Market Talk

Stocks end lower, but reclaim most of the ground lost after mid-morning word of a strong aftershock quake in Japan.

Quake headlines and tsunami warning send a chill through a market that’s grown rather blase lately toward various pockets of global upheaval (Mideast/North Africa; Japan disaster; Eurozone debt problems). Despite the bump in volatility, trading volume remains anemic.

Industrials, financials and utilities among the weakest sectors; energy stocks finish higher as Nymex crude tops $110.00/barrel, to its highest settle since Sept 2008. Gold settles at fresh Comex high of $1,458.50/oz; silver hits fresh 31-yr high.

DJIA slips 17.26 to 12409.49, and Nasdaq Comp edges 3.68 lower to 2796.14. S&P 500 falls 2.03 to 1333.51.

Latest aftershock doesn’t appear to have done too much additional damage, but rapid, sharp plummet on initial quake/tsunami warning headlines may’ve put some fear back into a market that’s had an impressive ability to shake off troubling news.

Abundant liquidity has nurtured the risk trade, building complacency amid a hazardous backdrop as everyone thinks they can get out before the stampede begins. After glimpsing that hair trigger this morning, looks as if some risk-takers may have seen enough.

A dose of cautionary comments on three things that seem to only go up lately: the euro, stocks and corporate earnings.

First on the euro, which surged through $1.43 today its highest level vs USD since January 2010, and looks as if it’s left any and all concerns about sovereign debt in the dust.

Nomura says in a report that it’s too early for the euro to shed that risk. “The uncertainties about the economic outlook, debt dynamics, and the political framework around managing sovereign insolvency are simply too great,” firm says.

It estimates “a debt restructuring isolated to Greece/Ireland/Portugal would trigger direct and indirect losses around $240bn for core Eurozone banks, while bank losses would rise to $480bn in a restructuring including Spain.” German banks have the largest exposure to the periphery, Nomura says, with estimated losses of $185B in a restructuring scenario involving Spain.

Implied risk premium on the euro “has compressed significantly since January,” firm says, as the single currency “decoupled from sovereign risk.” That process “has probably run too far at this point: a persistent risk premium is still needed.”

On to stocks and some thoughts from BofA Merrill small-cap strategist Steve DeSanctis. He points out that weaker economic news, higher energy prices and disaster in Japan tripped up stocks in early March, but a “liquidity driven rebound” has put the Russell 2000 within 1% of its all-time high.

“Volatility came tumbling down despite the fact that none of the earlier concerns…have been resolved,” he writes, and small caps “are now very close to the full year’s return we have been expecting.” DeSanctis says he’s been “taken back by the strength of the overall equity market and in small caps in particular given the economic backdrop and where absolute and relative valuations stand,” and thinks 1Q earnings estimates are too high. Continue reading…

Another listless day of trading for stocks, as bull-bear duel produces what’s essentially a flat session. Both sides seem as if they’re waiting for something to happen, with bears maybe looking for another big shoe to drop, while bulls sift for some catalyst to reenergize the months-long uptrend.

Volume again suggests little conviction, with NYSE composite trading volume only slightly better than yesterday’s year low. Ramped-up M&A action not creating as much zing for markets overall as deal parade continues.

Materials sector performs well, while health-care and industrials decline most. DJIA slips 6.13 to 12393.90, and Nasdaq Comp edges up 2.00 to 2791.19. S&P 500 ends 0.24 lower at 1332.63. Continue reading…

The rally train rolls on as stocks open 2Q on a positive note, trudging higher but finishing well below session peaks.

Encouraging March employment report, ISM manufacturing generally as expected and decent auto sales prod markets higher. NY Fed’s Dudley also helps sentiment, countering recent hawkish tone from some Fed officials with market-reassuring dovish language of his own.

Again, volume not especially impressive, particularly considering the first day of a new month and quarter. Looked as if bulls might fade in final hour, but had enough kick to finish fine.

DJIA adds another 56.99 to 12376.72; earlier reached highest intraday level since early June 2008. Nasdaq Comp rises 8.53 to 2789.60, S&P 500 ends 6.58 higher at 1332.41.

Kind of quiet for economic data next week, FOMC minutes due out Tuesday could be interesting but not necessarily market moving. Otherwise, week’s peppered with some Fedspeak, expect them to continue guiding expectations toward a QE II finish in June and then no more.

Alcoa kicks off 1Q earnings reporting season a week from Monday, and commentary/outlooks from corporate America may serve as the next test for stocks. Can’t rely on Fed liquidity forever, eventually the investment story needs to come back to the pace of profit growth and margin expansion. Will executives have enough faith in the economy’s forward momentum to pick up hiring and capex, or will they stay cautious and focused on controlling costs in a wait-and-see mode?

(Photo courtesy of the Library of Congress)

Stocks finish lower in a dull, light-volume session. Dow Industrials stay cooped up in a tight range for most of the day, and then falter in the final minutes in action that looked more like buyer fatigue rather than any fresh offensive by sellers.

Consumer discretionary stocks stand out for their weakness following a report showing consumer spending increased but mainly due to higher prices, and real disposable income fell in Feb vs Jan. Oil retreats, which weighs on DJIA component Chevron; IBM, Home Depot also among the average’s leading dollar decliners. All three major indexes end at session lows. DJIA falls 22.71 to 12197.88, and Nasdaq slips 12.38 to 2730.68. S&P 500 ends 3.61 lower at 1310.19.

Trading volume again was weak, which isn’t a great sign for bulls. Via Newswires’ Tomi Kilgore, Miller Tabak technical analyst Phil Roth noted this morning that volume during the recent rally has fallen “from moderately low levels to very low levels…suggesting the rally was mainly a function of traders reversing bearish positions, with little evidence of investment buying by traditional institutions or by the public.” Without increased upside volume, Roth said “the short-term rally is likely to become a top-broadening affair.”

Tomi also noted that while the DJIA today failed to break resistance in 12250-12280 range, “bulls can take some comfort knowing the Dow Jones Transportation Average is still up, and firmly above a similar resistance area.”

More from Tomi:

DJIA closes down 22 at 12198. The intraday high of 12273 was within the 12250-12280 resistance range where there were several intraday highs during the early-March consolidation range. Failing at that resistance preceded the DJIA’s 600-point drop in five sessions to a fresh 2011 low on March 16. But DJTA gains 22 to 5229, off a high of 5254, above its early-March resistance range at 5165-5195.

In times of trouble, or more rather, the current times of trouble, stocks are a safe haven.

That seems to be an emerging theme floating around the stock market, that amid a world on fire, investors are turning to U.S. stocks, and specifically blue chips like the ones that comprise the Dow Jones Industrial Average, as a safe haven, a refuge for their money.

We first saw this last week, when Richard Suttmeier offered it up at Minyanville as a rationale for explaining why stocks have been doing as well as they have. “Maybe investors are considering these blue chips as a safer haven than US Treasuries?” Suttmeier himself wasn’t buying it, noting that stocks are “overvalued fundamentally with deteriorating technicals.”

Now, we figured it was a one-off, just something thrown out there to explain something as screwy as stocks rising in the face of Japan’s triple crisis, Mideast revolutions and Europe’s sovereign-debt crisis, all of which threatens to cut the global recovery off at the knees.

After all, there are many things stocks are considered, but a safe haven? The stock market?

Then, in his daily comments, UBS’ Art Cashin, without endorsing the notion either mind you, explains what’s floating around the floor of the NYSE these days. What’s floating around is this idea that the Dow is a safe haven (we are talking about stock traders, here, so they’re not exactly objective in this matter. Still, we’re making a point.)

Continue reading…

- The Fed is often accused of being behind the curve, and for good reason. Look at this headline that ran earlier on the broadtape, quoting Dallas Fed’s Richard Fisher:

*DJ Fisher: Sees Early Signs Of Unconstructive Market Speculation

Early signs? Take a look at a chart of any commodity or major stock index. Early signs of unconstructive speculation? And this comes from a guy who’s considered to be one of the FOMC’s biggest hawks. Good heavens. Here’s his quote, reported by Newswires’ Frances Robinson in Brussels:

“We have abundant liquidity, now there’s excess liquidity, which is working through the system,” Fisher said. “There are in my view, early signs of speculative activity that I don’t consider constructive.”

If he’s only seeing “early signs,” how far behind the curve do you think the rest of the Fed gang is? By the way, Fisher quipped that protectionism is “the syphilis of economics.” Interesting analogy. What’s the gonorrhea of economics? Probably speculation. It’s bad, but you can get rid of it pretty quickly.

Meanwhile, Philly Fed’s Plosser is dishing up some hawkish comments, saying headline inflation is “all that matters,” and core is just for filtering noise. The frank talk is welcome, but stock market ignores him because his hawkish tendencies are well know.

- US stock markets seemed to find euro strength a source of comfort yesterday, and have frolicked with the single currency again today. But euro’s lost some zest in early afternoon trading and is catching some notice from stocks, which have since pulled back from their earlier highs.

As is often the drill, IBM and CAT together account for roughly 40% of the DJIA’s advance, at this point up 70.

- Now to the absurd file. JPMorgan strategist Thomas Lee takes the cake today for the headline on his morning US equity strategy note: “History showing post-nuclear disaster bounce is 9.6% for the next 3-mos plus negative investor sentiment point to upward bias in next few weeks.”

We kid you not. That’s what he wrote. After nuclear disasters, stocks usually bounce about 10% in the next three months. Uh, yes, sample size is a little small, so be careful taking this one to the bank, citizens.

Question for Mr. Lee: What are the returns for stocks three months after two regimes are deposed in North Africa, another nation erupts in civil war, a third European nation collapses financially and needs a bailout, and the world’s third-largest economy gets hit with a 9.0 earthquake, followed by a tsunami, followed by a nuclear crisis?

(Paul Vigna contributed to this post.)

The tone remains bullish for stocks this morning as the ongoing stream of liquidity provided by the Fed’s QE, and more recently by Bank of Japan, courses through global markets. Stocks were strong in Asia overnight, currently higher in Europe and US stock futures point to a higher open.

As of yesterday’s close, major US indexes have erased declines following the Japan quake/tsunami/nuclear crisis. Risk aversion remains just a dalliance, a mere gesture now and again, even as the litany of stresses and perils around the world hardly ever seemed higher.

A third look at 4Q GDP due at 8:30am ET, and final look at Reuters/Univ of Michigan March consumer sentiment at 9:55am. S&P futures off their earlier highs, up 3.60; 10-yr note up a little, yield at 3.39%.

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.