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…

Maybe that modest selloff yesterday was just bulls teasing bears, judging by gains in premarket equity futures. However, economic data due before the market opens still could present a potential hurdle for bulls.

January PPI, and housing starts both due at 8:30am ET. Let’s take a guess that weather may’ve stunted new home and apartment construction last month. Expectations are for starts to rise a little. Unless builders went full-out in the Sunbelt (where there’s already plenty of empty houses and condos), hard to see how starts produce even a modest rise.

Also, Jan industrial production and capacity utilization set for 9:15am. FOMC minutes due at 2:00pm, may add some twists and turns to late-session trading.

S&P futures up 4.00; 10-yr note higher, yield at 3.60%.

In what’s become a somewhat rare event lately, US stocks sold off. That’s right, nothing dramatic, mind you, but the weakness lasted wire to wire, without any convincing effort by bulls to turn this one positive. Can’t win them all.

To add a little perspective on this modest drop, both the DJIA and S&P 500 fell about one-third of a percent, and Nasdaq fell nearly 0.5%. Hardly much of a pullback, but it was the biggest point and percentage drop in twelve sessions, since the market got jittery on January 28 watching wall-to-wall coverage of protests in Egypt.

Economic data not especially inspiring, with the most notable aspects being inflation-related — hotter-than-expected import prices, and frisky gains in prices paid in NY Fed’s Empire State survey. Exxon and Chevron give back most of yesterday’s gains, and with Boeing lead the Dow’s dollar decliners. DJIA slips 41.55 points to 12226.64, and Nasdaq Comp falls 12.83 to 2804.35. S&P 500 ends 4.31 lower at 1328.01.

Housing starts, PPI, industrial production & capacity utilization and FOMC minutes all due tomorrow. Continue reading…

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%.

Once again it looks as if the Dow Industrials’ winning streak (now at eight straight sessions) may be in jeopardy, but it would be foolish to underestimate the bulls’ ability to turn things around, especially late in the session.

“These days, opening indications and actual closing prices are two very different animals,” Barry Ritholtz noted earlier at the Big Picture. He has a precise summation of how the bull vs bear battle has gone during the past several months:

In the face of massive liquidity of QE2, there remains a firm bid beneath this market. So far, losses have been modest to minuscule, with selling pressure well contained. M&A, share buybacks, anything but disappointing earnings are an excuse to put on the rally caps. Even dips are an excuse to buy. (We are running 53% cash on specific name selling, not overall market calls).

The bears are bloody but unbowed — they know a correction is imminent. But the bulls have heard this line for nigh on two years, and yet still the market still powers higher. The Dow, S&P and Nasdaq are all at multi-year highs. There is a difference between being early — a matter of days or weeks — and wrong. So far, the bears have been wrong.

Eventually, the grizzlies must be fed. They have their champions, including various Fed Hawks, who are terrified of an inflationary spiral. Lacker, Plosser and Fisher may be mortal enemies of price instability, but they are friends of Yogi and Boo-Boo and Baloo, well known amongst ursines for their opposition to easy money. And easy money is a bull’s best friend.

Even the most ardent bull knows that this too, will pass. The bears will have their day, before their next bout of hibernation.

The 64 trillion question: When? Continue reading…

Plenty of economic data has been directionally positive lately, and with that we will not quibble. Improving data is always welcome, but at the same time, let’s be sure to maintain some perspective.

There’s been a sense today of hearty congratulations to the consumer for doing a fine job shopping during the holiday weekend and Cyber Monday, and for their brighter confidence during the month of November. Neither accomplishment is to be diminished, but let’s look at where we are.

Save some of the back-slapping over strong Black Friday and Cyber Monday sales because…they’re always strong, folks. Or at least that’s how they’re usually portrayed. “Holiday spenders had fast start; Sales rose 6.5% during Thanksgiving weekend, and Cyber Monday spurred a 21% increase,” blared a headline from November 2007, a month before the recession’s official beginning. “Shoppers opened their wallets; Strong start to holiday season,” sang one headline just after Thanksgiving 2008. Continue reading…

Deterioration in NY Fed’s November Empire State manufacturing survey was quite an eye-grabber, with the general business index tumbling below zero for the first time since July 2009. Interesting to see investors whistling past this report today.

Here’s a sample of the ugliness:

General business conditions reading plunged to -11.14 from 15.73 in October; new orders fell off a cliff, to -24.38 from 12.90; average workweek slides to -12.99 from 3.33.

Plunge in new orders was the sharpest drop since September 2001, NY Fed says.

On the bright side, manufacturers expect things to get better, with the future general business conditions index climbing. Chalk that up to Republicans taking back the House. We’ll see how long the optimism lasts.

Capital Economics calls the weak report “worrying given that all the surveys had suggested industry was emerging from its summer soft patch.” Still, firm says Empire State survey “is very volatile, so it is far too early to conclude that industry is heading back into recession. But with the upward impetus from the surge in world trade, the release of pent-up investment demand and inventory rebuilding fading, industrial growth will remain subdued.”

Philly Fed dishes up its November business report on Thursday.

Stock futures slightly higher premarket as bulls look to bounce back from a rough week. Markets mixed in Asia overnight, edging higher currently in Europe, with the euro recovering a bit from earlier
lows.

USD index up 0.5%, Treasurys taking an early beating, perhaps on word that Republican lawmakers are trying to persuade the Fed to halt QE2 plans. Busy week for data, this morning brings Oct retail sales, and NY Fed’s Nov Empire State manufacturing survey at 8:30am ET. Sept business inventories set for 10:00am.

Also a lot of retailers reporting quarterly results this week, including Lowe’s this morning; Wal-Mart, Home Depot and Abercrombie & Fitch tomorrow. S&P futures up 3.70; 10-yr note hit hard, yield at 2.83%.

Reports from handful of big names — including Intel, JPMorgan, Google and GE — increase the visibility of 3Q earnings season this week.

Similar to the previous three quarters, stocks have rallied into the earnings reporting period. During the prior periods, the major equity averages have then relinquished fairly quickly the gains gathered in anticipation of strong earnings. Concerns about weakness in the economy slowly overcame any optimism garnered by stronger corporate earnings.

With markets now in full-blown conviction that QE2 is a November fait accompli, it may be harder for bears to get their swipes in as the earnings calendar rolls. Reaction to this week’s big-name results should be revealing.

Continue reading…

- SEC reaches a $550 million settlement with Goldman Sachs. “The regulators get to claim victory while the Eloi get to continue their frolic atop the fluffy clouds of privilege and untouchability,” Josh Brown writes at The Reformed Broker. “Nobody admits wrongdoing, rightdoing or frankly, admits anything at all for that matter.”

- “This is surely a massive win for Goldman, whose entire business was at stake if it was found guilty of serious wrongdoing,” Reuters blogger Felix Salmon says. “The risk, of course, is that Goldman’s victory here will only serve to exacerbate its arrogance. Could the Squids of West Street become even more insufferable, now?”

- Business Insider has a list of winners and losers in the Goldman fraud settlement case.

- Lots of data to digest this morning, and most of it isn’t promising. Producer prices fall for third straight month and manufacturing data was weak. Headline jobless claims number looks good, but seasonal adjustments played a large role in the better-than-expected figure. “Due to the seasonal issues around the adjustments with GM doing the opposite of what they’ve historically done has made initial claims more difficult to analyze for a few weeks,” says Miller Tabak’s Peter Boockvar. “One thing though is for sure, up to 3 million workers will be falling off the extended claims rolls as benefits run out.”

- Naked Capitalism blogger Yves Smith relays an interesting nugget from HousingWire: for every one home currently on the market, two are waiting to be sold. “The scary part here is this estimate of market overhang refers only to foreclosed and distressed property,” she says. “There is another category of hidden inventory, people who would like to sell but aren’t even listing their houses.”

- Oil has finally stopped gushing into the Gulf. For now, as BP tests a new containment cap.

- Apple’s (AAPL) acquisition of mapping company Poly9 marks the second maps-focused company AAPL has bought in the last year. “In the short term, and with Poly9 specifically, Apple is buying its Google Earth,” Business Insider’s Dan Frommer says. “But more broadly, Apple is preparing for life after Google.”

- H-P’s (HPQ) Android tablet, which was supposed to hit the market in 4Q, has been delayed and won’t ship before the end of the year, Digital Daily blogger John Paczkowski reports, citing anonymous sources. Reason for the delay aren’t clear. “Perhaps, H-P has decided to focus its resources on the future webOS slate PC that its new Palm unit is developing,” he says. “Or perhaps the company is reconsidering its multi-OS tablet strategy in light of the Palm acquisition. After all, H-P has said repeatedly it is ‘doubling down’ on webOS.”

- “Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging,” WSJ reports.

- Pretty pumped to see Carlos Beltran patrolling center field once again for the Mets.