Market Talk

Egyptian President Hosni Mubarak basically just flipped a big bird to the thousands of people out in the streets, mostly youths but joined in the past few days by the nation’s laborers and doctors and lawyers, delivering a defiant speech in which he offered a few, very few, concessions but making it clear he was not stepping down immediately.

Now, this is Market Talk, so we have to talk about this in relation to the markets. And it was a nutty day, nothing like Cairo, but still relatively dramatic. Stocks dropped sharply in the morning, as the long overdue sell-off appeared to arrive. But the market erased the bulk of those losses after word started to spread that Mubarak was going to address the nation, with the widespread consensus that he was going to announce his resignation.

Whether the market was rallying on the news, or using the news as an excuse to rally, well, that’s your call. DJIA finishes down 11 to 12229, after falling more than 80 in the morning; S&P 500 adds 1 to 1322, Nasdaq Comp inches ahead 1 to 2790. Trading in the last half-hour was especially erratic; the Dow came within 0.23 of a point of turning positive, before falling back.

The reaction across asset classes is muted; cruce rises a bit, gold’s down a hair, Treasurys are down, but it has more to do with market internals than the drama in Egypt. Ten-year note yield again hits 3.70% mark.

Mubarak did say he would “delegate” some responsibilities to the newly appointed vice president, Omar Suleiman, who later makes a separate speech in which he implores the people out on the streets to “go home” and work together “in the spirit of a team.”

Suleiman wasn’t exactly a crowd favorite, either. Can’t imagine that one’ll go over well. It’s going to be a long night in Egypt, and tomorrow’s going to be, well, I don’t know what it’s going to be and I don’t even want to speculate. But one observer on Al Jazeera commented that the situation is no longer fluid, it’s volcanic.

Once again it looks as if the Dow Industrials’ winning streak (now at eight straight sessions) may be in jeopardy, but it would be foolish to underestimate the bulls’ ability to turn things around, especially late in the session.

“These days, opening indications and actual closing prices are two very different animals,” Barry Ritholtz noted earlier at the Big Picture. He has a precise summation of how the bull vs bear battle has gone during the past several months:

In the face of massive liquidity of QE2, there remains a firm bid beneath this market. So far, losses have been modest to minuscule, with selling pressure well contained. M&A, share buybacks, anything but disappointing earnings are an excuse to put on the rally caps. Even dips are an excuse to buy. (We are running 53% cash on specific name selling, not overall market calls).

The bears are bloody but unbowed — they know a correction is imminent. But the bulls have heard this line for nigh on two years, and yet still the market still powers higher. The Dow, S&P and Nasdaq are all at multi-year highs. There is a difference between being early — a matter of days or weeks — and wrong. So far, the bears have been wrong.

Eventually, the grizzlies must be fed. They have their champions, including various Fed Hawks, who are terrified of an inflationary spiral. Lacker, Plosser and Fisher may be mortal enemies of price instability, but they are friends of Yogi and Boo-Boo and Baloo, well known amongst ursines for their opposition to easy money. And easy money is a bull’s best friend.

Even the most ardent bull knows that this too, will pass. The bears will have their day, before their next bout of hibernation.

The 64 trillion question: When? Continue reading…

Al Jazeera, which is about the only place you’ll be able to see continuous live coverage of Tahrir Square in Cairo, says Hosni Mubarak’s address to the nation is coming in about 15 minutes; It’s currently 2:45 p.m. Eastern time.

It’s trite to say so, but it looks like they’re celebrating winning the World Cup down there. That’s how the mood seems; they’re singing, dancing, waving flags, it’s a huge celebration.

For their sake, let’s hope the people are about to get what they expect.

Talk about timing. John, George and I were literally standing at the set, talking about Cisco’s earnings, when the first headlines started crossing about Mubarak stepping down. If we’d have taped five minutes earlier, we would’ve missed it, and I’d be cursing up a blue streak.

The market has a lot internally to deal with, but you wonder if the bulls will just grab onto the Mubarak news and force yet another rally.

(Incidentally, holy cow do I look small next to those two guys. Somebody get me an apple box.)

Egypt just heated up. Reports are breaking all over town that Hosni Mubarak is going to step down as Egyptian president tonight (we assume that’s tonight, Egyptian time, which is seven hours ahead of eastern US time.)

(U.S. stocks were down sharply, and then cut their losses sharply as word leaked out; still, equities are down overall, the victim of their own long winning streak. Crude oil, which had been largely flat, now up 0.6% at $87.25. You’d expect the crude pits to be a little nervous.)

Already, people are wondering, what next? What’ll happen now? Will the existing power structures remain? Will the people force a wholesale restructuring? Mubarak stepping down was inevitable at this point; the future of Egypt, and the region, however, could go in any of a number of directions.

Here’s the Journal’s story on Mubarak. The money quote:

“I spoke to him as the head of the NDP,” Mr. Badrawy (Hossam Badrawy, head of the National Democratic Party) said. “I told him this is for the good of the nation. This is the only way to restore confidence in Egypt. This is the move that the republic needs.”

Al Jazeera’s live blog says the crowd in Tahrir Square is chanting The army and the people in one hand – the army and the people are united” as the army discusses Mubarak’s “future” – what little of it is left.

BBC says Mubarak will hand power to VP Omar Suleiman. One wonders is the protesters will accept that; seems like they really want an entirely new power structure.

The news on Egypt has moved deep into the A section, even as the standoff there grows. I’m not sure if that’s more a testament to the short attention span of the American people, or the fact that we really just don’t much care what happens in Egypt, or that we can’t get too riled up about what’s happening in Egypt until something definitive actually happens. Maybe it’s a combination of all three.

Hey, we’re as guilty as the next guy. We probably wrote nothing but Egypt for four or five days, and then dropped it totally the past week. It’s just hard to get all fired up about it until something breaks (unless you’re an Egyptian, of course.)

Anyhow, nothing huge has broken. The main battle lines are still in place Hosni Mubarak is still holding onto his office despite the protests. It seems he’s learned a trick or two from the western powers, because his strategy appears to be “extend and pretend.”

But it really seems like the opposition is just growing, and you wonder how much longer he can hold on. At this point, it’s all just for pride’s sake; he’s already agreed to step down at the end of his term. He’s finished either way.

The anti-Mubarak movement is growing, in fact. Yesterday’s news was that laborers were now joining with the protesters. This morning, word is that doctors and lawyers are joining the fray as well, also on the side of the protesters. (A plug for WSJ’s Dispatch blog, they’ve been publishing a steady stream of breaking news on the protests. Good place for the latest information.)

What’s also interesting, to outside western observers at least, and probably to inside observers as well, is that, seemingly, the revolt has stopped, for now at least, in Egypt. There have been some protests in Yemen, and Jordan, and Bahrain, but they’ve been smaller and more peaceful, and more importantly, the governments there are trying to blunt any protests by engaging the protesters.

That doesn’t mean the movement is finished. There sure seems to be more than enough inequality and repression across the Middle East to fuel this thing. But you wonder if the leaders in other countries read the handwriting on the tanks.

US stocks poised to give some ground early, based on premarket futures, amid a slightly more downbeat mood in markets overseas.

Stocks in Asia mostly lower overnight, with inflation concerns getting some blame, and European markets are lower, weighed on by earnings disappointments.

Cisco’s results and outlook were also a letdown, contributing to a damper mood here in the US. CSCO off 9.6% premarket and set to nick about 16 points off the DJIA. Kraft reports results after the close.

Weekly jobless claims due at 8:30 a.m.; December wholesale trade numbers at 10:00 a.m. US dollar’s stronger, euro pulls back, recently at $1.363.

S&P futures down 7.60, DJ futures down 44. Ten-year note lower, yield at 3.66%.