The headlines tomorrow will be all about the major U.S. stock indexes posting their best first-quarter in more than a decade (and their second best ever.) It’ll make for some great bullish-sounding soundbites, and the fact that stocks are up at all given all the craziness of the 1Q is a testament to…something. But while it’s true, of course — the numbers don’t lie — it misses so much.
Just two weeks ago, the S&P 500 and Nasdaq Comp were in the red on the year, negative, down, losing ground, and the DJIA was a couple dozen points away from joining them. Now, they didn’t just rebound, they rebounded sharply, almost violently, in the face of a constant stream of bad news. Kind of makes you wonder what’s really going on, doesn’t it?
DJIA slips 31 points today (0.3%) to 12320, after Fed’s Kockerlakota suggests rate hikes could come later this year; still the index gains about 6.4% on the quarter. S&P 500 loses 2 to close the quarter at 1326. Nasdaq Comp adds 4 to 2781. Again, too, NYSE volume is low, like it’s been this entire rally. Volume equals validity, as the say on the Street, but there hasn’t been much validity in this rally.
Stocks were hardly breathing through most of today, but that late speech from the Minneapolis Fed chief Kockerlakota — suggesting rate hikes could possibly come later this year — sends markets down. So in addition to all the attention on the jobs report tomorrow, everybody’s going to be scrambling to recalculate their equations about when rate hikes are coming.
The difference between a fed funds rate of zero and 1% doesn’t mean much to the vast public — remember, it was that 1% rate that sparked the housing bubble — but it means a lot to traders, who have made a lot of money off that zero rate.
Posted by John Shipmanon March 31, 2011 Markets, Stocks /
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Hope we’re not too late…
Looks as if the stock-market rally since late August got too juicy to resist.
Contrarians, pay attention. Well known for their dubious market-timing skills, the average retail mutual-fund investor appears to be putting money back into US stocks. Some sizable money, too, after an extended affection for fixed income.
The fund industry’s main trade group said yesterday that funds which invest mainly in US equities saw a total inflow of $9.26B in February, on top of an $11.5B inflow in January.
That’s the first back-to-back month of inflows in almost a year, and follows nine straight months of outflows from US stock funds. It’s the best two-month stretch for domestic equity fund inflows since April-May 2009, when investors added more than $23B worth of fresh cash. That time followed a stretch of outflows in nine out of ten months, from June 2008 through March 2009.
The regular-Joe fund investor has a history of selling low and buying high, so this situation bears watching. Will it be more than a brief two-month uptick for inflows (as we saw around this time last year), or will mom & pop quickly return to their aversion toward US stocks?
U.S. consumers face “serious” inflation in the months ahead for clothing, food and other products, the head of Wal-Mart’s U.S. operations warned Wednesday.
Still, inflation is “going to be serious,” Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY’s editorial board. “We’re seeing cost increases starting to come through at a pretty rapid rate.”
Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.
“Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along,” Long says. “Except for fuel costs, U.S. consumers haven’t seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory.”
Long mentions June, which is incidentally right around the time the Fed’s bond-buying program ends. That’ll be a peachy combination for the consumer and the stock market, won’t it?
Let’s start putting some of the pieces of this puzzle together, shall we?
The news has been almost uniformly bad the past two weeks, unless you were the one person in your office pool who had Virginia Commonwealth. But stocks have been on a tear. Why, exactly?
We have a few facts from which to start constructing a theory:
- On March 16, the yen spiked, reaching Y76 to the dollar. The next day, finance ministers from the G7 nations held a conference call and agreed to intervene in the forex markets to put a cap on the yen.
- The DJIA and S&P 500 hit their year low on March 16.
- The yield on the U.S. 10-year Treasury note hit a year low of 3.20% on March 16.
Since March 16:
- The yen has appreciated no further, and currently resides around Y82.88.
- The DJIA is up about 6.5%. The S&P is up about 5.8%.
- The 10-year Treasury yield rose as high as 3.49% on Tuesday. Through Tuesday, it had risen every session since March 16, a streak that has not occurred since 1990.
Do not think these various things are unconnected. March 16 was a pivotal day in the global markets.
Posted by Paul Vignaon March 30, 2011 Markets, Stocks /
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US stocks rally yet again, with the Dow logging its eighth gain in the past 10 sessions, as investors seize upon signs of improvement in the jobs market.
DJIA jumps 72 (0.6%) to 12351, within hailing distance of its year high; S&P 500 rises 9 (0.7%) to 1328, Nasdaq Comp gains 20 (0.7%) to 2777. NYSE volume again low. Stocks may have run into technical resistance, with the 1330-area a resistance level for the S&P 500. Still, the three major indexes have all risen for the eight of the past 10 sessions, and the S&P’s two smaller indexes, the 600 smallcap and 400 midcap, are faring even better. The former is at its highest since October 2007, and the latter is at its highest ever.
Also, the Russell 2000 is 15 points away from its all-time high from July 2007. Are we feeling bubbly yet?
ADP pegs March jobs growth at 201,000, and while this report can diverge sharply from official government numbers, it’s enough to get the market excited — and it’s in a pretty excitable mood anyway these days. Of course, the big report comes Friday from Uncle Sam, and of course, that big report will be revised next month, and revised again, and revised again in a year.
But data points always provide a trading opportunity for the market, no matter the bigger picture. What the economy needs more than one data point is a sustained level of both job and wage growth. When you see those two things on a sustained basis, you can start to talk about having some real confidence in the economy.
Posted by John Shipmanon March 30, 2011 Markets, Stocks /
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The mood around the globe remains positive for stocks, with strong gains in Tokyo and Hong Kong overnight, and European markets currently adding to recent gains.
London and Paris trying to make it six straight positive sessions and nine of last ten. DJIA closed yesterday at its highest level in six weeks.
US stocks have performed well during the weeks leading into quarterly earnings periods as investors anticipate strong results, and we’re entering that zone right now.
Thin day for data, just ADP’s gauge of March private payrolls due at 8:15am ET. The big check-processor pegged February’s jobs growth at 201,000, a shade below expectations of 205,000. The problem is ADP’s numbers have shown some wild divergences with the government report that’ll come Friday, but it is directionally at least a positive.
S&P futures up 6.30, DJ futures up 48. Ten-year note’s down to 3.48% after hitting 3.50% earlier this morning. Crude futures are a bit lower at $104.62/barrel.
Meanwhile, DJ’s Tomi Kilgore notes stocks are looking at something of a breakout:
Dow industrials set to open above the pivotal 12250-12285 resistance range that capped the index the previous three sessions, and in five of the first seven of the month. Getting through it intraday is one thing, but it’s not a clear breakout unless the DJIA closes above it. If it does, a move above the Feb. 18 intraday high (12391) would be a formality, and bulls will start talking about the May 2008 highs around 13130. If the DJIA falls back within that range, however, a test of the 50-day moving average (12097) becomes likely.
US stocks rise on light volume, as Treasurys sink again, despite a plethora of dour news both here and abroad, and you can be forgiven if that raises questions in your mind about just how fundamental — and how speculative — these moves are.
DJIA gains 81 (0.7%) to 12279, S&P 500 rises 9 (0.7%) to 1319, Nasdaq Comp jumps 26 (1%) to 2757. NYSE volume is about 3.5 billion shares, well below the daily average this year of about 4.5 billion. It’s the Dow’s seventh gain in the last nine sessions, which is now back within hailing distance of its year high of 12391.
Treasurys meanwhile log their ninth consecutive losing session; the yield on the 10-year is up across those nine sessions, something that hasn’t happened since 1990.
Now, here’s the news that brought all that about: housing prices fell, again, consumer confidence is down, S&P downgraded Portugal and Greece, Congress can’t agree on a budget, and the fighting in Libya rages. There’s more, of course, but you get the picture. Normally, a combination like that would not be a winning recipe for stocks. But these are not normal times.
At the end of last week, we joked that “if the troubling headlines keep up, we could be back at all-time highs before Earth Day.” So far, so good – the headlines are still dreary, and bulls are the ones laughing as stocks forge higher.
It remains a curious and impressive sight. An ugly March consumer confidence report, and another month of home-price declines indicating that even after prices started heading south nearly five years ago (and tens of billions of taxpayer money used for artificial support), housing still hasn’t found a bottom. And stocks rally.
Now, it’s true the downbeat numbers were in line with expectations, but that doesn’t mean they stink any less. And their implications for future activity, both for consumers and the housing industry, are grim.
Economists worked to minimize the consumer confidence tumble, saying it’s tied to high gas prices, events in the Mideast and market volatility, as if those troubles are set to disappear any day now. Consumers’ near-term outlook is considerably worse than a month ago, with fewer expecting business conditions to improve, fewer expecting their incomes to increase and fewer expecting to see more jobs. And those declines are all off of already low numbers. Continue reading…
Posted by Paul Vignaon March 29, 2011 Markets /
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So, the housing report tanked, and the consumer confidence data tanked. As a result, investors are heading for a “safe haven.” No, no, not Treasurys; those are down again, the ninth consecutive session they’re down, in fact. No, we’re talking about the new safe haven, of course.
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 […]
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]
