows Phone 7 may be Microsoft’s (MSFT) best chance at making a serious dent in the smartphone market, Ryan Kim writes at GigaOm. “They’ve done a good job creating something that looks and feels distinct,” he says. “We still need to put the phones through their paces but the basic building blocks are there.”
- Small business optimism barely nudged higher in September, but it still remains at recessionary levels. Poor sales remain the biggest hurdle for small businesses during this sluggish recovery. “Usually small business owners complain about taxes and regulations (that usually means business is good),” Calculated Risk says. “But now their self reported biggest problem is lack of demand.”
- Not only are small businesses not interested in getting more financing, but they increasingly think financing conditions will worsen from current levels, writes FT’s Alphaville, based on NFIB’s small business survey for September. “Maybe investors are front-running the Fed, but small businesses seem unconvinced that further easing will actually loosen credit.”
- Wall Street pay is on pace to break a record high for a second straight year, WSJ reports.
- So far so good. Intel earnings beat expectations. And, as MarketBeat notes, the deets beyond the headline numbers also look pretty solid.
Stocks work off some sharp early weakness to end in positive territory, following some perceived reassurance in FOMC minutes that the Fed’s warming up the QE2 engines.
Early posture featured stronger dollar, sliding euro, but the USD began to lose steam well before the Fed minutes hit, enabling the Dow Industrials to erase a 97-point drop. Stocks looked to be on their way to a stronger finish, but pulled back right before the close.
All in all, stalking the euro continues to be a winning strategy for bulls. DJIA rises 10.06 to 11020.40, and Nasdaq Comp adds 15.59 to 2417.92. S&P 500 ends 4.45 higher at 1169.77.
Major indexes close at highest levels in five months, DJIA less than 2% below its 2010 closing high.
JPMorgan’s 3Q results look like the main event tomorrow. Curious to see how trading revenue comes in, any color on loan demand, credit-card and loan balances and how much lower loan-loss provisions contribute to overall results. JPM reports early morning.
China’s central bank raises reserve requirements, Fed minutes don’t offer any surprises, Pfizer announces a $3.6B deal to buy King Pharmaceuticals and all eyes now shift to Intel’s quarterly report after the closing bell. Dow Jones Newswires Assistant Managing Editor George Stahl as well as markets gurus Donna Kardos Yesalavich and Kristina Peterson discuss it all on the Markets Hub.
US stocks getting a boost late in the day after details from the most recent Fed meeting showed the central bank is more than ready to act to jump-start economic growth.
This reasoning isn’t anything new – the QE2 trade has been propping up the market arguably ever since Fed Chairman Bernanke’s Jackson Hole speech at the end of August. But as earnings season starts to ramp up, there’s concern that investor focus will shift toward companies’ quarterly results and outlooks, which may not have such a positive affect on stocks.
Miller Tabak’s Peter Boockvar dubs it the stock market’s “tug of war.” Essentially, the market is grappling with two key themes: sluggish economic growth and the Fed’s printing press.
“The Fed certainly has won the battle of asset prices since early September but will likely take a back seat until we refocus on it at the end of October,” he says. “Corporate America’s drive through 3Q and the outlook for 4Q will matter most and stocks I believe will consolidate at or below current levels during this precess.”
But don’t call Boockvar bearish just yet. He expects any consolidation from these levels to give way to a late October/early November rally due to the midterm elections and Fed action.
Dow Jones Industrial Average was recently up 31 to 11041 and S&P 500 up 6 to 1171, with both benchmarks trading at five-month highs. With stocks seemingly at overbought levels, Minyanville’s Todd Harrison offers his two cents on the situation.
“There’s an old adage that tapes that are overbought are sold on good (not great) news while markets that are oversold are bought on bad (but not horrid) news,” Harrison says. “Keep that in mind as earnings approach, and remember the asterisk that is the expectation of QE2 (which may well apply the same adage).”
Posted by Steven Russolilloon October 12, 2010 Bonds, Markets /
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Individual investors can take some cues from pension funds when it comes to bond investing, says Brent Burns, president of Asset Dedication. Burns tells Dow Jones’ Veronica Dagher why bonds still make sense for individual investors.
Yes, they did. FOMC meeting minutes say: “Stresses in European financial markets remained broadly contained but bore watching going forward.”
Contained? Uh oh, there’s that word again.
“Contained” has popped up a couple times in meeting minutes during the past two years, in references to inflation, but we haven’t seen it in this context since the central bank’s infamous observations that the subprime mortgage turmoil looked “relatively well contained” back in 2007. Gulp.
As a refresher, here’s what the meeting minutes said back in May 2007 (italics emphasis ours):
Members continued to view the risks to economic activity as weighted to the downside, although with turmoil in the subprime market appearing to have remained relatively well contained and business spending indicators suggesting a more encouraging outlook, these downside risks were judged to have diminished slightly.
Not hard to understand why we flinch when we see/hear the Fed say things look ”contained” in reference to something in which containment is consistently a troubling question, and very far from certain.
There’s a certain feel today, a somewhat subtle vibe, that investors may be (just maybe) looking a bit harder at the stock market’s expectations regarding QE2.
It’s clear that markets in general — stocks, bonds, commodities and forex — have priced in more Fed QE as a foregone conclusion, ready to roll as early as November. Presumptuous? Perhaps. Now the Dow Industrials are up more than 5% in the past four weeks, the 10-yr yield down more than 40 bps and a laundry list of commodities have soared. Coincidentally, with some greater insight into the FOMC’s Sept 21 meeting ready to spill, investors seem a bit more reflective.
Maybe they’re thinking those stock gains were a little excessive. After all, QE2 would largely be a last-ditch effort — the monetary equivalent of a hail-Mary pass — to spark something in the economy. Maybe we beat up the dollar a little too severely, bought the euro a bit too enthusiastically, they’re thinking, considering the festering problems on the continent that haven’t been fully addressed. We’ll know shortly if they feel chastened, or more emboldened, when we get a look at the FOMC minutes.
Stock futures pointmoderately lower premarket as the US dollar strengthens and the euro dips to its lowest levels in a week. Markets in Asia were mostly weaker overnight, with Tokyo hit particularly hard, Nikkei down 2.1% on ramped-up concerns about impact of yen strength.
Stocks also lower in Europe, euro recently hovering just above $1.38. Both oil and gold pull back on firmer USD.
FOMC meeting minutes, due out at 2:00pm ET, should command attention as folks try to glean more insight on any QE2 intentions. Intel reports 3Q results after the close. S&P futures down 6.80; 10-yr higher, yield at 2.34%.
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 […]
Bernie Madoff tells CNNMoney he’s having trouble sleeping. Click here to read more about that from CNN. He doesn’t know how lucky he’s got it, living behind bars in America. In China this week, a 39-year old businesswoman received the death sentence for running a $70 million Ponzi scheme – pocket change next to the […]
