Market Talk

US stocks rally to cap off a volatile February as oil prices remain elevated but off panic highs.

DJIA rises 96 (0.8%) to 12226, up about 2.8% on the month; S&P 500 gains 7 (0.6%) to 1327, Nasdaq Comp adds 1 to 2782. That makes three monthly winners in a row for the Dow, and five of the past six since Ben Bernanke started talking up QE2.

But, hey, it wasn’t such a bad month for crude, either. Nymex crude was up 5.2% in February, closing at $96.97. This benchmark is up six months in a row, rising 35% during that run. A move that big could be due only to fundamentals, right? Right.

Stock investors today jumped on a raft of economic reports, although we’re hard pressed to see how incomes rising as result of the payroll-tax cut is fundamentally good. No matter, apparently. The NAR says pending home sales didn’t fall quite as much as expected, so you know things are good.

You can expect a good day for stocks tomorrow, too, unless the world explodes overnight. The first trading day of the month has been a very reliable friend to the bulls.

Elsewhere, market’s starting to drill down to QE2′s scheduled end; so is the Fed. The central bank’s James Bullard and William Dudley were out today on the circuit talking about it, and Chairman Bernanke is sure to be asked about it tomorrow and Wednesday when he trudges over to Capitol Hill.

Whether this program gets cut off, tapered out or even fully extended is taking on more significance; it’s been a major source of the stock market’s rally since August, and indeed despite the Fed’s insistence it’s been a major source of the rally in commodities as well, so how the Fed plans to end it is a major concern.

Watching the ebb and flow of weekly jobless claims offers a high-altitude, fairly antiseptic view of what’s happening with layoffs nationally, but if you want to get a little dirt under your fingernails, go browse through state WARN notices.

WARN is short for Workers Adjustment and Retraining Notification Act, set up to give workers and unemployment agencies early warning of business closings and layoffs. The act requires notice (timing varies between states) prior to plant closings, mass layoffs, relocations or in some cases reduced work hours. East Shore Partners’ market strategist Joan McCullough wrote about the these notices (available on states’ department of labor websites) a couple months ago, and since then we’ve been keeping a casual eye on New Jersey and New York.

The national seasonally adjusted weekly claims data have improved, which is naturally welcome, and WARN notices don’t necessarily contradict that trend. But they do offer a more ground-level view of the layoff picture, particularly when you read names of places you might recognize and the number of workers being affected. Continue reading…

I found this very interesting. If you’re looking for trigger numbers within the crude-oil market, the number to watch for isn’t necessarily $120/barrel (for Nymex crude, at least.) That’s the number most people are pointing to as a tipping point for the economy. But the number, well numbers I guess, you want to keep your eye on is $103-$104. That level is a technical trigger for a spike up to the $140 range than torpedoed the economy back in 2008.

Here’s a break-down from BofA/Merrill Lynch’s Mary Ann Bartel, the head of U.S. technical analysis:

The continuation of the secular bull market for commodities is one of our themes for 2011. Within this theme, we remain bullish on crude oil. The pivotal level for crude oil futures is a 61.8% retracement at $103-104. This resistance has capped the rally, but given a positive trend for oil, our view remains that a break above $103-104 and continued turmoil in the Middle East points to a test of $140-150. On pullbacks, the prior breakout point provides support at $93-92, with stronger support at $87-84. Initial resistance beyond $103-104 is $118-120.

We saw crude oil rise right up to that level last week, and then stop. Mind you, nothing has really changed fundamentally on the ground, and the Jasmine Revolution is still threatening to spread, but the markets just…stopped. When that happened in the crude market, you saw the same halt ripple through all the other markets – stocks especially. It may just be a lull.

Continue reading…

Our colleague Kevin Kingsbury lays out why income “surged” in January:

While personal income jumped 1% in January, the biggest one-month increase in nearly two years, it was due to the 2-percentage-point drop in Social Security withholdings that went into effect at the start of the year. The reduction was part of the extension of Bush-era tax cuts through 2012 enacted in December. Absent the FICA decline, which was partially offset by the Making Work Pay tax credit that went away in conjunction with the withholding change, personal income was up 0.1% from December, the smallest since September’s flat reading.

If you just looked at the numbers in the stock market, you’d think things are pretty good. Dow’s going to be for a third month in a row, a roughly 2% gain this month, and there’s a nifty rally going on today, to boot. The reality is so different, though.

You are going to see the words “income” and “surge” put together today like ham and cheese on a sandwich. Don’t be fooled. It’s more like ham hocks.

Yes, personal income rose 1% in January from February, as reported by the Bureau of Economic Analysis. But this was almost wholly due to the payroll tax cut that went into effect the first of the year. Wages and salaries were up only 0.3% and transfer payments it seems were actually down a bit.

Meanwhile, spending was weak. Yes, it rose, but not nearly as much as expected. Also, keep in mind that these are January numbers. They don’t reflect any effects from this latest oil spike. The bottom line is the consumer is not spending money at any kind of pace that’s going to spark a self-sustaining recovery.

There is no way, no way, that this rise in oil prices doesn’t bite the economy. Absolutely no way. The place where I get gas two Friday’s ago was charging $2.95/gallon. That was up to $3.13 on Saturday morning, when I put some gas in the tank. It was up to $3.15 Saturday afternoon, when I happened to drive by again. It’s not just the squeeze on the consumer’s wallet. Rising oil prices affects businesses big and small at absolutely every step of their operations.

Continue reading…

US stock futures a tinge higher premarket, ahead of February’s final trading session and a busy week for economic data. Markets mostly higher in Asia overnight, and European stocks mixed to slightly higher.

US stocks snapped a three-week winning streak last week, but still on track for another monthly gain, which would make it three straight and five of last six months.

January personal income and spending hit the Tape few minutes ago. Incomes were up, thank you, Uncle Sam, but spending was weak; it did rise, but not nearly as much as expected. Remember, this is a report for January, so it doesn’t reflect any disruption from February’s oil shock.

Incomes were up by 1%, but if you strip all the games the government’s playing with your paycheck, disposable income was up 0.1%.

Chicago PMI set for 9:45 a.m. ET; and January pending homes sales at 10:00 a.m. Reports on manufacturing, construction spending, inventories and, of course, February nonfarm payrolls all due this week. Bernanke goes to the Hill tomorrow to talk about the economy.

S&P futures up 5.5, DJ futures up 47. Ten-year note higher, yield at 3.42%. Nymex crude actually down about 0.5%, at $97.40/barrel.

If you think the emerging markets are overdone, you might want to consider the frontier, says adviser Chris Cordaro. And, Dow Jones’ Brendan Conway relays one way traders are playing the market’s volatility.

So much for those notions that GE maybe added jobs in 2010.

Its 10-K fresh out (nice timing, Friday late afternoon/early evening), showing that the company, run by the head of the White House’s special jobs creation panel, cut another 17,000 jobs last year.

The “good news” is that GE only cut 1,000 US jobs, while eliminating 16,000 positions overseas. Still, that was more than 83 people per month cut loose in America last year.

Since 2006, the company has shed 22,000 US jobs, while the overseas workforce is down just 10,000 since 2006.

Again, we are eager to hear Jeff Immelt’s and his panel’s ideas on actually creating jobs in the US.

US stocks calm their britches, holding onto yesterday’s rebound, but still posted sharp losses on the week as the violence and chaos on North Africa continues unabated.

DJIA gains 62 (0.5%) to 12130, still down about 2% on the week; S&P 500 gains 14 (1.1%) to 1320, and Nasdaq jumps 43 (1.6%) to 2781. Crude gains a little ground, and tellingly Treasurys rise, a sign that investors are still looking for safe havens.

Market seems less worried about oil-supply shocks. Still, the surge in crude this week will be filtering through to the pump over the next few weeks, and given the revisions today to 4Q GDP — and what that said about the relative strength of the consumer — the economic effects are yet to be seen.

Listen, the bottom line for us here in the U.S. is that gas prices are going to go up, and all that optimistic talk about the consumer coming back that you were hearing in December was a bit off the mark. Add in that we are going to see a drag to the economy from the state and federal government.

Wages aren’t going anywhere, and while we may see a decent number next Friday on the monthly jobs report, it’s just a seasonally adjusted rebound from what was a seasonally adjusted number in January, and, well, we trashed this particular data point pretty good earlier this week. The bottom line is hiring remains weak, and given the headwinds isn’t going anywhere.

And all that’s assuming the Jasmine Revolution doesn’t have a bigger effect on the global economy than it already is having, and that’s not exactly a safe bet.