Market Talk

The images that mollified the markets here in the states today were fuzzy ones of helicopters dumping water on the destroyed nuclear reactors at Fukushima Daiichi, and the statements that mollified the markets were vague assurances of progress in fighting that catastrophe.

There’s also been a general feeling that the area stricken by the triple calamities isn’t economically vital, and the market’s been banking on the idea that the nation’s output won’t be too badly crimped. So long as Tokyo’s okay things will be okay seems to be the general idea.

But the disruption to daily life in Tokyo is growing, and if daily life there is being upended, then the economic effects of the calamity can only grow. I was here on Sept. 11. Nobody fled New York City, even though many wanted to. Everybody worked through a nightmare. I have no doubt that the Japanese people will as well, but this idea that it’s a “well contained” calamity, to borrow a phrase, is starting to look just a bit silly.

Obviosuly the situation in Tokyo is nowhere near as dire as that in the north, but the capital is becoming a very chaotic place itself, as the FT’s Gwen Robinson makes clear in this post that provides a look at the mood inside one of the world’s largest cities, and one of the world’s three major financial centers :

The television showed images of enormous queues at international airports around Japan. Some people, unable to make reservations by phone, went to Narita or Haneda airports near Tokyo to try to buy tickets over the counter.

Train stations were also packed with people trying to head west, particularly expatriate families seeking to relocate to cities such as Osaka, Kyoto and Fukuoka near international airports.

In fact, one expat wife who was taking her children to Kyoto earlier in the week described the bullet train, normally half full with besuited Japanese businessmen and a smattering of other travellers, as a “rolling high-speed nursery,” packed with screaming kids and foreigners all fleeing Tokyo.

Stocks rally to break a three-day losing streak, soaring on gaudy gains in the energy sector, as well as strength in materials and industrial stocks.

The prior three sessions had shaved about 3.6% off the DJIA, so snapback comes as little surprise. But rebound seems more a function of calmer headlines from Japan, rather than an all-clear signal.

Oil gets frisky again, along with a swath of other commodities. Lower jobless claims, strong Philly Fed add to positive vibe. No economic data tomorrow, so geopolitical concerns likely to be key focus.

DJIA rises 161 to 11774, and Nasdaq Comp adds 19 to 2636. S&P 500 ends about 17 higher at 1273.72.

Sitting out the past week on vacation, one thing I was struck by is the vibe from Wall Street analysts, strategists, pundits, etc., that the stock-market pullback driven by the Japan disaster is just another buying opportunity. Just another chance to load up.

The sense of assurance in the voices of guests on CNBC, or in written missives, reminds me of the same widespread attitude in the months following the tech bubble bursting in early 2000. Every dip was to be bought, stocks were “on sale” and each sell-off just created another “buying opportunity.”

I admit to eventually buying into the logic myself, by picking up 50 shares of Cisco (CSCO) in an IRA in early 2001 after the stock had fallen more than 50% from its 2000 peak. How much further could a blue-chip tech darling like CSCO fall, anyway? Another 60% from where I bought it, that’s how far. Ten years later it still hasn’t recovered all the way.

Looking back, the bursting of the tech bubble seems like a brief rain shower compared to the mayhem in the global picture today. As Paul noted earlier, how can anyone say with reasonable accuracy that “the worst is over”? Simply absurd.

Another grabber while I was away was the Fed noting “that the economic recovery is on a firmer footing.” Maybe so. But how firm can it be if the committee, without a single dissenter, caps off the statement by saying it “continues to anticipate that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate for an extended period”?

If things are firming so nicely, then why not cease with the QE2 and ease up interest rates a quarter or even half a point? Don’t hold your breath for that, citizens. The only thing on firm footing is Ben Bernanke’s loafer, pressing the liquidity pedal to the floor.

On today’s Market Hub, we try to get past the headlines and break down what’s happening with U.S. stocks and the Japanese yen, both of which are under varying degrees of pressure, despite today’s rise in stocks and easing in the yen.

Dennis Gartman touched on the topic of the yen, as he does most every day, in today’s Gartman Letter:

THE PANIC CONTINUES and quite honestly that is all one can say at this point, for the violence of the moves since the close of trading in N. America last evening have been nothing short of astounding. We cannot recall markets such as these since the days more than a decade ago when Long Term Capital Management was collapsing amidst the panic that was the Russian Crisis. That August we can recall the Yen moving 7 “Big Figures” in one day, sufficient to take trader after investor after institution after speculator…bullish and bearish of all markets everywhere… out of the positions with sizeable losses. Such are the markets when panic breaks out.

Gartman makes the point, without coming out and saying it. The horrific events of the past week in Japan, an earthquake followed by a tsunami followed by a nuclear crisis that, are still playing out. You do not know where this crisis is going to lead. Nobody does, and anybody who says the worst is over is trying to sell you something they do not, in fact, own.

Yesterday’s frantic trading in the yen — pushing it to a new record high against the dollar — were stunning in their pace, and even if the forex market doesn’t get as much press as the stock market, it pointed to a big shift in the marketplace. How big, and what else it will affect, remain to be seen.

Continue reading…

Despite more declines in Asian stocks overnight, European markets are currently moving higher, contributing to a positive premarket setup
for US stocks.

Hard to detect any appreciable improvement since yesterday in the news flow out of Japan or Mideast, but bulls are maneuvering for an opening bounce after yesterday’s sizable selloff.

February CPI and weekly jobless claims due at 8:30am; Feb industrial production & capacity utilization set for 9:15am; Philly Fed’s March business outlook and Conference Board’s LEI both due at 10:00am. S&P futures up 9.70; 10-yr note lower, yield at 3.24%.