Market Talk

I just feel like we're not going anywhere, you know what I mean?

US stocks enjoying a fierce run-up on the heels of yesterday’s triple-digit decline, highlighting a theory Todd Harrison pointed to this morning that the market’s initial reaction following a Fed meeting, or in this case testimony, is often the false move.

A slew of corporate earnings and a better-than-expected data on existing home sales are fueling the rally, which recently sent the Dow up 220 at 10340. But a disappointing jobless claims report, which is largely getting overshadowed amid today’s run-up, deserves more attention.

The number of workers filing initial claims for jobless benefits rose 37,000 to 464,000 in the week ended July 17, marking the biggest weekly rise since February.

So much for the recent positive momentum in jobless claims. They had dropped the prior two weeks in a row and hit 429,000, their lowest level since August 2008. But the latest run-up — new filings surging 37,000 marks the biggest weekly rise since February — takes the unemployment measure back above 450,000.

“Even if today’s rise in jobless benefits doesn’t mean much, there’s still the bigger problem that’s plagued this metric all year: It’s going nowhere fast,” James Picerno writes at The Capital Spectator. “As the weeks and months roll by without a material decline in new filings for unemployment insurance, it’s getting tougher to argue that the labor market’s salvation is just around the corner.”

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With a little more than half of the S&P 500′s components checking in this earnings season, 4Q operating earnings, according to S&P, are coming in at an almost absurd 481% increase over last year’s 4Q (the only time the group ever produced a loss, incidentally.)

On an “as reported,” basis, including charges and the like, earnings are up 148% over last year.

However, sales are up only 6.6% from a year ago. The sales gains are “not impressive,” S&P’s senior index analyst Howard Silverblatt says. “Sales are contingent on both corporate and consumer spending, both of which are shaky.”

Capital expenditures by corporations, he notes, fell 22% in 2009, and although there are hopes they rise in 2010, there were hopes in 2009, too. “The general hope over 2009 was that information technology has to benefit from that; oddly enough when 2009 did not produce the results, the sentiment continued based on the belief that the spending eventually has to be made.”

It’s notable that in Microsoft’s earnings release, the company noted it hasn’t seen any discernible increase in enterprise spending and isn’t even hopeful that an increase is on the way.

So, again those profit-growth rates are coming mainly as a function of cost-cutting, which in large part translates into layoffs (which also alleviates the need to new capital spending, by the way. Nice how that one works; if you don’t have more bodies in the office, you don’t need new desk, chairs, filing cabinets, computers, phones, training manuals, etc.)

“While the situation continues to improve,” Silverblatt says, “it is just baby steps on what appears to be a long, slow recovery, which given the current economic and political environment, is sure to be more than a bit bumpy.”

All right, here it is, the final tally on the stock market in 2009. Whether it really is the start of a new bull market, or the work of the Plunge Protection Team, stocks rallied in spectacular fashion after hitting bottom in March. And yet, as John pointed out the other day, it’s a rally that has been lightly attended.

While you ponder that and other mysteries — like how do Ryan Seacrest and Carson Daly both get New Year’s Eve shows — here are the numbers to chew on, courtesy of Dow Jones’ stats group.

For 2009, the Dow Jones Industrial average rose 1651.66 points, or 18.8%. That’s the fourth biggest yearly point gain in its history, and the biggest since 2003, although it’s only the 33rd best year ranked by percent. It’s up 59.3% from the closing low of 6547.05 on March 9, but still down 26.4% from its all-time closing high of 14164.53 on Oct. 9, 2007. The index has gained ground in five of the past seven years.

The S&P 500 rose 211.85 points in 2009, or 23.5%. It’s the fifth largest year on points, but only the 18th largest by percentage. The S&P is up 64.8% from its 2009 closing low of 676.53, hit March 9. It’s still down 28.8% from its all-time closing high of 1565.15, hit Oct. 9, 2007. The S&P is up six of the past seven years.

But for the decade, according to S&P itself, the S&P 500 is down 24%; it closed at 1115.10 today, and at 1469.25 on Dec. 31, 1999. After accounting for dividends, the total return for the decade was negative 9.1%. Energy rose 102% in the decade; tech fell 54%. Financials lost 39.8%.

But the numbers tell only part of the story. The decade produced two bull markets, two bear markets and two burst bubbles, in tech and housing. ”It also saw,” S&P’s senior index analyst Howard Silverblatt writes, “many high level frauds, mismanagements, self-serving individuals (in both the public and private sector,) which has resulted (in) at least in a deep concern and (at) the most a full mistrust by investors of institutions.

“For markets to function, this confidence will need to return, and it can only be returned through deeds and actions.”

Here’s to hoping 2010 is better than 2009. Happy new year, folks.

Let' see, six plus four, carry the three, and...huh, that's less than last year.

For 3Q earnings, or one quarter one of these days, the bottom line is actually going to be on the top line.

S&P’s senior index analyst Howard Silverblatt notes sales for the S&P 500 companies are expected to fall about $1.52 trillion from 3Q08 — almost as much as the federal stimulus and healthcare plans put together.

Companies will make their EPS numbers this quarter the way they did last quarter, he notes, mainly through cost cutting. But, “you can only cut so long,” he writes. “Eventually you need to increase the top line in order to increase the bottom line.”

Silverblatt also notes that financials are expected to rise 115% in the quarter — which will still leave them down 72% from the 3Q98 and 83% off the 3Q06.

Earnings in 2010 are projected to hit $73.47, up 34% from the projected 2009 tally of $54.77. But that would still be 16% below 2006′s $87.82, with the market down 26.5% from the 2006 close.

At some point, companies are going to need to show actual, organic growth. It hasn’t happened yet.