The Dow Jones Industrial Average closed slightly lower as another round of interest-rate hikes in China weighed on blue-chip index.
DJIA drops 18 (0.2%) to 11555, with Procter & Gamble and Kraft leading declines. The Dow traded in another narrow range, falling as much as 55 points while rising less than a point before reaching the closing bell. The narrow range marked 16th straight day that the index had a swing range of less than 100 points. The last time such a streak occurred was in 1996.
Meanwhile, S&P 500 rises 0.1% to 1258 behind strength in financial sector. Nasdaq Comp gains 0.1% to 2667.
Holidays combine with big winter storm to cause trading volume to slow to a crawl. Monday contained the lightest volume of any fully day of trading on the New York Stock Exchange in 2010.
H&R Block drops 7% to $11.80 after disclosing HSBC Holdings is ending its long-term contract for controversial refund anticipation loans. AIG gains 9.3% to $59.38 after securing three credit facilities totaling $4.3B.
Apologies for the light posting this morning. Snowmageddon has left the newsroom nearly empty this morning.
US stocks are trading lower Monday morning, following weak overseas markets, as China’s rate increases are stoking fears that it may try to slow its booming economy.
The Dow Jones Industrial Average was recently down 35 points, or 0.3%, to 11539. Trading volume appears to be lower than usual, with less than a billion shares having changed hands in NYSE Composite trading within the first hour and a half of the session. The 2010 average for a full-day session is around 4.8 billion shares.
The holiday-shortened week combined with heavy snow blanketing the east cost are contributing to today’s light volume.
Main driver for Monday’s action was China’s decision over the weekend to hike both its key lending and deposit rates by 0.25 percentage points as it attempts to keep inflation under control. This was the second rate hike in slightly more than two months and economists are anticipating additional increases in 2011.
Consumer discretionary stocks led the S&P 500 down 2 points to 1255. H&R Block fell after disclosing late last week that HSBC Holdings was terminating its long-term contract for refund anticipation loans.
Some day China is going to crack open like Humpty Dumpty. Some day, all the games the Chinese play with their economy, with their currency, with their officials statistics, with their populace, are going to come unglued.
China’s growth model is unsustainable and the country faces a sudden slowdown unless it undergoes urgent economic and political reforms, according to a renowned Chinese academic and former member of the People’s Bank of China’s monetary policy committee.
In a scathing indictment of the country’s extraordinary growth story, Yu Yongding listed rising social tensions, choking pollution, a lack of public services and an over-reliance on exports and investment, particularly in real estate, as threats to the country’s economic future.
“China’s rapid growth has been achieved at an extremely high cost. Only future generations will know the true price,” Mr Yu wrote in an opinion piece published in the state-controlled China Daily. “[China’s] growth pattern has now almost exhausted its potential. So China has reached a crucial juncture: without painful structural adjustments the momentum of its economic growth could suddenly be lost.”
The “miracle” that is the Chinese economy is being engineered in almost the exact same manner as the recovery in the U.S. The only difference is you’ll never get U.S. officials to admit they’re central planners. Granted that’s hyperbole. U.S. officials don’t go around ordering banks to make loans, and construct entire cities that sit empty. Both both have chosen the essential path of throwing money at a problem, rather than trying to resolve it and move on.
More from the FT article:
“Some local governments are literally digging holes and then filling them in to ratchet up the GDP,” Mr Yu wrote. “Consequently, there are simply too many luxurious condominiums, magnificent government office buildings and soaring skyscrapers.”
While most of Mr Yu’s observations have been expressed before, it is unusual to see such a litany of complaints from such a senior establishment scholar published in state media.
His comments even included a call for political reform to help “break the unholy alliance” between government officials and business people.
Feeling a little deja vu, with the premarket complexion nearly identical to yesterday’s at this time, except stocks were stronger in Asia overnight.
Positive tone for global markets is being attributed to a Chinese official’s comments in support of EU bailout measures. Was there some concern that China might denounce such actions? This stuff is boilerplate trade diplomacy, folks, so the emphasis it gets today speaks to the lack of other tangible drivers. Oh, so China’s cool with the EU’s attempts to keep its economic system intact? What a relief.
Despite the DJIA’s inability to make headway yesterday, the path of least resistance still seems to remain higher into year end, as participants focus on wrapping up business and enjoying the holidays.
Euro flatlining around $1.315, USD index shaded lower. S&P futures up 4.00; 10-yr note higher, yield at 3.31%.
So if, for instance, the Chinese government tells us over the weekend, as they did this weekend, that its CPI rose 5.1%, do you believe that, or not? Try not. You can bet China’s inflation is higher than it’s letting on, and you can bet GDP is lighter than it’s letting on. What might have kept the Chinese from raising rates over the weekend isn’t the inflation issue, but the hot-money issue.
If you want to know what’s going on in the Chinese economy, you have to look not at the official stats, but at secondary stats like power output. That’s what’s Veneroso’s been eyeing, and what he sees has given him pause.
Posted by Paul Vignaon November 19, 2010 Markets, Stocks /
Late spurt — it is an options expiration day after all — pushes US stocks into the black for the day, albeit ever so slightly. Stocks bounce around, caught between the hope there’s a solution to the Irish problem and fear that China’s imposing a solution to its inflation problem – one that will have sour effects on world growth.
DJIA adds 22 to 11203, up about 10 points on the week. S&P 500 gains 3 to 1199.69, just a hair’s breath under the psychologically key 1200 level. Nasdaq Comp rises 4 to 2518. Traders erased earlier losses, but don’t seem to have any real desire to push things higher. Why go into this weekend long? Ireland is still up in the air, there’s chatter China might raise rates over the weekend.
This state of affairs might persist next week, given it’s Thanksgiving, but there’s a heavy data calendar for a short week. Oh, and don’t forget, it was Thanksgiving week last year that Dubai dropped its debt bombshell on the world.
GM rises in its second day of trading, but by just a few pennies.
Let’s catalog some of the gathering storm clouds, as a set-up for a must-read comment from John Hussman over at Hussman Funds. Maybe all of this adds up to just so much noise, and goes nowhere. Maybe the states work out their problems, Europe works out its problems, and China works out its problems. Or maybe these things meet, overlap, reinforce each other, overwhelm the first responders and we get another disaster. There’s no way of knowing. But it’s important to know that they’re out there, all the same.
- California had to delay by a day a bond sale, after the supply overwhelmed demand and led to a sharp pullback. Not a particularly good sign for a state facing a $26 billion budget gap (or hole, or chasm, or cliff, or whatever adjective you chose.) The muni-bond market is being roiled as investors look to cash in before the situation among the states gets worse (think, federal stimulus to the states is going to run out next year. R’ut r’oh.)
- The labor market in the U.S. — meaning the single largest engine of economic growth on the planet — remains stagnant (the most positive adjective I can think of to describe it.)
That’s just a sampling from these shores. If anybody cares to catalog the silver linings, feel free. I’m listening. But from where I sit, this much ballyhooed recovery is still, still, nothing more than the Pinocchio doll I said it was last fall, whose strings are being pulled by Uncle Sam and the Fed. It’s not a real little boy.
US stocks suffer their biggest drop in more than three months and fall to lowest close since Oct. 19. Fears over a slowdown in Chinese economic growth, European sovereign-debt woes and criticism of Fed’s QE2 hit market hard.
DJIA drops 178 (1.6%) to 11024, its third decline in last four sessions and 12th largest drop of the year. Travelers and Alcoa lead blue chips lower. S&P 500 falls 19 (1.6%) to 1178 and Nasdaq Comp declines 44 (1.8%) to 2470.
S&P 500 is down 4% since hitting fresh 52-week high earlier this month. The move was delayed for a few days, but the sell-on-the-news reaction to QE2 appears to have picked up steam throughout last few sessions.
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 […]
Bernie Madoff tells CNNMoney he’s having trouble sleeping. Click here to read more about that from CNN. He doesn’t know how lucky he’s got it, living behind bars in America. In China this week, a 39-year old businesswoman received the death sentence for running a $70 million Ponzi scheme – pocket change next to the […]