Somewhat surprising yesterday to see US stocks hold up as well as they did, considering the dollar’s decent bounce. Then again, dollar rallies lately have been one-day wonders, so that may explain why equity bulls shrugged it off.
Stocks look soft this morning. The closer this big Fed meeting gets, the more nervous the market gets. This morning’s front page WSJ story about the Fed clearly got everybody’s attention, and that’s one reason you’re seeing the trading pattern of the past few months, sell the dollar, buy everything else, changing gears.
US dollar index a tad higher premarket, euro again in retreat, straining to hold at $1.38 even. P&G, International Paper among the big names reporting quarterly results this morning. Street looks to be at high end of PG’s FY2Q EPS range.
September durable goods orders rose 3.3%, more than expected, but excluding transportation (think planes,) it fell 0.8%, and new orders for nondefense capital goods excluding aircraft, an awkward way of saying business spending, fell 0.6%.
September new home sales set for 10:00 a.m.
S&P futures down 7.80, DJ futures down 60. Ten-year note sliding further, yield up to 2.68%.
You watching this market action this morning? The Dow, down 100 points after the durables and housing reports hit the tape, has fought back almost all the way to even, down just a point or two. It’s like a prize fight.
But those data points were no prizes, make no mistake, and they’re just two more in this string of dismal reports that have been coming out lately. That’s what we’re talking about on the Markets Hub today.
If you’ve been a faithful reader of our little blog, you know we’ve been preoccupied with, and fearful of, and warning about the economy doing exactly what it is now doing. That once the various stimuli wore off, the economy’s problems would still be there.
But even given that we’ve been expecting exactly what’s happening to happen, the economic reports these days are surprising even us (well, me, at least, really, but it sounds so much better when you put it in the editorial “we.”)
These things are turning into “tape bombs,” as in reports that hit “the Tape” like a bomb. (“The Tape” is a nickname for the Broadtape, which is what the Dow Jones news service used to be called back in the days when it literally was delivered as a long piece of tape (and thus, “ticker-tape” parades” down the Canyon of Heros in lower Manhattan.))
This morning’s stunner was the durable goods report. After two straight monthly declines, this one was expected to show a fairly solid rise of 3%, mainly on the back of strong orders that Boeing had already announced. Well, those orders were in there. But, still, orders overall rose just 0.3%. That means that excluding those plane orders, which always have an outsized effect on this report, everything else, well, everything else stunk.
- Gold dropped to a three-month low yesterday. “For gold, the battle now is between short-term traders, who see the metal’s rally as played out for the moment, and the true believers, who see gold as the only refuge from the risk of further government-engineered debasement of paper currencies,” Tom Petruno says.
- Harvard economics professor Martin Feldstein describes how difficult it truly is to forecast economic growth. “While it would be rash to forecast a double dip as the most likely outcome for the economy during the rest of this year, many of us are raising the odds that we attribute to such a downturn.”
- Nonfinancial companies in S&P 500 have a record $837B in cash, according to S&P, which is 26% higher than year-earlier figures. “The odd thing about this gigantic cash pile is that these companies are barely being paid any interest by keeping this money in cash,” Eddy Elfenbein writes at Crossing Wall Street. “It shows you just how scared they are.”
- Princeton economist and NY Times columnist Paul Krugman is baffled at the Obama administration’s waffling on whether to appoint Elizabeth Warren to head the new Consumer Financial Protection Bureau.
- Unemployment remains stubbornly high and GDP growth is slowing, but that doesn’t necessarily mean investors should avoid stocks. Peridot Capital’s Chad Brand compiles S&P 500 returns from 1958 through 2009 and concludes: “Investors choosing to own stocks only in years with negative GDP growth would have earned nearly four times as much than investors choosing to invest only when GDP was growing at 5% or better.”
- “If BP emerges from this debacle fatter and happier than anyone imagined a few months ago, whatever happened to the idea of corporate accountability?” former labor secretary Robert Reich ponders. “Does this mean any giant corporation can wreak havoc and then get back to business as usual?”
- Selling Phibro may be one of Citigroup’s best moves. “It isn’t often these days that Citigroup comes out ahead of the Wall Street pack,” WSJ’s Deal Journal says. “But at least for now, the Phibro deal is proving to be a plum.”
- “The administration would have been in a much better position today had it made a concerted effort months and months ago, even an unsuccessful one, to give the economy the help it clearly needed,” Mark Thoma writes.
- Durable goods orders slid for a second straight month, which comes as no surprise to Michael Shedlock, an investment advisor for Sitka Pacific Capital. “I cannot help but laugh at economists who refuse to see the economy is slowing dramatically, and somehow think manufacturing is going to lead the way to recovery,” he says. “That was an across the board stunningly bad report.”
- A new paper from two economists says without the Wall Street bailout, bank stress tests, emergency lending and asset purchases by the Fed and Obama’s fiscal stimulus program, GDP would be about 6.5% lower this year.
I suppose “uninspired” is my code word (you know, like Ben Bernanke’s got his “unusually uncertain”) for what happened in the market today. Let’s recap:
US stocks drop during what’s a generally uninspiring session; earnings reports were uninspiring, the durables report was uninspiring, the beige book was uninspiring. After two plus weeks of rally mode, it’s understandable that the market has an off day.
DJIA loses 40 (0.4%) to 10498, S&P 500 falls 8 (0.7%) to 1106, Nasdaq Comp drops 24 (1%) to 2265. NYSE volume of 4B shares traded is low (although not so low for these slow summer months.) Those three indexes are all perched around their 200-day moving averages, which are proving to be some resistance. In Treasurys, the 10-year yield is perched right at 3%, and the euro is stuck at $1.30. A lot of perching, ahead of tomorrow’s weekly jobsless claims and Friday’s GDP report (first reading on 2Q.)
Lots of earnings, but the numbers are more circumspect than yesterday. Fed’s beige book offers relatively glum assessment of the economy, reinforcing what just about everybody but the most raging of the bulls knows: the economy is slowing down.
So what is “uninspired” code for? Well, just like the Fed chairman’s unusual uncertainty, it’s code for “lousy,” of course. Stocks have been such a streaky one-way deal this year, run them up, run them down, and so essentially range-bound, that you wonder if the latest rally is now over and we’re going back into sell mode.
- “When you hear about corporate insiders emailing undercover FBI agents with insider information in this day and age, you can only shake your head and ponder the utterly pathetic intellects of the people involved,” Josh Brown writes at The Reformed Broker. “As we hear more details about the investigation, I suspect there will be even more head-scratching over how it could be possible that these people haven’t learned better by now.”
- While pursuing financial regulatory reform, the Obama administration chose new regulations over structural change, an easier outcome but not necessarily the best choice. Mark Thoma has the details.
- Number of workers who voluntarily quit in February actually surpassed amount of folks who were fired for first time since October 2008, a positive for weak labor market, especially since turnover essentially froze during the height of the recession, Barry Ritholtz notes at The Big Picture. “The backlog of ‘workers waiting for better times to make a move to better jobs’ is now acting like pent-up consumer demand — only for employees.”
- April durable goods surged 2.9%, well ahead of analysts expectations, which is “just the thing to blow away the deflation blues that have been poisoning the party over the past few weeks,” James Picerno writes at The Capital Spectator.
- Why is Steve Ballmer still Microsoft’s (MSFT) CEO? “Microsoft still has a dominant market share in PC operating systems and office applications, but it’s managed to take that massive competitive advantage and waste it everywhere else over the past decade,” James Kwak says.
- Yahoo (YHOO) CEO Carol Bartz’s potty mouth generates ton of attention in blogosphere, but Reuters blogger Rob Cox says investors should be wary of executives who spout expletives at critics. Bartz used some questionable language in an interview yesterday with TechCrunch’s Michael Arrington, which “smacks of desperation,” Cox says. “Shooting the messenger is never a sign of strength.”
- Yahoo’s chase to the bottom. “The bottom line is that turning around a decline at an Internet company is tougher than elsewhere. That is at least partly because of the ease with which consumers can switch to a different website. Once a site’s image is impaired, it is very hard to repair,” Martin Peers writes at WSJ’s Heard on the Street column.
- Google says it generated $54B of economic activity in 2009. Digital Daily John Paczkowski believes the purpose of Google’s report is to show regulators it’s not anticompetitive. “What better way to counter perceptions that Google merits antitrust scrutiny than to highlight its positive effect on the national economy?”
- Google’s (GOOG) investment case getting muddled? “Most of [Google's] time nowadays seems dedicated to releasing products that don’t make a dime,” writes Chad Brand of Peridot Capital, who discloses his firm has a small position in Google. Downside looks limited based on declining P/E ratio, but “I have mixed feelings as to whether it warrants the commitment of new capital,” he says.
- Facebook attempts to appease privacy advocates by redesigning its privacy controls.
- “Whatever little trust Wall Street might have regained in the recovery since 2009 was surely dashed back to square one on May 6,” Ray Pelleccia writes on the Exchanges blog. The “flash crash” continues to defy easy explanation, and that only adds to the public’s widespread bafflement and distrust of what happens in our financial markets.”
Madeleine Lim and Paul Vigna discuss Greece’s formal request for aid, the huge jump in new home sales and the durable goods report. It’s Tomorrow’s News Today.
New home sales sink to a fresh record low, and we don’t buy this snowbound-buyer argument. The housing market is not strong, and the timing’s bad, as it’s about to be unhinged and sent off to fend for itself.
Elsewhere, durable goods rose. But, Portugal reminds everybody Greece isn’t the only country in Europe with problems.
Newswires’ Madeleine Lim and Kathleen Madigan discuss disappointing durable goods and jobless claims data as well as the latest on health-care overhaul plans, all on Tomorrow’s News Today.
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Michael Dorff, a professor at Southwestern Law School in Los Angeles, says CEOs are paid for performance – but it’s usually not their own performance. They’re paid millions for the performance of the economy, their industry, their employees, and sometimes just for having good luck. For years boards of directors – often made up of CEOs who believe in […]
