Despite Poor Housing Data, Philly Fed Big Miss, Stocks Rock On

Following yesterday's exercise in exposing how Wall Street makes money at the expense of almost everyone else, confirmation today as stocks gained despite continued horrible data from the housing sector and a huge miss in the Philadelphia Fed's latest report on economic conditions in the region.

According to the NAR, existing home sales for the month of April dipped 0.8% nationally to a seasonally adjusted annual rate of 5.05 million.

Chief economist, Lawrence Yun said:

“Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger...”

Naturally, Mr. Yun, an economist, hasn't set foot outside his office for some time and hasn't taken into account the facts that banks aren't lending, jobs are scarce and those who do have regular jobs haven't received a raise in a while, all along dealing with higher energy and food prices.

Median price for a single-family home fell 5.4% year-over-year, to $163,200. Total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, and the NAR feels this is amount is a 9-month supply. Their figures are probably not inclusive of the two to four million homes in the so-called "shadow inventory" which includes houses in foreclosure, off the market and in the hands of the banks (REO) and other distressed properties.

That, my friends, was the good news.

The report from the Philadelphia Fed was a little more alarming, where its business activity index slumped to 3.9 from 18.5 in April. Ah, yes, that recovering economy just continues to click along in places like the Northeast business section of the country.

Stocks actually lost ground for a few moments after these two sets of data reached Wall Street at 10:00 am EDT, but then the computers running the trading floor were reminded that tomorrow is stock option expiration and their human masters would be in need of more money for hookers and cocaine, so back up they went, on volume so thin Charlie Sheen was brought in to cut it.

That was, except for the darling IPO of the day, LinkedIn (LNKD), the business/social website that was priced at $45/share, but opened at $85 and traded as high as 122 before setting for the day at 94.25. That price places the company's market cap at around $10 billion, which is more than 65% of the companies listed on the S&P 500. The trading frenzy over what amounts to a web-based rolodex brought back memories of the 1999 tech bobble. Some traders actually shed tears of nostalgia.

Dow 12,605.32, +45.14 (0.36%)
NASDAQ 2,823.31, +8.31 (0.30%)
S&P 500 1,343.60, +2.92 (0.22%)
NYSE Composite 8,427.95, +20.47 (0.24%)

Advancing issues held sway over decliners, 3603-2911. On the NASDAQ, 81 new highs and 38 new lows, while the NYSE showed 179 new highs and a mere 17 new lows. Volume was slight, though the A/D line hints that there was a smattering of caution, likely concerning the forward-looking trends set by the Philly Fed and housing data, to say nothing of the impending end of QE2, which accepted 1.9 billion in outright coupon purchases today. Ted Fed has released the schedule through June 9. Some time after that, the operation is supposed to end, though few doubt that the easy money will come to a complete halt.

NASDAQ Volume 1,739,600,875
NYSE Volume 3,625,738,000

The price of oil eased, down $1.66, to $98.44 per barrel of WTI. Gold traded down $2.30, to $1494.60. Silver was off seven cents, at $34.95 per troy ounce.

With options expiring tomorrow and the Fed dealing another $5-6 billion in POMO, unless nuclear war breaks out somewhere - and even if it does - stocks should show more gains, at least in the morning.

More Stumbling Along for Stocks as US Economy Slowly Crumbles

Anyone under the age of 60 as of this date (you'd have to be born on or after August 24, 1950) who believes that they'll be getting all of their promised Social Security benefits when they reach the age of 65... what's that? President Clinton and the Republican-led congress raised the retirement age to 67? Oh, that's right, I completely forgot that the government changes the rules as they go along...

So, where was I? Right. If you are under the age of 60 and actually believe that Social Security (already paying out more than it takes in) will pay you, beginning at age 67, what they say you're actually due, you need a reality check, not a government check. The federal government is technically insolvent, has been for years and the situation continues to worsen every day politicians dance around the issues of unfunded liabilities such as Social Security and Medicare. The future obligations of those two entitlements alone amount to something in the range of $53 to $85 trillion, completely dwarfing the more-readily recognized national debt, which itself is an abomination at over $12 trillion.

These debts and obligations are a large part of the problem causing individuals, businesses and investors to stop cold in their tracks when attempting to make buying decisions. The overburden of these debts, brought about by a congress - and a public that allowed it - which binged on debt and the former surpluses in the programs (at least in the case of Social Security) are just one issue facing the US economy. There are many others, but these are the big ones, and they will absolutely kill the US economy, the only question being when.

I don't purport to have an answer to that, though it would be prudent to not rely on any future income promised by the US government, and to a lesser degree, any state or municipality simply because the money just isn't there. Baby Boomers are heading directly into the Social Security pool and the burden on current earners will be unbearable unless remedies are found, and soon.

Unfortunately, nobody in Washington is willing to touch the issue until, at the very earliest, January of next year, when a new congress will be installed. Don't count on any meaningful reforms any time soon, however, as the candidates for federal offices - congressmen and senators - are not even as well-qualified as the ones currently holding office, and this bunch isn't very good at anything.

So, America continues to stumble through the worst recession since the 1930s a ship without a rudder, or a sail. We are just drifting along, nobody knowing exactly which direction we're going, when we'll arrive or what awaits us when we get there.

Consensus opinion is leaning toward believing that wherever we're going, the destination will be a bleak and desolate place, especially when we get economic data like that released by the NAR today, showing existing home sales falling to their lowest levels since the National Association of Realtors began tracking the numbers in 1999.

This kind of bleak economic picture is not welcome to investors of any stripe. People are scared, bordering on desperation from a housing and employment collapse which are symptoms of even bigger ills, debt and dwindling resources.

Dow 10,040.45, -133.96 (1.32%)
NASDAQ 2,123.76, -35.87 (1.66%)
S&P 500 1,051.87, -15.49 (1.45%)
NYSE Composite 6,681.03, -103.94 (1.53%)

Declining issues finished the session well ahead of advancers, 4439-1402. New lows shot past new highs, 416-190, marking a complete turnover in that indicator. Volume was a bit higher than previous slow sessions, though, on a down day, that has to be viewed as a negative.

NASDAQ Volume 1,885,569,250
NYSE Volume 4,631,528,500

Oil continued its relentless slide, which, during the month of August, is alarming. Crude usually improves price-wise during the summer, though this year has remained largely range-bound. Crude fell another $1.47, to $71.63 on the day.

Precious metals were the only safe haven. Gold gained 4.80, to $1,231.80, while silver ramped ahead by more than 2%, up 39 cents, to $18.37.

The litany of sour economic news continues apace, and though it would be welcome for a bit of good news on the economy, none seems forthcoming. The US and global economies are stumbling badly with no apparent end in sight.

All Global Markets Feeling the Pinch; Jobs, Housing Apply Pressure

Maybe I was a bit too harsh in recent postings, calling US stock exchanges things like, "the laughing stock of the world," and "overtly manipulated."

This was the conclusion I came to after seeing this headline: Europe shares fall, ending 9-day rally; BP slides, as I had no idea that the European bourses had embarked upon such a ridiculous rally. Knowing they had been advancing in recent days, along with the Euro itself, seemed commonplace, until the headline shook me out of the doldrums and back to reality.

It makes a great deal of sense, realistically, that the Euro-zone nations would ply the same heavy-handed collusion that makes US markets zig, zag, sway to and fro on a moments notice, with or without news or even rumors, until after the fact. All of the European economies and those in North America are under the same gun: they must print money or die, as their currencies become more and more worthless pieces of paper. Accordingly, officials at the various central banks must look dutiful, despite knowing their vain efforts will eventually come to naught.

A nine-day rally across the continent is thus no surprise, merely an extension of the supra-market powers held by the major banks and financial institutions, blessed by the central banking cartel. Their only option is to inflate assets, create money and pray that they may liquidate their own assets and run to a developing nation before the populace comes for them with pitchforks in hand and torches ablaze.

This makes even more sense in light of Monday's faux rally, based entirely on hopes that China's revaluation of the Yuan might stimulate some economic activity for their beleaguered economies. Apparently, most of the insider financiers forgot that China is primarily an importer of raw materials and an exporter of finished goods, and that condition doesn't necessarily stack up to much of anything positive for the Euro-Anglo-American alliance, which has gone from Empire to empty over the past 60 years.

China continues on a powerful growth pathway, along with India, Brazil, Russia and many other previously-underdeveloped countries which now benefit from globalization without the excessive burden of decades worth of unfunded liabilities in health care and pensions. One can also throw Japan into the failing-developed world mix, since they began an accelerated path of destruction nearly twenty years ago and haven't been able to shake off persistent deflation in their internal economy.

Once it was clear that European markets were heading South, it didn't take long for the US to follow the lead on Tuesday. With the S&P and Dow crossing over the flat line throughout the morning and early afternoon, the NASDAQ finally succumbed and headed permanently into the red zone after 2:00 pm as stocks closed at or near session lows for the second straight day. Losses in all the major US indices accelerated through the closing hour of trade. The Dow and S&P closed below their respective 200-day moving averages, while the NASDAQ finished precariously hovering over its own 200-day MA.

Adding to the nightmarish scenario was more data suggesting another round of price declines in the US housing market, though much different in quality from the subprime bust of 2008-2009. The new paradigm is closely related to jobs, which still are not being created in the private sector and likely won't. No jobs means no mortgage payment and further defaults and foreclosures for the major banks.

The vicious deflationary cycle is gaining momentum on the back of deplorable employment and housing environments. Today's release of existing home sales for May by the NAR evidenced a 2.2% decline month-over-month. The weak housing market is being exacerbated by continued weakness in the jobs market and resetting of millions of adjustable rate mortgages sold from 2005-2006, most of which carry a balloon second loan set to expire - and need to be refinanced - this year and next.

With employment conditions as poor as they are, many homeowners in this condition will not be able to secure bridge financing and will fall into default and foreclosure, adding more of a glut to an already-over-saturated residential market. The result will be another breakdown in price by anywhere from 10-25%, depending on the market.

Dow 10,293.52, -148.89 (1.43%)
NASDAQ 2,261.80, -27.29 (1.19%)
S&P 500 1,095.31, -17.89 (1.61%)
NYSE Composite 6,858.95, -119.91 (1.72%)

Declining issues continued to dominate advancers, just as they had on Monday, 5054-1483, but the bearish camp had additional ammunition for their argument Tuesday as new lows nearly surpassed new highs, losing out narrowly, 105-93. Volume was decidedly thin, though velocity may not be an issue during what seems to be setting up as a long, hot summer of decline.

NYSE Volume 5,205,686,000
NASDAQ Volume 1,801,127,500

Commodities did little better than equities on the day. Oil lost 61 cents, to $77.21, while gold added a marginal gain of 20 cents to finish at $1,239.90. Silver added 9 cents in price, to $18.90.

Stocks continue to be highly speculative, volatile and risky in this environment and no place for retirement savings, which is, unfortunately, where most of Americans are invested, either through their own 401K plans or state-funded pensions. Another severe downturn in stocks could easily spark a panic similar to the one in 2008, though this time the consequences may be even more severe.

The doomsday scenario may take as long as another five to seven years in which to be played out, so many investors and hard-working middle class Americans may still have time to fortify their financial defenses.

Reiterating the advice of the past year and a half: Cash and equivalents, arable land and tools of trade are suitable long-term investments for financial survival.

A double dip in virtually all important measures of economic activity seems almost a certainty at this point. Stocks could tumble as much as 30% by year's end, if not more.

Thin Trading, Stocks Higher

Despite another sour report on Existing Home Sales for January - off 7.2% - investors and speculators bid up stocks slightly on the final trading day of February.

Following the release of the housing data at 10:00 am, stocks sank to their lows of the day, but, as has been the case recently, the not-quite-invisible hand of the PPT or other erstwhile stock manipulators pushed the index to its high of the day in less than 30 minutes, a move of roughly 75 points on the Dow.

After that initial burst of despair and excitement, stocks vacillated just above the unchanged mark for the remainder of a lackluster session, one with even lower trading volume than normal due to severe winter storms in the Northeast. Also, just moments before the closing bell, word that a 7.0 magnitude earthquake had struck off Japan seemed to rattle traders, selling off a roughly 20 point gain in the final five minutes.

Dow 10,325.26, +4.23 (0.04%)
NASDAQ 2,238.26, +4.04 (0.18%)
S&P 500 1,104.49, +1.56 (0.14%)
NYSE Composite 7,035.04, +21.59 (0.31%)

Advancing issues led decliners, 3887-2872. There were 312 new highs, to just 34 new lows. Volume was spare.

NYSE Volume 4,742,490,500
NASDAQ Volume 2,153,935,500

Oil finished ahead by $1.49, at $79.66. Gold gained $10.00, to $1,118.50, while silver also was up, ahead by 37 cents, to $16.51.

The major indices finished up for the day and the month, but down for the week. In 2010, stocks have finished weeks on the upside just 3 times and lower 5 times. The major indices are down for the year, but only by 1 or 2%.

The government's revised reading on 4th quarter GDP was no surprise, at 5.9%. Chicago PMI was up a point, to 62.6, in February, and the University of Michigan's Final Consumer Sentiment gauge for February came in at 73.6.

Deals, Upgrades Boost Stocks; NASDAQ Breaks Out

Led by news that Sanofi-Aventis (SNY) will buy retail health products firm Chattem (CHTT) for $1.9 billion and upgrades of key Dow components Intel (INTC) and Alcoa (AA) helped stocks kick off the short Christmas week with a bang.

Stocks soared right off the opening bell and held onto most of their gains through a somewhat listless session, though there was plenty of M&A news to keep participants interested. Besides Alcoa surging nearly 8% at the close, merger mania seems to have overtaken the health care sector, as pharma firms flush with cash seek to expand into the consumer market.

With the US senate voting to suspend debate on the health care bill, the major drug companies seem confident they have wrung the very best deal they could out of their congressional puppets. Many firms in the sector have been up sharply in recent days, including Dow components Merck (MRK) and Pfizer (PFE), considering the reform measure to be nothing more than bluster and Democratic party PR, void of substantive change. Thus, big pharma and health care providers will continue their rapacious plundering of the American people well into the next presidential cycle without a hitch.

Since US politics has been and continues to be largely held hostage by Wall Street, the pharmaceutical companies got whatever they wanted from a compliant Congress, meaning no real reform and no tax changes. It all adds up to business as usual for American medicine - the public pays, and if it can't, taxpayers foot the bill.

Dow 10,414.14, +85.25 (0.83%)
Nasdaq 2,237.66, +25.97 (1.17%)
S&P 500 1,114.05, +11.58 (1.05%)
NYSE Composite 7,147.15, +60.96 (0.86%)

Simple indicators affirmed the upside bias, suggesting further price appreciation for equities as advancing issues trumped decliners, 4503-2061, and new highs beat new lows, 499-94. Even though the dollar was higher against foreign currencies, stocks managed healthy gains, with all ten sectors advancing. Volume was slightly lower than normal, due to the closeness of the holidays, but not so poor as to suggest that traders were completely disinterested.

As the Dow and S&P were churning over ground already harvested, the NASDAQ broke out to new highs, as financial services and technology led the index higher. Amazon (AMZN), Google (GOOG) and Apple (AAPL) all posted strong gains.

NYSE Volume 4,531,713,500
Nasdaq Volume 1,837,347,875

The commodity complex was buffeted by the rising greenback. Oil slipped 89 cents, to $72.47. Gold fell dramatically, below the psychological $1100 level, down $15.50, to $1,096.00, in a continuation of the pull-back from all-time highs. Silver responded in like fashion, losing 28 cents, to $17.04.

With just three more days remaining in the shortened week (plus, Thursday will be a half-session), Tuesday's trade is likely to be more tempered as the third and final GDP estimate for the 3rd quarter is released at 8:30 am and existing home sales data for November will be announced at 10:00 am. At the same time on Wednesday, the National Association of Realtors (NAR) will release new home sales figures for November.

Existing Home Sales Gain Pushes Stocks Higher

Rising for the 4th day in a row, major US stock indices broke through resistance and above previous highs of a week ago, thanks to cheery news from the National Association of Realtors (NAR), who released their July existing homes sales data, showing the largest one month gain in the history of the series, dating back to 1999.

The 7.2% gain over June's figures was the 4th straight monthly gain for the measure. The NAR reported that distressed sales made up 31% of all sales and first time buyers were responsible for 30%. The 5.24 million units in July were well ahead of the 4.89 million in June, and are 5%t above the 4.99 million-unit pace in July 2008.

This is capitalism at work. The oversupply of homes on the market has lowered prices to a median of 178,000, though many of the distressed, foreclosed properties are going for well below that number. There are speculators, new buyers and even people upgrading within the context of historically-low interest rates and oversupply on the market forcing prices down.

Today's data was another in a lengthening string of positive economic reports and investors took action right upon the news. At 10:00 am, when the report was released, all of the major indices shot straight up, to near the closing levels. The Dow, which was already up 50 points at the open, immediately tacked on another 100, taking the average above 9500 for the first time since November 4, 2008, when the index closed at 9625.28.

The NASDAQ and S&P blew through their respective highs as well, with confidence in the US economy continuing to grow.

Dow 9,505.96, +155.91 (1.67%)
NASDAQ 2,020.90, +31.68 (1.59%)
S&P 500 1,026.13, +18.76 (1.86%)
NYSE Composite 6,676.26, +122.86 (1.87%)

Market internals confirmed that the rally was broad and deep, as 5027 stocks showed gains, to just 1467 on the losing side. There were 208 new highs to 93 new lows. Volume was solid, the best in weeks, indicating that this rally still has legs. Some analysts are calling for 1050 on the S&P and 10,000 on the Dow by the end of the year, and, while those estimates may seem trivial, there is a growing chorus of capitalist cheer-leading from corners as diverse as rural farming interests to chic fashion retailers. Even if there is another pullback, which will occur when everyone least expects it, as is the usual case, there's sufficient evidence to posit that even though various government entities (cities, states and federal) are running enormous deficits, it is that deficit spending money that kept people working and money flowing through the economy.

There will certainly come a time in which these debts must be dealt with, but nobody seems interested in dealing with those thorny issues at present. That day will come all too soon for investors and speculators, the wisest and craftiest of which have remade fortunes or made new ones during this six-month-long rally.

It was the seventh week out of the past eight that markets finished a week higher than the previous one, and gains have been substantial.

NYSE Volume 6,724,499,500
NASDAQ Volume 2,279,040,750

Oil was up again, but again only marginally, as on Thursday, gaining 12 cents, to $72.54. The metals were among the winners of the asset classes, with gold higher by $13.00, to close at $954.70. Silver had a nice reversal as well, picking up 28 cents, to $14.16 per ounce.

The day, and the week, were among the best seen for US business interests in more then 10 months. While the US may not be fully out of recession - though there are obvious signs that it is - the pathway of recovery is becoming more and more well-defined by the day.

Rigged Rally

Any doubt that the US stock markets have been, are being or can be manipulated was put to rest today at precisely 3:00 p.m. Eastern time. It was at that moment that the Dow Jones Industrials climbed an extraordinary 50+ points in just over one minute. There was no news, no report issued that would move the market, only the covert actions by groping, free market fondlers.

Briefing.com called the 3:00 jump a "technical trade," which is a good substitute for "we don't know," and the Fed's Beige Book was released at 2:00, not 3:00, but maybe it took a while to digest.

In any case, the final result was a healthy gain for the Dow, with the other indices tagging along.

Dow 13,784.50 +67.55; NASDAQ 2,648.17 +8.31; S&P 500 1,518.09 +7.05; NYSE Composite 9,930.36 +20.41

Other than the faux late-day rally, it was really a see-saw session with the markets initially buffeted by stellar earnings reports from Amazon (AMZN) and Boeing (BA), then battered by the National Association of Realtors' (NAR) existing Home Sales for June, which came in well below estimates, suggesting that, considering the current malaise in the housing market, those estimates might want to be a little less optimistic going forward.

It was the worst showing for housing in roughly 4 1/2 years, though that in itself should not have been much of a surprise.

Elsewhere, companies were churning out 2nd quarter earnings reports, and some actually weren't all bad.

• Xerox (X) beat estimates by a penny, but was pounded lower by 1.10 (nearly 6%).


• Colgate-Palmolive (CL): Excluding restructuring charges, net income in the most recent quarter was $457.5 million, or 84 cents per share. Analysts expected earnings per share of 84 cents.


• ConocoPhillips (COP) posted income, excluding extraordinary items, of $4.8 billion, or $2.90 a share, compared with $5.2 billion, or $3.09 a share, during the second quarter of 2006. The results were well above the $2.68 analyst expectations.


• Freeport-McMoRan Copper & Gold (FCX): On the acquisition of rival Phelps Dodge in March and increased metal pricing, net income after paying preferred dividends rose to $1.10 billion, or $2.62 per share, from $367 million, or $1.74 per share, a year ago. Revenue surged to $5.81 billion from $1.43 billion last year. Analysts surveyed by Thomson Financial were looking for profit of $2.71 per share on revenue of $5.27 billion.
• GlaxoSmithKline (GSK): Pretax profit was flat at £1.896 billion -- compared with £1.897 billion a year earlier -- and was ahead of analysts' consensus expectations of £1.833 billion. Net profit rose to £1.36 billion from £1.34 billion a year earlier.


• Apple (AAPL): (After the close) For fiscal 2007 third quarter ended June 30, 2007, posted revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share. These results compare to revenue of $4.37 billion and net quarterly profit of $472 million, or $.54 per diluted share, in the year-ago quarter.

The story beyond the headline numbers was in stark contrast. Decliners beat advancing issues by a 3-2 ration, and new lows swamped the market, beating new highs by 630-134 (no, that's not a misprint).

Oil posted huge gains on the NY Mercantile Exchange, with crude up a massive $2.32 to $75.88. So, square those facts and numbers with a nearly 70-point rise on the Dow... really, try it.

Gold was hammered down $11 to $673.80, with silver losing 29 cents to close at $13.15.

More hijinks are in store for certain tomorrow, as new home sales figures for June are released and another 400+ companies roll out earnings reports.

Roller Coaster Won't Stop

Just when I think there's some direction to this market (in the last two weeks I've been of both opinions, bullish and bearish), the following day obliges a reconsideration of my position. So, I, like the market, am still in flux, with my year-end prediction of a lackluster 2007 in equities still very much intact.

Today's disaster was presumably precipitated by poor participation in the government's bond auction, sending yields on the 10-year to highs not seen since last August. A poor reading on existing home sales - an 8.4% drop for 2006, the biggest decline in 17 years - added to money flow woes and sent investors fleeing for safer bets.

Treasuries are unwaveringly an ambiguous condition, with the yield curve nearly flat and partially inverted. 2-year notes are yielding 4.97%, while at the other end, 30-year bonds are at 4.96% That's about as flat as it gets and one should assume that bond traders are just as confused as their stock-trading brethren.

The problem, from a stock trading perspective, is that yields are rising, signifying a tightening economy and that's bad for stocks. That's almost believable, today. Tomorrow will surely be another story.

The whole cycle is pointing in a negative direction depending on which measures you watch. If profits are being squeezed, price pressure will ensue, and that's unmistakably inflationary. Bond yields will rise as a coolant, and stocks will fall. Rinse, repeat, ad nauseum.

I'm not about to buy into the argument that the economy is on the verge of recession or collapse. There are certainly issues to be resolved, not the least of which happen to be political (fiscal policy and Iraq), but they seem to be churning slower than grandma making the butter.

Resolution to the nation's political and economic malaise would supply some impetus for extension of the rally, though we could be on the edge, with a major correction just weeks or even days ahead.

A 1500-2000 point decline on the Dow would probably shake out weak hands and do more good than evil. Today's 119-point shave nearly wiped out the gains of the previous two sessions (145 points). I'd expect more of the same tomorrow, but, as previously expressed, the opposite has usually occurred thus far in 2007.

We're all still on pins and needles on the January Barometer watch. The S&P 500 lost almost all advantage, losing 16.23 today and leaving it just 5 points into the green for 2007.

It looks as though we won't know much of anything until the very last day of the month, this coming Wednesday. Even then, if it's close on either side of break-even, it may be meaningless and the confusion will continue. As we dip and dive, shuck and jive though the first month of the year, the one thing for certain is that nothing's for certain.