Market Talk

Paul and I talk about the March jobs report, outlook for jobs and NY Fed’s Bill Dudley with Mesirow Financial economist Diane Swonk. Dave Kansas then offers some perspective on Nasdaq/ICE bid for NYSE Euronext.

The latest trend on the NYSE floor is the Ostrich Rally. UBS’ Art Cashin, the dean of floor traders, laid it out in his daily commentary:

Traders have watched with growing interest a phenomenon that seems to have grown from the first days of the demonstrations in Athens.

Simply put, if there is chaos on the screen, the stock market frets and often falls.  If, a day or so later, the screen is filled with talking heads, the market rebounds (even though the talking heads happen to be talking about on-going chaos in the streets).  In essence – if I can’t see it, it can’t hurt me.

The result has been a replacement of the Goldilocks market with a current “yo-yo” market.  Down one day then up the next.  Yesterday was no exception.

With reporters access to Libya restricted, there were few images of chaos and killing in the streets.  There were reports of the same but no images.

Stocks started choppily but managed to regroup within minutes.  They re-surfaced the whacky “K. Daffy wants to negotiate” rumor resurfaced.  The boys in the oil pits seemed to take the bait for the second time.  Lower oil sent stocks higher.

A bit later, upbeat comments from Bank of America’s investor day seemed to help all the financials.

That was pretty much it.  Stocks hit their high around noon.  They then moved choppily sideways for the balance of the day.

You could see what Cashin’s talking about pretty clearly this morning: stocks futures were slightly higher, but then news broke about fresh fighting in Libya, and beyond just news, there was some video to go along with it. Once traders saw those plumes of smoke rising from the Libyan desert, bids dried up.

I have to share this with you, it’s too priceless. So the NYSE puts out this notice that gambling isn’t allowed on the floor of the exchange. Here’s the snippet we ran on the wire, from Newswires’ Jacob Bunge:

12:48 (Dow Jones) NYSE Euronext (NYX) issues “reminder” notice to exchange members that gambling is prohibited on trading floor and “a criminal offense in New York.” Write your own punchline about the financial crisis or the markets in general, but NYSE’s regulation department warns further against using post computers for “games of chance” or calling your bookie from the floor. “If you have any questions about whether a particular activity is prohibited, you should consult with your firm’s compliance officer, senior manager, and/or legal counsel,” according to NYSE notice.

Gambling? On the floor of the New York Stock Exchange? Naaah…

I mean, that’s like that classic joke about the aristocrats, right? The set-up is provided, and you can fill whatever outrageous, hysterical take on it you like.

“The NYSE warned traders that gambling is not allowed on the floor of the stock exchange…then promptly threw everybody out and shut down forever.”

“The NYSE warned traders that gambling is not allowed on the floor of the stock exchange…after which traders began massively shorting the NYSE.”

Okay, so those aren’t exactly funny. But you get the point. The exchange has always had something of a casino feel about it, and that’s only gotten worse since the Maestro came to town and laid down the Greenspan Put.

So please, feel free to add your own punchline in the comments. Most creative gets a Market Talk t-shirt. (Okay, we don’t actually have Market Talk t-shirts, but if we did, we’d give the most creative poster one for sure.)

Addendum: Just to add a little weight to the point, here’s a comment to consider, from the Crosshairs Trader blog (h/t Reformed Broker):

Wall Street speculation is the most stupendous game known to the world of chance; as compared with it, the game of Monte Carlo pales into utter insignificance; in no other game are the stakes so high, is success so transitory, and failure so overwhelming.

Who said it? Franklin C. Keyes…in 1904. The title of the Crosshairs post? ”Same As It Ever Was.” 

- Consumer credit falls for fourth straight month. “There’s absolutely nothing encouraging about these numbers from a standpoint of ‘recovery,’” Karl Denninger writes. Perhaps more disturbing is the negative revisions. “They effectively erased the alleged ‘improvement’ in the rate of decline that was allegedly ‘reported’ last month.”

- Paul Krugman wants to know what went wrong as high unemployment continues to plague the economy. “It’s now obvious that the stimulus was much too small; yet there’s virtually no chance of getting additional measures out of Congress,” Krugman says. “From a strictly economic point of view, we could still fix this: a second big stimulus, plus much more aggressive Fed policy,” he adds. But politically, we’re stuck…I’d like to say something uplifting here; but right now I’m feeling pretty bleak.”

- Bank lobbyists successfully watered down financial reform, Simon Johnson writes, except for one key aspect: the Kanjorski Amendment. The amendment “gives federal regulators the power and the responsibility to limit the activities or even break up big banks if they pose a ‘grave risk’ to the financial system,” Johnson says. “The debate on big banks and the dangers they pose is far from over.”

- Apple’s (AAPL) next release of its Apple TV set-top box will let viewers watch individual TV episodes for 99c, according to the NewTeeVee blog. In a move reminiscent of how AAPL launched what became the world’s biggest music retailer, it’s apparently trying to get TV programmers to allow episode rentals for less than the current $1.99 or $2.99 fees.

- The housing bust, which first hit the working class, has made its way up the ranks and now is hitting the affluent pretty hard. About one in seven homeowners with loans of more than a million dollars are seriously delinquent, NYT reports, while only one in 12 mortgages under $1M are delinquent. The “message here is that high income borrowers aren’t taking the Freddie/Fannie/bank bluster about strategic defaults seriously,” Yves Smith says.

- Adobe’s (ADBE) next version of Flash will support 3D graphics, if the session lineup for the company’s MAX 2010 conference is any indication. The session, flagged in a CNet post, promises “a deep dive into the next-generation 3D API coming in a future version of Flash Player.”

- Percentage of S&P 500 stocks trading above their 50-day moving averages has spiked up to 28% amid this week’s big rally, Bespoke Investment Group reports. “For bulls, this means there could be a long way to go before the rally runs out of steam. For bears, this shows that even after a pretty big rally, breadth remains rather weak.”

- Sure the New York Stock Exchange is flying both the Dutch and Spanish flags, but don’t be fooled by the alleged display of World Cup nonpartisanship. NYSE CEO Duncan Niederauer asked exchange employees to wear orange in support of colleagues in The Netherlands (where NYSE operates an exchange) before Sunday’s final with Spain, says spokesman Ray Pellecchia, emphasizing in a blog post that his own blue-and-orange tie is “NOT a Mets tie.”

- Deflation worries are still prevalent. “Debate rages about whether the trend is a warning sign for the economy or merely statistical noise,” James Picerno notes at The Capital Spectator. “To be fair, outright deflation isn’t here yet, nor is it certain (or even likely) that it’ll turn up.” But the risk remains. “And with the outlook for a jobless recovery looming, this is no time to soft pedal the D risk.”

- Reuters blogger Felix Salmon is pessimistic that there’s an easy solution to the long-term unemployment issue plaguing the US. “Maybe unemployment is simply a problem to which there is no good medium-term solution, let alone any short-term fix,” he says. “Certainly the government can’t directly employ the unemployed, and although I’m a big fan of arts subsidies as a way of creating jobs, that kind of thing is only ever going to have a marginal effect.”

- “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.”

Newswires’ David Benoit reports:

Maybe Procter & Gamble (PG) should have changed the giant ad on the front of the NYSE this morning to say “thank you traders” instead of “thank you moms.”

The front of the storied exchange is covered today in one large pink Mother’s Day card from PG, as the company’s executives are ringing the closing bell to “help celebrate Mother’s Day.”

After the NYSE managed to slow down the plummet in PG electronic shares by implementing good old-fashioned human trading, think the executives will be patting more than a few backs while there today?

(Photo credit: David Benoit)

Newswires’ Geoffrey Rogow reports:

The mantra on Wall Street this month has  been “it’s best to stay flat.” Given a 60% jump in the S&P 500 since March, which has pushed many into the black for the year (and then some,) most veteran traders are treading lightly.

Further damping trader’s penchant for risk, this morning’s jobs report was one of the few calendar events left in a holiday-focused month, with the expectation being it’s going to be even lighter in the next few weeks. For now, as was the case for much of 2008, traders simply don’t want to hold a lot of long positions going into a weekend.

“This is a Friday around Christmas time,” said John Brady, senior vice president with MF Global. “Portfolio managers and traders just don’t want to get out beyond their skis this late in the year.”

Of course, at the center of the day’s surge and and subsequent selloff has been the push and pull of what raising interest rates would mean for stocks.

Continue reading…

Rolling Stone? Rolling Stone!? Can't they just stick to Usher and John Mayer?

Is it us, or does Goldman Sachs suddenly seem…touchable?

Through the subprime meltdown and credit crisis, Goldman seemed like the one firm that was untouchable. The masters of the masters of the universe. The hedge funds melted down. Bear Stearns disappeared. Lehman Brothers disappeared. Citigroup was saved only by the grace of Uncle Sam. Financial carnage tore apart Wall Street. Goldman endured. Nobody or no thing could lay a glove on them.

But lately it seems like some blows are landing.

Continue reading…