Market Talk

Stocks had a strong week, bolting higher in a stout rebound after the sell-off instigated by Japan’s earthquake/tsunami/nuclear crisis nightmare. A nightmare that’s still ongoing, by the way.

Oil didn’t move much today, but energy stocks led the way, along with the material and industrial sectors. IBM, CAT, Chevron and Exxon Mobil account for almost 80% of the DJIA’s advance. DJIA rises 50 to 12220, Nasdaq Comp adds about 6 to 2743 and S&P 500 grinds out 4 to 1313.80.

What’s most impressive about the week’s gains is that they came amid a cascade of unpleasant headlines. Leaking radiation; European debt problems flaring up again; horrendous housing data; weak durable goods orders; another commitment by US military forces as civil war rages in Libya; spreading unrest in Middle East and North Africa; and oil prices marching higher. And of course, that air-traffic controller sound asleep in the DC tower. Horrifying. Continue reading…

February’s new home sales were an utter disaster, falling to a record low. Mizuho USA economist Steve Ricchiuto may’ve put it best: “Nothing good can be said about the February report on new home sales.” Nothing good should be said of these abysmal numbers, but that didn’t stop some economists from straining to find the silver lining.

RBS economists accurately noted no sign of recovery, but suggested other data, like a slight uptick in the monthly home-builders’ sentiment index, showed the picture wasn’t “nearly so dire,” so “we are hesitant to read too much into this one report.”

Huh? Don’t want to “read too much” into a record low? Yeah, wouldn’t want to misread the fewest number of new homes ever sold in a month. Credit Suisse economist Jonathan Basile points out that the number of new homes for sale — 186,000, not annualized — was the lowest level since November 1967. Maybe we shouldn’t read too much into that either.

Kidding aside, the small number for sale isn’t a bad sign, as it shows builders being disciplined enough to just try to sell what’s on hand before they ramp up more new construction.

RBS wasn’t alone in reaching for a positive spin. RDQ Economics also cites NAHB’s sentiment index (which rose to 17 from 16; it hit 72 in June ’05 and recently as high as 22 last May). Firm says survey suggests “underlying conditions are improving slightly,” and the firm expects a bounce “over the next two months.” Not exactly a heroic call, expecting a “bounce” off an all-time low.

Mizuho’s Ricchiuto doesn’t sound as optimistic. “The sharp decline in prices also suggests that consumer wealth may be taking another hit even though equity valuations have risen,” he writes. “This report and the existing home sales data released yesterday confirm that the housing market is still in free fall.”

Investors may or may not be looking for a silver lining, but they apparently see home-builders as a sort of “why not?” proposition. One of the best sectors on the day was consumer discretionary, which includes the home builders. PulteGroup (3.6%) and Lennar (1.2%) rose, although DR Horton (0.5%) fell.

After all, how much worse can it get?

Strong wire-to-wire gains for stocks, led by the energy sector as oil prices climb again, and by a beefy performance from industrial stocks.

The perception of an improving situation in Japan offered bulls some running room, even as conflict in Libya remains nasty and helps drive up oil.

Steep drop in existing home sales, and word that Portugal will likely seek a bailout both get shrugged off as well. Financial stocks gain, but are notable laggards, along with health-care sector.

Today’s big move comes as stocks recover from oversold conditions. Sustaining these gains will be the test this week. DJIA rises 178 to 12036, while Nasdaq Comp adds 48 to 2692. S&P 500 ends 19 higher at 1298.

Note that the S&P 500 closed in the lower part of a resistance band that some technicians note between 1297 and 1308. S&P Equity Research’s Mark Abeter said after running into all this overhead resistance, “we think the S&P 500 will drop back and at least retest the lows” of last week.

Mary Ann Bartels at BofA Merrill echoed that sentiment, noting that an uptrend since last summer’s lows was broken, and along with a break last week of 1270 “on big volume,” it suggests “at least a test of the recent low of 1249 with possibly the need to test second support at 1220-1170.”

(Tomi Kilgore contributed to this post.)

Treasury Department will begin unloading its $142 billion stash of mortgage-backed securities in an “orderly wind down” beginning this month, which raises an interesting question: Will these sales shed any light on the valuations of MBS that commercial banks are still sitting on?

Banks have not been eager sellers of their inventory of troubled MBS and other non-performing real-estate loans, as bids for the stuff have generally been well below what the banks are willing to accept. And as long as FASB isn’t forcing banks to mark these securities to market, then there’s no strong incentive to sell.

But the Treasury has incentive to sell, noting in its Q&A on the wind-down that its “mission does not typically include managing a large mortgage portfolio.” At least Treasury’s willing to admit it now. The Fed hasn’t yet reached that conclusion.

As of now, Treasury plans to sell $10 billion in MBS per month until it’s all gone, but could suspend sales “if market conditions become less favorable.” Any suspensions or slow pace of sales should offer some gauge on whether bidders continue to low ball, or if Treasury — like banks — is still asking too high a price for the debt.

Treasury says it’ll post its portfolio holdings at the end of each month,  including any sales that were completed, broken down by coupon and agency here.

It’s no secret that banks are parked over a mother lode of bad loans, mainly residential and commercial mortgages, and they prefer to not publicly acknowledge (by marking to market) what those loans are really worth. That tactic has helped banks recuperate and appear healthy, but it’s a stance that’s also costing at least of few jobs, in a roundabout way.

We’re a little late to this story, but our new-found fascination with state WARN notices led us to find one from a California company called Kondaur Capital, which said about a month ago that it plans to lay off 161 workers by April 18. A little searching brought up an article last month by the accomplished Paul Muolo at National Mortgage News.

Seems Kondaur buys nonperforming loans, and finds itself needing to layoff workers because there aren’t enough bad loans available to buy.

Come again? Aren’t banks still sitting on mountains of toxic debt? Can’t find enough to buy? Continue reading…

Stocks see selling with some conviction (NYSE listed volume more than 5.7 billion shares)  for the second day in a row, spurred on by fear that soaring oil prices will derail the fragile economic recovery.

Nymex crude briefly hit $100/barrel for first time in more than two years, sending shivers through industrial stocks, and stocks of companies most sensitive to discretionary consumer spending, like Tiffany and Coach.

H-P shares tumble almost 10% after disappointing earnings and outlook, and drop accounts for roughly 35 points of Dow Industrials’ decline.

First back-to-back triple-digit drop for DJIA since early June, average falls 107.01 to 12105.78, and Nasdaq Comp slides 33.43 to 2722.99. S&P 500 ends 8.04 lower at 1307.40.

No real sign that the source of the market’s current angst — unrest in North Africa and Middle East — is about to abate, so oil prices (instead of the Fed) may be calling the shots here for a bit.

Weekly jobless claims, January durable goods orders and new home sales will be tomorrow’s economic reports of interest. On the earnings calendar, GM, Target, Sears and Kohl’s all report before the open; AIG reports after the close.

Stocks succumb to a selloff that’s been lurking out there, and comes as little surprise to anyone who’s watched markets rise nearly uninterrupted for almost six full months now.

Heady gains since late August collide with spiking oil prices and building geopolitical unrest to create a potent catalyst for a selloff. Exxon Mobil, Chevron and Kraft the only Dow components to escape declines. Materials, financials, industrials and consumer discretionary the hardest hit sectors.

Bulls have shown a remarkably strong ability lately to rebound from setbacks like this, which will be tomorrow’s test. In addition to what’s likely to be another day of violence and protests in North Africa/Mideast, investors get a chance to react to January existing home sales, and H-P’s disappointing outlook.

DJIA falls 178.46 to 12212.79, and Nasdaq Comp slides 77.53, or 2.7% (equal to about 335 DJIA points) to 2756.42. S&P 500 ends 27.57 lower at 1315.44.

Couple factoids: S&P 500 today saw it’s biggest percent and point drop since August 11; biggest point drop for Nasdaq Comp since June 29, and biggest percent drop since Aug 11. Also the biggest percentage and point drop for Russell 2000 since last August.

We hear consumer confidence hit a three-year high in February, at 70.4, according to the Conference Board. Guess this level looks a lot better coming up out of the basement than it did the last time it was visited in February 2008.

“”There is no evidence that the recent collapse in consumer confidence is going to turn around any time soon,” said Brian Bethune, senior economist at Global Insight, as quoted by the AP back then. Stories note at the time it was the worst confidence reading since the start of the Iraq War in 2003, and excluding that one, worst since 1993. So this level hasn’t been associated with “happy days” in the past.

Look, it’s better than heading lower, but it’s a bit of a stretch to suggest it’s a sign consumers are gearing up to unleash some wave of pent-up spending. Conference Board tries to put the best spin on it, but the overall damp mood can only be spruced up so much. The outfit says “consumers’ appraisal of present-day conditions improved moderately in February.” What’s “moderately” mean? Continue reading…

Here’s a press release from JPMorgan so soaked in sanctimony, we feel damp just reading it. Here’s the headline: JPMorgan Chase Announces New Programs for Military and Veterans.

Bottomline, JPM made some foreclosure “mistakes” with military customers for which it “deeply apologizes” and pledges to make amends. How heroic.

It’s a great thing to be helping veterans and military families. They deserve it all the time, and PR stunts “initiatives” like this shouldn’t happen just because a big bank gets called out for bum foreclosures.

Another directionless premarket setup for stocks, as investors prepare to digest a burst of economic data this morning.

January retail sales, import prices and NY Fed’s February Empire State manufacturing survey all due at 8:30am ET; December business inventories and homebuilders’ Feb sentiment index set for 10:00am. Cleveland Fed’s Pianalto also scheduled to speak about economic conditions around 10:00am.

Prediction: Any better-than-expected data helps stock rally, but anything that stinks gets dismissed as skewed by bad weather.

Dell reports results after the close. FedEx profit warning late yesterday gets shrugged off, as it seems everyone saw this one coming, what with all the bad weather and soaring fuel costs. FDX actually pointed higher premarket, the spin no doubt suggesting “it could’ve been worse.” Well, the weather may get better, but don’t hold your breath on those fuel prices, citizens.

Stocks in Europe mostly higher, euro is firmer, USD index off 0.3%.

S&P futures flat; 10-yr note lower, yield at 3.65%.