The major indices were more influenced by outside forces today than any great inner impetus. Most traders of individual issues are anxiously awaiting quarterly earnings reports, so the news of the release of the 15 British sailors from Iran came as very welcome news to jittery world-watchers.
When word came that Iran would release the sailors, oil prices slipped more than a dollar, but soon rebounded when US inventories checked in at very low levels. For the day, oil fell 26 cents to close at $64.38.
Gains on the US indices were minimal, following yesterday's dramatic rise. The NASDAQ posted the best percentage gain, 0.34%.
Dow 12,530.05 +19.75; NASDAQ 2,458.69 +8.36; S&P 500 1,439.37 +1.60; NYSE Composite 9,398.56 +17.10
Volume was once again on the light side, with advancing and declining issues nearly even. New highs were heavy for the third straight session at 387, compared to only 58 new lows. This metric continues to indicate a market on the verge of a major breakout. Any solid earnings should propel stocks past their February all-time highs in coming days or weeks.
Since the minor correction of last month, weak hands have been wrung out of this market, though valuations are still on the high side. Most of the best values are likely to be found in the tech sector which has been somewhat battered lately. The net cash outflow from the continuing collapse in housing prices is unlikely to have a serious effect short term, so the market is looking more and more like a well-fueled locomotive ready to embark on a long uphill journey.
Risk in the US markets is all a matter of perspective. While there are still some structural difficulties, there's also a lot to like about US equities, which more and more are becoming globalized, well-branded and acceptable. Money has to go somewhere, and when weighing the choices, the US still has the advantages of stability with growth potential over most of Europe and Japan, and certainly beyond emerging markets in India, China and East Asia.
We may be about to embark on another mid-90s type of bull market, but that kind of run carries the risk of a significant bust at some point, a la 2000-2001. Despite that, most of Wall Street seems to have discounted almost all risk and is ready to buy in with both hands.
Gold and silver were contrarians today, both registering better than 1% gains in value. But, since they've both bounced in a bounded range for nearly a year, there may not be much to it. The metals still look less attractive than stocks in the near term.
Wednesday, April 04, 2007
Tuesday, April 03, 2007
April Fools? Stocks Gain as Oil Slips
There wasn't a great deal of news today but all of it was good and that helped restore some confidence to a shaky market. Since the fallout from mid-February to mid-March the markets have stabilized and rebounded quite well. The Dow has recovered 460 points off its March 5 low, the NASDAQ has added 110 points from the same date and the S&P 500 is up more than 60 points.
What fueled today's action were a series of unrelated reports and market action which together created one big buying spree on the street. A 0.7% rise in pending home sales got the market's attention and eased some of the fears of a spreading crisis. That minuscule rise would hardly be worth noting under usual circumstances, but the worries in housing are palpable, and this little bit of good news was welcome relief. What the market isn't seeing is another story. More on that later.
U.S. chain store sales rose 0.3 percent in the week ending Saturday, according to data released by the International Council of Shopping Centers and UBS Securities. This report came on the heels of a 4.6% gain in the previous week, so the fact that there was no pullback was a strong sign.
The price of oil also contributed to wealth creation in equities, with crude losing $1.30 to $64.64 a barrel on the NY Mercantile Exchange. As I've commented all too frequently, the price of oil (and by proxy, gasoline), is the key cog in the economic cycle.
If the oil barons (you don't really think there's actually a free, open un-rigged market in crude, do you?) can wrap their brains around the concept that lower gas prices actually means more money for them (supply-demand scenario) and let the price slide into the high-to-mid 50s over the next few months then the economy might actually flourish.
Despite auto sales of the big 3 US automakers slumping in March, the market shrugged off that bit of disappointment and surged ahead in a buying orgy that saw new highs for 469 issues with only 83 new lows. As I commented yesterday, that indicator is telling us that the market is poised for more upward movement, circumventing the big correction that many - including me - said was coming.
Indeed, the sewers of Wall Street are full of pundits and predictors who said a correction was imminent over the past four years. Incessant priming of the liquidity pump by the Fed has averted any notion of a downturn since the early months of 2003.
Dow 12,510.30 +128.00; Nasdaq 2,450.33 +28.07; S&P 500 1,437.77 +13.22; NYSE Composite 9,381.46 +75.91
Getting back to those tepid housing figures... there's still a problem in suburbia. Housing prices rose dramatically over the past 6 or 7 years and a pullback was overdue. There's going to be plenty of home buying in the next few years, but most of it is going to come at some expense to the sellers. Simply put, buyers in 2000-2006 paid too much and some are getting out at a loss today. Any abrupt economic disruption would likely cause a panic in oversold markets. In general, home sales are likely to be brisk, but at lower prices, producing a net loss in economic activity and the general market is too concerned with day-to-day observations to pay attention to that troubling longer-term trend.
Still, the credit and money spigot at the Fed is still wide open and there's no way to close it gently without spinning the economy into a recession. Despite what the Fed says about controlling inflation, it's mostly lip service. Prices and wages will continue higher.
Gold was up and silver down. Holding coins or raw metal is still bad practice in today's environment. Expect a pullback before another rally can occur in the precious metals.
What fueled today's action were a series of unrelated reports and market action which together created one big buying spree on the street. A 0.7% rise in pending home sales got the market's attention and eased some of the fears of a spreading crisis. That minuscule rise would hardly be worth noting under usual circumstances, but the worries in housing are palpable, and this little bit of good news was welcome relief. What the market isn't seeing is another story. More on that later.
U.S. chain store sales rose 0.3 percent in the week ending Saturday, according to data released by the International Council of Shopping Centers and UBS Securities. This report came on the heels of a 4.6% gain in the previous week, so the fact that there was no pullback was a strong sign.
The price of oil also contributed to wealth creation in equities, with crude losing $1.30 to $64.64 a barrel on the NY Mercantile Exchange. As I've commented all too frequently, the price of oil (and by proxy, gasoline), is the key cog in the economic cycle.
If the oil barons (you don't really think there's actually a free, open un-rigged market in crude, do you?) can wrap their brains around the concept that lower gas prices actually means more money for them (supply-demand scenario) and let the price slide into the high-to-mid 50s over the next few months then the economy might actually flourish.
Despite auto sales of the big 3 US automakers slumping in March, the market shrugged off that bit of disappointment and surged ahead in a buying orgy that saw new highs for 469 issues with only 83 new lows. As I commented yesterday, that indicator is telling us that the market is poised for more upward movement, circumventing the big correction that many - including me - said was coming.
Indeed, the sewers of Wall Street are full of pundits and predictors who said a correction was imminent over the past four years. Incessant priming of the liquidity pump by the Fed has averted any notion of a downturn since the early months of 2003.
Dow 12,510.30 +128.00; Nasdaq 2,450.33 +28.07; S&P 500 1,437.77 +13.22; NYSE Composite 9,381.46 +75.91
Getting back to those tepid housing figures... there's still a problem in suburbia. Housing prices rose dramatically over the past 6 or 7 years and a pullback was overdue. There's going to be plenty of home buying in the next few years, but most of it is going to come at some expense to the sellers. Simply put, buyers in 2000-2006 paid too much and some are getting out at a loss today. Any abrupt economic disruption would likely cause a panic in oversold markets. In general, home sales are likely to be brisk, but at lower prices, producing a net loss in economic activity and the general market is too concerned with day-to-day observations to pay attention to that troubling longer-term trend.
Still, the credit and money spigot at the Fed is still wide open and there's no way to close it gently without spinning the economy into a recession. Despite what the Fed says about controlling inflation, it's mostly lip service. Prices and wages will continue higher.
Gold was up and silver down. Holding coins or raw metal is still bad practice in today's environment. Expect a pullback before another rally can occur in the precious metals.
Monday, April 02, 2007
Market Squeezes Out Another Positive Close
With first quarter earnings reports due to begin hitting the street later this week, the major indices managed to put on a smile at the close on Monday. Even the NASDAQ, which had traded in the red for almost the entire session, managed to gain fractionally.
Advancers and declining issues on the NASDAQ were dead even, with 1517 up and 1517 down, though gainers were far ahead on the NYSE, 2039 to 1214. New highs amounted to 317, near a peak, to just 108 new lows. This is a signal that the markets are about to make a break, either further to the upside (which means a 6-700 point move) or down about 4-500 points.
The Dow also registered its 15th positive day since the Feb. 16 top, more than the 14 down days, though the index is still 400 points off that high. It's been a real see-saw market, with alternating up and down weeks the past 5. If that's any kind of guide (probably not), we're due to finish on the plus side on Friday, though nobody's making book on it.
Dow 12,382.30 +27.95; NASDAQ 2,422.26 +0.62; S&P 500 1,424.55 +3.69; NYSE Composite 9,305.55 +43.73
Overall, it was a very tame day of trading. Even the oil bourses weren't bubbling as crude gained only 7 cents to $65.94. While that number is still too high for most of the public to want to comprehend, there seems to be some consensus among oil traders that there's not much more upside to this market. As the supply-demand scenario gives way to inflation and pricing pressure, oil, and its derivative, gasoline, may actually stabilize at slightly lower levels over the summer, all of which is good news for the economy and consumers.
The biggest news of the day was New Century Financial, the troubled sub-prime lender, filing for Chapter 11 bankruptcy protection. The company announced layoffs of more than half of its workforce, 3,200 in all, and other protections and refinancing arrangements with CIT Group and Greenwich Capital Financial Products.
The news was sobering and expected. However, the real fallout in the housing market may still be on the way as prices continue to fall in major markets. The cooling of the housing market is a slow process with the effects likely to be felt across the economy for a lengthy period of time.
After years of loose financing and consumers dipping into equity to finance all kinds of purchases, that spigot is slowly being turned off. The downward pressure in the economy will first be seen in large ticket purchases as households cut back on financing.
Gold and silver continued their in-range trading. It's almost gotten to be an inside joke, that holders of precious metals are now not hedging against inflation, but against their own well-being. After a dazzling run-up culminating at a peak of over $714 last May, gold has been one of the duller stories of the past year.
Advancers and declining issues on the NASDAQ were dead even, with 1517 up and 1517 down, though gainers were far ahead on the NYSE, 2039 to 1214. New highs amounted to 317, near a peak, to just 108 new lows. This is a signal that the markets are about to make a break, either further to the upside (which means a 6-700 point move) or down about 4-500 points.
The Dow also registered its 15th positive day since the Feb. 16 top, more than the 14 down days, though the index is still 400 points off that high. It's been a real see-saw market, with alternating up and down weeks the past 5. If that's any kind of guide (probably not), we're due to finish on the plus side on Friday, though nobody's making book on it.
Dow 12,382.30 +27.95; NASDAQ 2,422.26 +0.62; S&P 500 1,424.55 +3.69; NYSE Composite 9,305.55 +43.73
Overall, it was a very tame day of trading. Even the oil bourses weren't bubbling as crude gained only 7 cents to $65.94. While that number is still too high for most of the public to want to comprehend, there seems to be some consensus among oil traders that there's not much more upside to this market. As the supply-demand scenario gives way to inflation and pricing pressure, oil, and its derivative, gasoline, may actually stabilize at slightly lower levels over the summer, all of which is good news for the economy and consumers.
The biggest news of the day was New Century Financial, the troubled sub-prime lender, filing for Chapter 11 bankruptcy protection. The company announced layoffs of more than half of its workforce, 3,200 in all, and other protections and refinancing arrangements with CIT Group and Greenwich Capital Financial Products.
The news was sobering and expected. However, the real fallout in the housing market may still be on the way as prices continue to fall in major markets. The cooling of the housing market is a slow process with the effects likely to be felt across the economy for a lengthy period of time.
After years of loose financing and consumers dipping into equity to finance all kinds of purchases, that spigot is slowly being turned off. The downward pressure in the economy will first be seen in large ticket purchases as households cut back on financing.
Gold and silver continued their in-range trading. It's almost gotten to be an inside joke, that holders of precious metals are now not hedging against inflation, but against their own well-being. After a dazzling run-up culminating at a peak of over $714 last May, gold has been one of the duller stories of the past year.
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