Market Talk

Clearly some strong readings in the January ISM report, notably in the prices index. Perhaps the most informative section contains the following:

Commodities up in price: Aluminum; Aluminum Products; Brass; Brass Products; Caustic Soda; Chemicals; Copper; Copper Based Products; Corn; Corrugated Containers; Diesel; Freight Rates; Fuel Oils; High Density Polyethylene; Lubricants; Nuts; Packaging Materials; PET; Plastics; Plastic Products; Plastic Resins; Polyethylene Resin; Polypropylene; Soybean Oil; Stainless Steel; Stainless Steel Products; Steel; Steel Products; Steel Surcharges; and Sugar.

Commodities reported down in price: none.

Here’s the kicker. Commodities reported in short supply: “Electric Components is the only commodity reported in short supply,” ISM said. A list of 30 commodities with rising prices (many soaring), not a single commodity falling in price. One commodity reported in short supply.

So much for that time-worn economic model for price determination in a market. Continue reading…

The initial reaction to President Hosni Mubarak’s national speech was swift in Tahrir Square in Cairo. Amid the shouts from the crowd (and, of course, I’m relying on translations here, since I don’t speak Arabic) was one clear message:

“Leave!”

Here’s a few grafs from the Journal story:

The Muslim Brotherhood, which is working with a coalition of opposition groups, was quick to say Mr. Mubarak’s pledge to step down months from now wasn’t enough and that the protests will continue.

“No one is satisfied,” said Mohammed Morsey, a spokesman for the group. “He and his system have already failed, and the people do not want him to continue with his colleagues. He has to leave.”

Mr. Mubarak’s announcement makes him the second victim of an unprecedented wave of protest in the Arab World that toppled Tunisian President Zine al-Abidine Ben Ali last month and has leaders in Jordan, Syria, Algeria and Yemen scrambling to shore up their positions.

Good luck with that, fellas.

The stock market isn’t worried about Egypt. The stock market isn’t worried about anything, seems.

US stocks rally after another good reading on the manufacturing sector, pushing the Dow and S&P 500 back over key psychological and technical levels, and as the market decides Egypt’s big news just isn’t a disruption.

DJIA jumps 148 (1.2%) to 12040, back over 12000 S&P 500 rises 21 (1.7%) to 1308, back over 1300; those numbers have been targets for a while. Nasdaq Comp gains 51 (1.9%) to 2751. Crude slides 1.5%, as there haven’t been any disruptions to the global oil trade due to the Egyptian unrest.

ISM says the manufacturing sector had its best showing in nearly seven years. That’s all the bulls needed to hear.

Mubarak addresses Egypt in a national speech; says he won’t run for president again “for the good of the nation.” The immediate reaction from the people in Tahrir Square isn’t, shall we say, welcoming.

But Egypt is a world away from Wall Street. Here’s something I put on the wire early this afternoon:

BofA/Merrill’s David Bianco isn’t necessarily telling you to sell, mind you, but he notes today that the firm’s “Sell Side Indicator” held steady in January, and remains at its highest levels since May 2008. “The last time that Wall Street strategists were this bullish on equities was a few months before the collapse of Lehman Brothers,” he writes. But the indicator itself still remains in neutral territory, he notes. “Given the contrarian nature of this indicator, we take some comfort in the fact that Wall Street strategists are still recommending that investors should be underweight equities.”

It’ll take more than a million or so angry Egyptians, and Tunisians, and Yemenis, and Jordanians, and Syrians, and God knows who else, to knock this stock market off its stride.

Oh, and if you’re thinking, because we know you are thinking it, well, if the Fed stops buying all those Treasurys, that’d stop the rally, well, here’s the first, first hint that the groundwork’s being laid for QE3:

The Federal Reserve could debate extending its bond-buying program beyond June if U.S. economic data proves weaker than expected, Kansas City Fed President Thomas Hoenig said.

Another round of bond buying “may get discussed” if the numbers look “disappointing,” Hoenig told Market News International in an interview published on Tuesday.

Why end a good thing while it’s going strong, right?

Addendum: Immediate reaction in Cairo, as reported by the Journal:

*WSJ: Immediate Reaction From Tahrir Square Is Anger, Shouts Grow Louder

I find it impossible to believe the people will be mollified by Hosni Mubarak saying he’s leave office – in eight months.

Previously:

No, we don’t have it. But Reuters will carry the Mubarak speech live (h/t Zero Hedge)

He’s widely expected to say he won’t run for another term, which ends in September. Who out there thinks this will do anything to mollifying the 100,000, or 200,000 or million people (depending upon who’s doing the counting) out in the streets in Cairo? Who thinks Mubarak has a chance of lasting to September?

He should focus on making it to Saturday, forget September.

“His abdication seems to have already begun,” Reuters’ Samia Nakhoul writes.

Addendum: I delinked from that Reuters site; it was crashing my browser. Don’t know about you. You can watch it all on Al Jazeera.

Latest, latest word is President Hosni Mubarak is going to address the nation tonight, with Al-Arabiya reporting that he’s going to say he won’t seek another term.

Given the time difference between Cairo and New York, seven hours, that speech should be coming very soon. His term is over later this year, but somehow I doubt even this latest concession would mollify the hundreds of thousands clogging the streets in Cairo.

So that would make two governments toppled over the past two weeks. Anyone care to bet on where the third will come? The King of Jordan fired his cabinet today, a move that earlier did nothing for Mubarak. The movement is also picking up steam in Yemen and Syria.

Addendum: this report says Mubarak’s term ends in September. Given what we’ve seen from the protesters, I see no way they’re going to let him stick around for another eight months.

Here’s a headline that just crossed the Broadtape that should shock just about absolutely nobody:

Severe Winter Storm Hitting Much Of US – Reports

Doesn’t come as a surprise to me; I spent more than an hour this morning waiting outside for a bus. Already, you can hear the weather being used as an excuse for everything from jobless claims to retail sales. One thing it won’t be used to excuse is the stock market, which today is striking fresh multi-year highs, as apparently the market has now totally discounted the crisis in Egypt and any effects from it. If you watch the business news shows, in fact, Egypt is hardly an issue at all anymore. They’ve already moved on.

That would be a mistake. The ramifications of what’s happening in Egypt will be felt beyond the ruling palaces of Cairo. It will be felt, as well, beyond the oil pits. (Truth be told, we should give the boys on the NYSE floor a break. This crisis is going to be ongoing, the ramifications will move on a time-frame totally divorced from the second-by-second life of the U.S. stock exchanges, and, well, they’ve still got business to conduct.)

While the majority of the focus so far has been on the effects of the crisis on oil, you might want to pay attention to how it’s affecting food.

Capital Economics’ Julian Jessop has this thought:

For now, we are more concerned about the impact of the events in Egypt on food prices. Unlike the rise in the cost of oil, the recent increases in agricultural commodity prices mainly reflect supply shocks, which have been compounded by export bans and hoarding. Extreme weather conditions last year damaged crops in many parts of the world, notably harvests of wheat and sugar. The resulting increases in food prices have contributed to social unrest in many countries, including in Egypt. Governments in the rest of the Middle East and elsewhere, fearful of contagion, are responding by restricting exports of agricultural commodities and/or increasing imports to add to precautionary stockpiles. In the near-term however, these individual actions simply make the global problem worse.

This suggests that, even if the crisis in Egypt eases soon, the actions taken by governments elsewhere to prevent similar uprisings in their own countries will add to the upward pressure on global agricultural commodity prices. This will add to the upward pressure on food price inflation too, and is probably a better reason than higher oil prices to expect the global recovery to disappoint.

I love Kristina’s opening here: “Unrest is spreading through the Middle East, but the stock market doesn’t seem to care.”

Truer words were never spoken, as they say.

It’s been nearly guaranteed for at least the past year — stocks go one way — up — on the first trading day of the month. Looks like the pattern could hold, devil may care.

Nearly all the S&P 500′s 2010 gains were captured during the first trading session of each month, and in seven of the last twelve months, the index was up more than 1% in the month’s first session. So, your odds are pretty good today bulls. While Egypt’s turmoil persists, the dynamic hasn’t changed much, so the consistent drone has lulled investors back to more a complacent mood, perhaps at their own peril.

Pfizer’s 4Q bottom line looks as expected, but outlook disappointed, shares off a little premarket. Meanwhile, strong results out of UPS, upbeat outlook has shares up about 3% premarket.

Jan ISM manufacturing index, Dec construction spending due at 10:00am. Dec auto sales also due today. Crude futures pull back following highest settle yesterday since Oct 2008.

S&P futures up 7.40; 10-yr note falling, yield at 3.43%.