Market Talk

Stocks end lower, but reclaim most of the ground lost after mid-morning word of a strong aftershock quake in Japan.

Quake headlines and tsunami warning send a chill through a market that’s grown rather blase lately toward various pockets of global upheaval (Mideast/North Africa; Japan disaster; Eurozone debt problems). Despite the bump in volatility, trading volume remains anemic.

Industrials, financials and utilities among the weakest sectors; energy stocks finish higher as Nymex crude tops $110.00/barrel, to its highest settle since Sept 2008. Gold settles at fresh Comex high of $1,458.50/oz; silver hits fresh 31-yr high.

DJIA slips 17.26 to 12409.49, and Nasdaq Comp edges 3.68 lower to 2796.14. S&P 500 falls 2.03 to 1333.51.

Latest aftershock doesn’t appear to have done too much additional damage, but rapid, sharp plummet on initial quake/tsunami warning headlines may’ve put some fear back into a market that’s had an impressive ability to shake off troubling news.

Abundant liquidity has nurtured the risk trade, building complacency amid a hazardous backdrop as everyone thinks they can get out before the stampede begins. After glimpsing that hair trigger this morning, looks as if some risk-takers may have seen enough.

The tone remains bullish for stocks this morning as the ongoing stream of liquidity provided by the Fed’s QE, and more recently by Bank of Japan, courses through global markets. Stocks were strong in Asia overnight, currently higher in Europe and US stock futures point to a higher open.

As of yesterday’s close, major US indexes have erased declines following the Japan quake/tsunami/nuclear crisis. Risk aversion remains just a dalliance, a mere gesture now and again, even as the litany of stresses and perils around the world hardly ever seemed higher.

A third look at 4Q GDP due at 8:30am ET, and final look at Reuters/Univ of Michigan March consumer sentiment at 9:55am. S&P futures off their earlier highs, up 3.60; 10-yr note up a little, yield at 3.39%.

Beats me why stocks went down today.

A late-day selling spree forces stocks to close at session lows. The risk trade that has propelled equities throughout much of September takes a day off as concerns about financials return.

Stocks wavered around the flat line for much of the session, but made their move down in the final 10 to 15 minutes of the session. DJIA finishes down 48 (0.4%) at 10812. S&P 500 drops 6 (0.6%) to 1142, has dropped four of the last five sessions. Nasdaq Comp falls 11 (0.5%) to 2370.

Word comes out late in the day that Fed officials are considering new tactics if they resume purchases of Treasury securities to bolster a disappointingly slow recovery. Rather than massive bond purchases with a finite end, Fed officials are weighing a more open-ended, smaller-scale program, WSJ reports. That may’ve hurt stocks in the final few minutes.

Moody’s downgrades the debt of Anglo Irish Bank by three notches, which hurts financial stocks. But more M&A activity boosts confidence as Unilever agrees to buy Alberto-Culver for $3.7B and Southwest announces plans to buy AirTran for $1.4.

On tap for tomorrow, Case-Shiller Home Price Index, Richmond Fed business activity survey and consumer confidence data.

This is definitely a risk on/risk off market. US stocks fall as the risk trade abruptly turns off, after the old fears over Europe reignite.

DJIA loses 107 (1%) to 10341, S&P 500 falls 13 (1.2%) to 1092, Nasdaq Comp drops 25 (1.1%) to 2209. NYSE volume is very low, so it’s hard to draw any real conclusions. But while stocks fall, gold hits fresh record high. The euro fell almost a whole two cents. The 10-year Treasury yield fell to 2.61%. That all ought to tell you something.

WSJ story says European banks hid sovereign-debt risk from stress tests, but who really bought those tests in the first place? Not us. Report that German manufacturing orders slipped didn’t help matters. But what really should be catching your eye is the rising costs of credit protection for both public and private debt in Europe. In some cases, they’ve gone back to the pre-bailout levels. Ireland’s hitting up its neighbors for “support” as the state-owned Anglo Irish Bank craters (I love how absolutely everybody describes the bank as “troubled.”

Weakness in European stock markets and declining euro contribute to a moderately negative premarket tone for US stocks as this holiday shortened week gets underway.

More discussion about the lack of real stress in Europe’s bank stress tests has added some edginess to the mood. Slow week for US economic data, nothing of note due today. Fed’s Beige Book and July consumer credit both out tomorrow afternoon.

Investors retreating from last week’s full-on risk embrace, oil futures dipping back below $73/barrel, EUR/USD recently at $1.275 after climbing above $1.29 last week. USD index up 0.7% at 82.58.

S&P futures down 5.50, DJ futures down 42. Ten-year note rebounds, yield back down to 2.65%.

US stocks kick off August on a bright note, surging from the opening bell and never looking back, as better-than-expected manufacturing and construction spending data fueled the run-up.

Strong quarterly reports from European banks ignite the rally, with major indexes closing near session highs. DJIA closes up 208, or 2%, to 10674 and S&P 500 rises 24, or 2.2%, to 1126. Nasdaq Comp jumps 41, or 1.8%, to 2295.

Both the Dow and S&P break through their 200-day moving averages, according to Bespoke Investment Group. S&P 500 now faces resistance at its mid-June high of 1131, but the Dow’s next resistance level is all the way up at 10900, firm says.

Investors kick off August right where they left July off, as last month was the best calendar month for asset classes since November. But thinking the easy money is back in full force wouldn’t be prudent.

“The underlying economic worries that moved the crowd to sell in recent months haven’t gone away,” James Picerno writes at The Capital Spectator. “A more plausible explanation is that the fading appetite for risk in May and June went a bit too far too fast.”

Nevertheless, for a day, the risk trade was in full force: Treasurys were lower, the dollar dropped, gold closed slightly higher and crude surged 3% to $81.34, closing near a three-month high. Lots on tap for tomorrow; June personal income and spending as well as pending home sales, factory orders and auto sales.

US stocks are surging, with the S&P 500 within hailing distance of the important 200-day moving average, as the euro is providing a big boost.

Euro’s back near 1.23 (currently at 1.2282 and rose as high as 1.2299 recently,) an indication of equilibrium on the Continent, and that’s giving the risk trade renewed legs. S&P 500 back above 1100, up 12 at 1104 lately, with the 200-day moving average around 1112 (depending upon whom you ask.) Punching through there could spark even more buying. Every sector’s higher, with energy and consumer discretionary leading the gainers. DJIA up 98, Nasdaq Comp up 32.

But despite the bullish sentiment in the indexes, there are good causes for concern. “We’ve just had a flurry of data that may be raising a caution signal,” UBS’ Art Cashin writes. He points to the record drop in building materials in last week’s retail sales report.

Jobless claims are still maddeningly high. The Baltic Dry Index fell 3.9% on Friday, its 11th straight decline. Then there’s the ECRI Leading index, which fell into negative territory last week and is dropping sharply. “If the ECRI continues at this level, it may indicate negative growth in the third quarter GDP,” he writes.

“Why the sudden shift to negative in these various indicators? That’s not clear yet but they bear very careful monitoring.”

We don’t know who’s going to win this weekend’s Preakness Stakes, but in honor of that storied race, we’ve imagined a different race, taking place right now. Call it the Weakness Stakes.

AND THEY’RE OFF!

It’s Eurobail followed by Risk Trade and French Pride. Eurobail, Risk Trade, French Pride. Then it’s Grecian Burn, Average Joe and Helicopter Ben. Teutonic Beast, Vampire Squid, Fear Trade and Moral Hazard bringing up the rear.

Eurobail, Risk Trade and French Pride. Eurobail and Risk Trade running almost neck and neck. Eurobail in fact looks like he’s pulling Risk Trade by the nose.

Grecian Burn’s quickly falling back, he’s going to have a hard time keeping up with this pace.

Helicopter Ben’s moving up on the inside, Ben trying to keep his movements hidden, not wanting to commit too early, but we’re sure he’s going to do something unexpected.

Fear Trade still bringing up the rear, but he doesn’t seem to mind. Looks like he’s happy to let the field wear itself out. Eurobail, French Pride, Risk Trade.

Around the far turn it’s Risk Trade, Eurobail and Helicopter Ben. Vampire Squid keeping pace on the outside, waiting to make his move. It’s like he knows something. Moral Hazard moving steadily through the field with a vengeance.

And here comes Average Joe! Average Joe’s giving it everything he’s got! He’s moving up on the outside looking in. Past Helicopter Ben. Passing Risk Trade. Looking to catch up to French Pride. He’s almost there, neck and neck, he’s got the leader in sight!

Continue reading…

US stocks reverse field today, dropping along with a variety of other risky assets as the dollar surges amid a global scramble for safe havens.

DJIA falls 53 to 10836, a day after jumping 103, S&P 500 falls 6 to 1168, Nasdaq Comp loses 16 to 2399. Gold, crude both fall, with the latter sliding under $80/barrel.

Meanwhile, and conversely, the dollar surges as euro tumbles after Portugal gets downgraded, reminding everybody than Greece isn’t the only trouble European nation. Euro falls to a 10-month low against the greenback, and some sharp-eyed observers expect to see it continue dropping.

But the flight to safety doesn’t permeate to Treasurys, where a weak 5-year Treasurys auction adds to sovereign debt jitters, and government bonds sell off.

Domestically, new home sales in February fell to a record low, which is especially bad after yesterday’s bad existing home sales report. The housing market, it seems, hasn’t exactly gotten the memo that it’s time for it to sail under its own power. Durable goods rose though, offering some hope for the recovery crowd.

But a quick look in that direction also reveals some causes for concern. For one thing, orders and shipments for computers were weak. Then there was an interview with Xerox’s chairman, who said the company isn’t seeing a “significant change” in business spending. Just two more little signs that this expected surge in capital spending that’s going to be the rocket fuel the economy needs may not turn up.

It was a good day to take a risk.

US stocks rally along with commodities as the dollar drops after Europeans hand Greece a deadline, which brings the risk traders out of the woodwork.

DJIA jumps 170 (1.7%) to 10269, S&P 500 rises 19 (1.8%) to 1095, Nasdaq Comp gains 31 (1.4%) to 2214. It’s the Dow’s biggest day since Nov. 8. Dollar loses 1.2% against the euro, and crude surges, which drives energy and materials stocks. Treasurys, curiously, also rise; some short-covering is cited there, after last week’s $81B bout of refunding. (Not sure I necessarily buy that, but it was curious that bonds did as well as they did today given the rallies everywhere else.)

Simon Property offers bankrupt General Growth Properties $10B; if it goes through, Simon would get control of about one-third of the nation’s mall. Two sentiment measures, the NY State Mfg index and NAHB Home Builder index, rise. But make no mistake, today’s action was driven by what’s going on in Europe, and what it did to the dollar/euro trade today.

For a day, everybody seems to have calmed down over the whole Greece issue, but be warned this is not going to go away. Markets were mollified by the month Europe’s finance ministers gave Greece to clean up its balance sheet. But it seems to us that was as much to buy the finance ministers time as the Greeks, and to allow the ministers to look tough for the home crowd. Nobody wants to offer a bailout, but in the end they may not have a choice.