Stocks jumped out to some decent gains this morning as bulls tried to circle the wagons after last week’s selloff, but more QE2 trade unwinding — evidenced in dollar strength/euro weakness — seemed to be too much of a hurdle to sustain the advance.
Major averages end mixed, with Dow Industrials eking out a single-digit increase after earlier rising almost 90 points. Materials, energy and tech sectors finish as biggest laggards; financials post the best gains, but well below day’s highs.
Treasurys get absolutely hammered (more evidence that some QE2 love has faded), with 10-yr note’s yield rising almost 16 bps to highest level since Aug 5.
DJIA rises 9.39 to 11201.97, and Nasdaq Comp slips 4.39 to 2513.82. S&P 500 ends 1.46 lower at 1197.75.
Earnings reports due tomorrow from Wal-Mart and Home Depot. Oct PPI, industrial production & capacity utilization and homebuilders Nov sentiment report all due in the morning.
Deterioration in NY Fed’s November Empire State manufacturing survey was quite an eye-grabber, with the general business index tumbling below zero for the first time since July 2009. Interesting to see investors whistling past this report today.
Here’s a sample of the ugliness:
General business conditions reading plunged to -11.14 from 15.73 in October; new orders fell off a cliff, to -24.38 from 12.90; average workweek slides to -12.99 from 3.33.
Plunge in new orders was the sharpest drop since September 2001, NY Fed says.
On the bright side, manufacturers expect things to get better, with the future general business conditions index climbing. Chalk that up to Republicans taking back the House. We’ll see how long the optimism lasts.
Capital Economics calls the weak report “worrying given that all the surveys had suggested industry was emerging from its summer soft patch.” Still, firm says Empire State survey “is very volatile, so it is far too early to conclude that industry is heading back into recession. But with the upward impetus from the surge in world trade, the release of pent-up investment demand and inventory rebuilding fading, industrial growth will remain subdued.”
Philly Fed dishes up its November business report on Thursday.
Two multibillion-dollar deals were announced in the hot mining and data-storage sectors, while better-than-expected retail sales are boosting stocks. Watch Donna Kardos Yesalavich, George Stahl and I break it down on the Markets Hub:
US stocks last week suffered their worst weekly performance since Aug 13. But the poor showing doesn’t necessarily mean the rally’s over. My “Technically Speaking” column (subscription required) today looks at how stocks have historically performed following double-digit percentage pullbacks:
If history is any indication, last week’s declines shouldn’t prompt investors to kiss this rally goodbye.
The Standard & Poor’s 500-stock index shed 2.2% last week, ending a string of five consecutive weekly gains. Yet the weekly drop came after a four-month rally for the broad index in which it completely retraced its 16% price correction from late April to early July.
That may seem like a quick run-up, especially since the bulk of those gains occurred in September and October. But historically it’s right on par with other recoveries following double-digit percentage pullbacks.
Sam Stovall, chief investment strategist at S&P, said the S&P 500 has experienced 18 corrections — considered declines of 10% to 20% — since 1946. On average, those corrections required only four months before the index was able to return to break even, meaning the current rally is on target with previous recovery rallies.
Once those corrections returned to break-even levels, the index went on to average an additional 10% gain in the following four months before encountering at least a 5% pullback, according to Stovall.
“Obviously, some recoveries made it no further than breakeven, such as in 1955 and 1997,” he wrote in a note to clients. “Still others just kept going, and going, and going, such as in 1954, 1961, 1976 and 2003, when all lasted more than 250 additional calendar days.”
The S&P 500 topped at 1227 on Nov. 5 before retreating last week. But the declines shouldn’t shock anyone, especially considering the precipitous rally stocks have endured throughout the last few months.
“You could say that the market [was] just catching its breath after eclipsing its April high, like a marathon runner who slumps in exhaustion after crossing the finish line,” Stovall said. “Yet if history is any guide, for it’s never gospel, this market advance has further to run before succumbing to another meaningful decline.”…
GM stock is on track to return to public trading Thursday, and the hype is ramping up, which reminds us of another highly anticipated and sought-after IPO: Blackstone Group.
Remember that one? Everybody wanted a piece of Blackstone when it first offered shares to the public in late June 2007, just a few months before US stock markets hit an all-time peak. “Shares are so oversubscribed that some Wall Street analysts fear that irrational exuberance will send investors tripping over themselves to get the first publicly traded piece of the private-equity boom,” the Washington Post wrote on the day of BX’s IPO. Some headlines wondered: “Is Blackstone the Next Google?” Continue reading…
Stock futures slightly higher premarket as bulls look to bounce back from a rough week. Markets mixed in Asia overnight, edging higher currently in Europe, with the euro recovering a bit from earlier
USD index up 0.5%, Treasurys taking an early beating, perhaps on word that Republican lawmakers are trying to persuade the Fed to halt QE2 plans. Busy week for data, this morning brings Oct retail sales, and NY Fed’s Nov Empire State manufacturing survey at 8:30am ET. Sept business inventories set for 10:00am.
Also a lot of retailers reporting quarterly results this week, including Lowe’s this morning; Wal-Mart, Home Depot and Abercrombie & Fitch tomorrow. S&P futures up 3.70; 10-yr note hit hard, yield at 2.83%.
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 […]