US stocks bounce at the open as better-than-expected earnings from Exxon Mobil (XOM), a larger-than-anticipated rise in personal income and strengthening manufacturing activity fuel the rally.
But keep an eye on the run-up’s stamina, as the stock market has portrayed an ugly pattern of late. Stocks have shown hefty gains at the open in recent sessions, only to see those gains drift away by mid-afternoon, putting any rally’s sustainability in question.
Dow rose as much as 119 on Friday, only to close down 54 – near session lows. Same thing happened last Tuesday, when the index rose as much as 88, but eventually lost all the gains and finished down three. And prior to today’s action, the Dow was down 6% since Jan. 19.
“There’s simply no way to sugarcoat it,” Bespoke Investment Group says, as recent trading suggests stocks may have risen too fast, too soon. (The Dow rose 64% between mid-March and Jan. 19.)
The long-term uptrend is also getting close to breaking. “If the uptrend breaks, investors will need to reposition their portfolios, which ultimately puts even more pressure on share prices,” firm adds.
- Overseas stocks ahead of US on correction course. “But note: Over the last year, foreign stocks have mostly followed the US market trend, not led it,” Tom Petruno says. “At this point, they probably don’t have a message for Wall Street so much as they’re looking for a message from Wall Street.”
- “Millions” of Kindles flying off Amazon’s shelves. TechCrunch’s Michael Arrington pegs it at 3 million.
- Hard to draw conclusions in this complicated market. “The markets right now are especially complicated and appear to be facing fundamental things that it has either never faced or not faced in modern times,” says Roger Nusbaum, portfolio manager at Your Source Financial.
- S&P 500 crashes through support. Traders had been watching 1080-1085 level. So much for the strong opening. “The reversal today was telling,” FusionIQ CEO Barry Ritholtz says.
- It’s getting ugly out there. “This type of action, when the market trades sharply down even though economic reports and earnings reports both beat estimates handily, is not good,” Bespoke says. “There’s simply no way to sugercoat it.”
- Seems like Apple hasn’t lost affinity for AT&T. “Apple has been happy with the company as a carrier partner and is confident of its plans to vastly improve its network,” Digital Daily blogger John Paczkowski says.
- Pressure on the euro accelerates as currency falls below $1.39 for first time in more than six months.
- Might be a little soon to talk about “post-crisis” times, Pimco CEO Mohamed El-Erian says. “Too many markets, too many institutions have assumed this would happen quickly,” he notes.
- AIG releases list Of troubled derivatives contracts. AIG says in SEC filing that it’s releasing documents “due to recent public disclosure of the full contents of Schedule A,” a detailed listing of $62.1 billion in notional value derivative transactions its financial products group wrote.
This is going to be one heck of a reclamation project.
One of the jobs of reporters is to report the news — well, I guess that’s their only job, really — and the first three letters of “news,” incidentally, spell “new,” which explains why we’re always looking for something new to report to you, the reader. That’s why today, every paper in the country, every wire service, quite a few online aggregators even (to the extent that there’s a human being there doing the aggregating,) will all be looking for a new reason to explain today’s drop in stock prices (should the decline stick through the closing bell.)
Profit taking on Apple? Check. Renewed “jitters”? Check. Disappointing earnings, disappointing data? Check, check. But the reality is this selloff started nearly two weeks ago, and the reasons for it will remain mainly the same until it’s over.
The selling began two Friday’s ago, if you recall, with that 100-point slide in the Dow. That slide was erased the next Tuesday, and indexes struck nominal fresh highs, which made everybody forget about Friday. But then on Wednesday the indexes slumped again, and we’ve been off to the races since.
On one level, this is all very simple. Stocks are up roughly 60% since March, a blistering, historical-level rally that must inevitably cool. A correction has to occur at some point, indeed it’s a necessary safety valve. Stocks are down about 6% since those highs last week, and it it drops another 4%, will represent the first “real” correction since March, a 10% reversal being the rule of thumb for defining a correction.
On another level, though, this selloff is about resetting expectations after year in which most folks were content to be told things were getting less bad. And that issue will remain no matter where indexes finish today.
US stocks taking it on the chin this afternoon, with technology sector getting slapped around the hardest – off more than 3%.
Worse-than-expected weekly jobless claims and durable goods reports this morning, as well as some disappointment surrounding Apple’s (AAPL) new tablet, weighing on stocks. But it also seems like this is just another pullback amid the larger correction the market has been experiencing throughout the last two weeks.
And the Dow Jones Industrial Average is slip-sliding away back toward the always important, from a psychological point at least, 10000 level.
It seems as if investors are largely ignoring many of the better-than-expected earnings reports recently, suggesting the bulls’ 10-month run may be running out of steam. Since the Dow’s close on Jan. 14, it has dropped about 625 points, or 5.9%.
DJIA and S&P 500 are both on pace to close lower for the third consecutive week. Each are set to record their longest weekly losing streaks since July 10. And if current trends hold true, January is turning out to be the worst month for stocks since February 2009.
From a technical perspective, keep an eye on 1085 as a closing level on S&P 500, FusionIQ CEO Barry Ritholtz says. “A close below this sets up another 5% leg down towards 1035 area,” he notes.
Dow industrials were recently off 151 at 10084; S&P 500 down 17 at 1080.
You can tell from my skimpy market recap that I got called up to the sixth floor to be a guest on WSJ.com’s News Hub, and talk about the stock market. Here’s the video:
- “For the last 10 months, as stocks have rallied with only minor interruptions, even the bulls have warned that at some point a ‘correction’ would hit,” LA Times’ Tom Petruno says. “Is this finally it?”
- Not a lot to cheer in NBC Universal’s 4Q results. But don’t worry GE, it’ll all just be a memory soon enough.
- Obama’s bank plans don’t bode well for venture capital industry, Infectious Greed blogger Paul Kedrosky says.
- Gluskin Sheff chief economist David Rosenberg succinctly lists what’s plaguing the economy. “Greece. Portugal. Ireland. China tightening. Bank bashing. Foreclosures. The housing and mortgage market. Jobs. The Fed’s exit strategy (if it happens),” he says. What does it all mean? “There is no quick fix,” the Pragmatic Capitalist says.
- Bernanke’s confirmation vote suddenly looks like it’s in jeopardy. Not a good sign, especially since it would have some “unpredictable macroeconomic consequences all on its own,” Matt Yglesias writes.
- Betting on Bernanke not such a sure thing anymore. As more senators come out against reconfirming Ben Bernanke as Fed chairman, the betting markets are starting to sour on him, Catherine Rampell writes at NYT’s Economix blog. Odds of Bernanke being reconfirmed have fallen from 93% to 80%, according to Intrade
- The Economics of Contempt blog wonders if Obama’s plan is merely a “transparent political stunt”?
- People love to criticize. But Reuters blogger Felix Salmon says he’s “cautiously optimistic” about the future impact of Obama’s bank plan. “No, it won’t singlehandedly prevent another financial crisis – but I’m getting a bit tired, at this point, of people criticizing necessary moves on the grounds that they’re not sufficient,” he says.
- “Fear and greed are the odd couple whose constant squabbling dictates the direction of financial markets,” Liam Denning writes in a WSJ Heard on the Street column. Keep an eye on the VIX.
- The Last of Lost – ABC’s hit series set for its final season. How awesome is this show? Obama actually rescheduled his “State of the Union” address a few weeks ago so it wouldn’t conflict with the season premiere.
If Tuesday was the Brown Rally, is today the Obama Selloff?
US stocks get hammered after President Obama announces measures to limit bank risk-taking, which seem to have taken Wall Street by surprise.Dow industrials on pace for their second consecutive triple-digit decline and fourth consecutive triple-digit move dating back to last week. The last time the Dow finished the day with four consecutive triple digit moves (up or down) was back in May.
“We continue to believe the secular bear market is with us, and such policy action creates a sense of uncertainty that is simply staggering,” the Pragmatic Capitalist blogger says. “Stocks cannot and will not rise substantially when the government appears to be on the attack against Wall Street.”
Obama’s remarks should provide a greater good down the road, but they also have “potential to cause a great deal of near-term volatility,” blog says. “Uncertainty is a market’s worst friend and there is a growing abundance.”
US stocks are selling off sharply for the third time in the past four sessions (closed Monday for MLK Day.) Is this the big one? Since at least June, every time the market has appeared on the verge of a selloff, the doubters (us included) have come out of the woodwork, waiting to see if the miracle rally of 2009 will finally evaporate into the thin air.
It hasn’t happened yet. There have been a couple of times when it appeared imminent, but each one was met with a renewed bought of buying. With the DJIA down more than 2% since last Thursday’s close, people (us included) are already perching on the edge of their seats, waiting to see if this is finally the one.
“Probably not,” Barry Ritholtz of The Big Picture fame says in his daily comments out of his FusionIQ outfit, “especially when pervasive concern continues to be the dominant investor theme.” A correction of 5% could be in the offing, he says, but “we continue to find it hard to believe that top is in play when everyone continues to call for it! After all tops are formed when everyone becomes so comfortable with stocks they invest all their available liquidity without a hesitation or care in the world. And clearly that is not the current sentiment.”
While there’s been a dedicated band of doubters (yes, us included,) it does seem that the general consensus on the Street has been that the bottom was hit and it’s only up from here. But whether or not the market’s anticipating a correction, one thing is clear: given last year’s run-up, the easy money’s already been made.
Equities are selling today despite what is generally considered good news. Even the sources of that good news are selling off. JPMorgan and Intel both topped Street views, and yet both stocks are down, as are their respective sectors (with financials incidentally leading all sectors down,) as is the entire market.
What gives? Well, for one thing, the good news on the earnings front has been well anticipated by investors, and the gains you could argue are already priced in to the stocks. Remember, the market prepared itself for big numbers, big percentages coming off last year’s 4Q, which was the worst on record, the first time the S&P 500′s 500 companies as a group ever lost money. So Intel and JPMorgan didn’t really surprise anyone.
But there could be another explanation for the selloff. We wrote Tuesday about a rare sell signal drifting around the VIX charts. It came to us via UBS’ Art Cashin, who quoted Main Line Investors’ Robert McHugh. It’s a pretty convoluted one, to be sure. The VIX had to close below its lower Bollinger Band on one day. Then rise above it again on another. Both those things happened this week. And stocks are down sharply today.
Don't put all your picklin' jars on the same shelf.
Given that equities have risen for nine months running without so much as a 10% correction, any little hiccup is going to make people nervous. (It makes some other people think the whole thing’s a rigged game, but that’s another story.) At some point, a correction is inevitable. The only questions are when and how large will it be, and the longer it takes to appear, the more severe it’s likely to be.
With stocks getting off to a rough start here after Alcoa’s big earnings miss, the question is already alive, if not kicking very much.
“While each camp can produce plenty of evidence supporting their views, I am unable to say either side is convincing,” Barry Ritholtz writes at The Big Picture. “There simply is not enough data to make the call that the run which began in early March is over — at least not yet.”
Since about mid-November, the stock market has been more or less flat, albeit while inching along to marginal new highs. This has led some to conclude the market’s out of breath, or out of energy, or out of something. Meanwhile, stocks keep hitting fresh highs, and the situation can create some amount of agita. Something, at some point, has got to give. Continue reading…
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President Reagan’s former budget director David Stockman says Edward Snowden performed a heroic act, the Patriot Act should be repealed, and this whole spying-on-U.S.-citizens thing is a symptom of an out-of-control military-industrial complex. Click here to watch him go on YahooFinance. The author of “The Great Deformation: The Corruption of Capitalism in A […]
