On 5/4/12, Friday, RBA (Australia) lowers growth and inflation projections which jives with the 50 basis point cut move this week and verifies the commodity weakness. Germany yields are at record lows as money seeks perceived safety. The markets hope for a better Jobs Report than the Good Friday trouble last month but at 115K jobs, well below consensus, markets sell off. The troubling aspect is that the work week hours are flat and the average hourly earnings are flat, thus, companies are handling current work loads fine and do not need to hire workers. The unemployment rate dropped a tick to 8.1% but not due to a healthy economic recovery but quite the opposite—workers simply are no longer counted as unemployed since they are out of work for too long a time, they are dropped off the roles. Following the report, both Labor Secretary Hilda Solis and President Obama tout the success of the Administration leaving most of the country to scratch their heads at the absurdity. Even folks with limited knowledge of economics realize that something is wrong with the economy. The financials collapse and volatility spikes sealing the fate of the markets during the first hour of trading. Oil tumbles lower thru 100, 99 and 98. The AAPL grows rotten losing 2.9% today and 6.3% on the week. The 10-year yield fell to near three-month lows printing in the 1.8%’s. The day ends with the SPX down 22 points or 1.5%, the Dow Industrials down 168 points or 1.3% and Nasdaq down 68 points or 2.3%. The markets experience the worst trading week of the year. For the week, the SPX lost 2.4%, the Dow lost 1.4% and the Nasdaq lost 3.7%. Traders now await the France and Greece election results this weekend.
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On 5/6/12, Sunday, the France runoff election occurs and Sarkozy is defeated as expected. The futures markets are lower but not substantially. Hollande wins by a close 52/48 margin so this may help reduce the negative effects of France voting in a more socialistic government. The Greece anti-bailout parties win their elections. Greece simply does not want the party to stop and votes against austerity. France bond yields are flat but Greece yields rise. The Greece news appears more important.
On 5/7/12, Monday, the negative futures overnight moderate by the opening bell. The euro drops under 1.30 but recovers. The markets spend much of the day stumbling sideways thinking that the France news is not so bad and much of that was priced into markets. The Greece situation is becoming increasingly worrisome, however. News circulates that MS may be downgraded but the financials shrug off this bad news and move higher helping buoy the broad indexes along with copper strength. The markets close flat on the day.
On 5/8/12, Tuesday, the euro is down seven days in a row now at 1.30. European stock markets tumble lower. Greece is now a major worry once again after the politicians fail to develop a coalition government. New elections would be needed which would occur in June. The problem is that Greece needs money to pay debt due within the month and other countries are not going to be quick with help considering Greece’s vote that favors lounging on beaches instead of austerity. U.S. futures are lower pre-market as the fear of contagion in Europe increases. The markets drop and cascade lower after the opening bell. Copper collapses. The financials move lower and the strong retail sector finally cracks. Keystone’s SPX:VIX Ratio Indicator loses the 68 level signaling a large down day on tap and more selling ahead. The Athens stock market closes at a low not seen since 1992, 20 years ago. As the day continues, the markets bottom late morning and recover much of the losses. The SPX:VIX ratio pops back above the critical 68 level. After the close, DIS reports positive results encouraging the bulls.
On 5/9/12, Wednesday, the markets tumble lower at the open but then recover when news hits that the Eurozone will extend a life line to Greece to cover debts into June when new elections are anticipated. A coalition government cannot be agreed to in Greece since there are too many factions involved. It is like herding kittens. At the same time, Greece is falling apart. 1,000 businesses are closing per week, unemployment continues higher, the economy is spiraling downwards. Markets close with moderate losses, down about one-half to one percent. Gold and oil continue lower. The gold miners, however, recover today. After the close, CSCO results are in line but guidance is weak and CEO Chambers, known for his non-sugar coated analysis on tech and current economic conditions, says IT spending is fading and companies overall are cautious moving forward, definitely not the rosier talk that CEO’s, the salesmen-in-charge, typically spew. Chambers warns of ‘cautious’ spending in the IT sector.
On 5/10/12, Thursday, the weak futures overnight are moderating as the CSCO bad news and guidance sinks in. Germany’s Merkel states once again that Eurobonds are not the solution to the debt crisis. The markets languish in a sideways move all day long. After the market closes, JPM drops a bombshell announcing that there was a two billion dollar trading foible at the bank. The trades were supposed to hedge against risk but were simple one directional plays gone and going bad. The trades are not closed out and will linger for another quarter or two. CEO Dimon ‘takes responsibility’ but that means nothing in today’ society. Twenty years ago ‘taking responsibility’ meant you resign, nowadays it is simply a parlor trick that diverts attention allowing the same old stuff to take place. Dimon says “this trading didn’t violate the Vocker Rule—but violates the Dimon Principle.” The Vokcker Rule provides stricter regulations on how banks operate due to the 2008-2009 financial meltdown. Dimon is the strongest critic of increased banking regulation and the self-appointed spokesperson fighting Congress to decrease regulations. If there was one way to ensure that banking regulations stay strict, perhaps even become more so, it is with this JPM debacle. Thought to be perhaps the top notch risk manager in the world, CEO Dimon and J. P Morgan Chase, instead it turns out that he is like all the rest. Congress immediately shouts for tighter banking regulations. The sad part is the average citizen is hurt the most since tighter regulations will stifle the banking industry, slow job growth and maintain the economy in a long funk. The JPM fiasco will have a continued impact on markets. U.S. futures markets plummet over ten S&P handles.
On 5/11/12, Friday, overnight the JPM news roils global markets with Asia and Europe lower. The euro falls to a three-month low. The Greece market continues printing at 20-year lows. The Spain market is near nine year lows. Some financials are starting to approach levels not seen since 2009. Commodities have lost the 2012 gains. China industrial data disappoints showing that global growth is slowing. JWN, Nordstrom’s, a barometer on how strong the wealthy continue to spend, disappoints on earnings hurting the retail sector. JPM starts the day down 6% and finishes the day down over 9%. This is a huge move for a stock that is widely owned and serves as a core position for many large investment houses. The SEC is now investigating JPM so the story will have legs for weeks, perhaps months to come. The markets moved higher early in the day but by the close moved back to flat. The markets posted a second weekly decline. Oil is at its lowest level in a year losing over 2% this week with WTIC at 96. Gold loses 4% this week. After the close, Fitch downgrades JPM. S&P rating agency lowered JPM’s rating from stable to negative due to the two-billion dollar trading loss. The rating agencies are now worried that JPM appears to be pursuing a much riskier and more aggressive trading strategy than originally thought.
On 5/12/12, Saturday, media reports that Facebook’s long anticipated 5/18/12 (next Friday) debut as a public company may become derailed due to regulatory approval delays. Wall Street deals always have a way of coming together so FB will likely begin trading next Friday as scheduled.
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On 5/14/12, Monday, the buzz surrounding Facebook’s Friday public offering grows.
On 5/15/12, Tuesday, CPI. Retail Sales.
On 5/16/12, Wednesday, Housing Starts and FOMC Minutes.
On 5/18/12, Friday, the long-awaited Facebook IPO begins trading. OpEx Friday.
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On 5/22/12, Tuesday, Existing Home Sales.
On 5/23/12, Wednesday, New Home Sales.
On 5/24/12, Friday, Consumer Sentiment.
Can you update your thoughts on $CPC now that it is at 1.24? Hard to go long given that Greece could default on another bond issue on Tuesday. At the same time, shouldn't there be some OpEx buoyancy? And some tech bouyancy as we approach Fascebook's debut? Have a good weekend.
ReplyDeleteHello Weaver, you are always on the ball and clearly grasp a lot of ideas on this site easily. Yes, CPC above 1.2 is surely a sight to see. These levels have not been seen since early December, five months ago. The CPC above 1.2 shows that traders are finally getting off their complacent couch and becoming increasingly worried about the markets. Just as complacency leads to weaker markets, as we have seen over the last month, as fear increases in the markets again this will lead to a rally. With CPC above 1.2 this is where markets will want to snap back and rally. The CPC can easily move higher to 1.4 or 1.5 or higher which would correlate to the broad indexes much lower. Typically, however, it is a jagged process as the CPC shows, so a move for the CPC back down to 1.0 may be in order corresponding to a market rally, then the fear can return once again to take the CPC higher.
ReplyDeleteTypically, OpEx Mondays are up, and the period from OpEx Tuesday into Wednesday is typically bull-friendly so you are correct. Keystone is not so sure about FB adding all that much tech buoyancy, however. After all, it is a telemarketing company where people provide their personal info voluntarily, where most of the revenue is build on Zynga's games, and where far more clever sites are on the horizon such as a communitiy approach to social on the neighborhood and local level that is of far more use than having 1,000's of faceless friends scattered around the world that you will never meet. Add in that FB will probably never see the light of day in China since they have RENN; China is likely simply using Zuckerberg as a sucka. Wine and dime him, promise him things, then do nothing.
So the CPC and OpEx Monday would provide an advantage to bulls on Monday, if the SPX:VIX ratio holds the 68 level and heads higher the market rally will be ongoing. Just have to take things hour to hour.