On Friday, 1/25/13, the European banks handily meet LTRO requirements creating market optimism. German sentiment is better than expected. Draghi is interviewed in the morning and says 2012 was the rebirth of the euro. The euro rallies higher, now well over 1.34, which sends futures markets higher. The European debt crisis remains under the surface but the perception that things are improving is calming the markets. PG and KMB earnings beat. New Home Sales disappoint with lower than expected numbers but the prior month revisions are higher. The 10-year yield hits 1.95% with money moving out of bonds into stocks. CAT and JOY, two China bellwethers sell off strongly. Copper, oil and commodities move lower. The markets continue to ignore any bad news and move higher into the afternoon from the 10-11 AM Fed money pump that occurs each day. AAPL continues to drop falling under 440 intraday. XOM overtakes Apple as the largest market cap stock reclaiming the top spot. The tried and true old school company (Exxon) retakes the flashy company (Apple) after the sizzle flames out. Both will share the mantel moving forward. A shameful display of business television occurs when an argument between two large hedge fund activists, Carl Icahn and Bill Ackman, is aired over the public airwaves. Seasoned traders are amused at the display but the average person viewing the markets sees two billionaire cry babies complaining about how much money they make which serves to only worsen their opinions on investing and the stock market. The SPX is up eight days in a row, a pace not matched for five years. The SPX closes above 1500, a key psychological level, and now the focus is on new all-time highs. Markets are having the best January in 20 years. For the week, the SPX is up 1.1% to 1503. The Dow Industrials are up 1.8% this week to 13896. The RUT is up 1.4% to 905 and the Nasdaq is up a paltry 0.5% to 3150 on the week. Note how the small caps and tech are not showing strong leadership. Apple continues to sell off AH’s.
On Saturday, 1/26/13, violence escalates in Egypt on the two year anniversary of the initial demonstrations. There are thirty deaths over the last couple days as the riots increase and the country becomes polarized. Geopolitical risk is not priced into the markets. Spain’s Rajoy says Germany should provide more help to the struggling euro nations. Merkel dismisses the comment saying Germany is already doing plenty. S&P rating agency downgrades Illinois to the lowest rating of all States, now worse than California.
---------------------------------------------------------------------
On Monday, 1/28/13, Egypt declares a State of Emergency as the riots and chaos are growing out of control and the death count rises. Oil prices remain elevated with Brent oil at 113. Italy’s oldest bank, Monte Paschi, is in the spotlight since its bailout occurred without full disclosure of the bank’s financial situation. Draghi was involved with those decisions, so this may cause embarrassment or credibility problems for him as he attempts to right the European ship. The Italian banks receive a large boost helping the Italian stock market. CAT, a key China bellwether, earnings beat but the guidance is lower and there is a big drop in back log. CAT says the second half of 2013 should be better and provides such a large guidance range, so huge that a CAT dozer can drive through it, rendering the guidance worthless. CAT simply does not know what to expect this year. Companies are frozen in confusion due to all the central banker and political meddling in markets. The alleged China fraud and accounting problems are ongoing for CAT. Fitch warns that a downgrade of U.S. debt may occur if the talks in Washington do not properly address the fiscal problems. Markets yawn ignoring any bad news. Durable Goods Orders are a blowout and bounce the futures higher, even though much of the increase was BA airplane orders. Pending Home Sales are much weaker than expected but the markets ignore bad news. The markets are flat all day long. The 10-year Treasury note yield hits 2% intraday. Moody’s cuts the Canadian banks including Bank of Montreal. Egypt continues to unravel as Morsi declares a curfew and requests talks to calm the turmoil. This meaningless rhetoric only inflames the protestors as they ignore the curfew and the protests grow. The protestors say that Morsi has hijacked Egypt. Oil price remains elevated. After the bell, YHOO earnings beat.
On Tuesday, 1/29/13, France’s labour minister Michel Sapin says that France is ‘totally bankrupt.’. The proclamation roils global markets as France scrambles to silence Sapin and perform damage control. Spain’s retail sales plummet. Spain will miss budget deficit targets due to the austerity measures. The austerity is destroying the economy which is already in a depression. In this bazaar easy money world, however, traders pay no attention to bad news and only trade off good news. India’s central bank cuts rates as the global race to debase continues. The U.S. morning newspapers are plastered with headlines of optimism such as “Surging Stocks: Bears On Heels.” Newspapers often indicate key contrarian market turning points where too much euphoric optimism hints at a market top forming. A USA Today article title highlights ‘Rational Exuberance’ in markets. PFE earnings beat. IP, the key paper company, is a miss. Case-Shiller Home Price Index shows house prices continuing to increase which further encourages the housing sector and markets. FOMC meeting begins. Consumer Confidence disappoints for the second month in a row now at levels not seen since November 2011, but the markets ignore bad news. The NYSE experiences a computer glitch that affects a limited number of stocks. Traders do not even notice the glitch since they are too busy buying with both hands without care or worry. These computer glitches will look interesting in retrospect in the future after the next flash crash occurs. The broad indexes are printing new multi-year highs each day. The SPX is at 1508. The Dow Industrials are only 50 points away from 14K at 13954. After the bell, AMZN misses earnings on both the top line and the bottom line. But instead of a selloff, Amazon jumps 8% in AH’s trading due to an improvement in margins. Bad news truly is good news these days.
On Wednesday, 1/30/13, Spain economic data is weak. Spain is rapidly deteriorating and recognizes that social unrest is now a serious concern. Frustrated and unemployed folks take to the streets. The Monte Paschi scandal remains in the news which may tarnish Draghi’s image. Stanley Fisher, the Israel central banker, resigns unexpectedly. Ninetendo (Wii) cuts the outlook and expects losses moving forward. The 10-year yield hits 2.03%. WTIC oil climbs to 97.86. Copper is catapulting higher along with commodities fuelling the recent market gains as global central banker easing is creating new asset bubbles. The euro is over 1.35 a level not seen since December 2011 when the LTRO’s were announced. The major nations are in a race to debase so the euro is odd man out. Europe is in recession and depression with auto sales falling off a cliff. Draghi will need to weaken the euro moving forward to spur growth. Sapiem, an Italian oil services company, drops 40% in value. Interestingly, BAC sold millions of shares only days earlier. A stink is already rising from the ashes that smells like insider trading. Eurozone consumer confidence rises indicating that ignorance is bliss? GDP surprises printing negative -0.1%, the lowest reading since December 2009. Two negative GDP quarters in a row constitute a recession. All the money printing and waste of U.S. taxpayer dollars over the last few years results in sickening negative growth. The Fed actions are harming the economy. Markets were never allowed to correct properly. Everyone wants the upside of capitalism but no one has the stomach for the downside, hence, capitalism no longer exists, the governments will always bailout companies with taxpayer’s hard-earned money. Quantitative easing is digging a deeper hole but the Fed has no other ideas. Markets leak lower as the session moves into the afternoon. The FOMC Rate Decision announces more of the same; the Fed will be accommodative for the foreseeable future. Markets are non-responsive to the news and continue to favor the bears today. The 10-year Treasury yield drops back under 2%. The VIX moves up over 14. Oil remains elevated with WTIC near 98 and Brent over 114. The SPX drops six points to close at 1502 staying above the psychological 1500 level. The Dow Industrials were only fifty points from 14K but lost ground today closing at 13910. FB reports earnings after the bell beat on the top and bottom line, however, the stock is sold. FB usage is decreasing on the desktops and increasing on the mobile devices but producing ad revenue from the smaller screens continues to prove challenging. President Obama dismisses his Jobs Council.
On Thursday, 1/31/13, EOM. Deutsche Bank posts a three billion dollar loss but the capital requirements are acceptable moving forward. German unemployment is better than expected creating hope that a recovery is on tap. Spain is sold off hard with weak banks leading the way lower. Dollar/yen tops 91 not seen for over two years as Japan devalues the yen. Dow Chemical (chemicals and plastics are the building blocks of a strong recovery, or lack thereof) misses on bottom line EPS and cites a slow China economy. UPS, the key shipping indicator for the global economy, misses on earnings citing a malaise across the shipping industry. POT earnings and guidance are uninspiring. Copper weakens on the news. The 10-year yield is 1.97% well off the 2.03% high yesterday. Jobless Claims jump higher after the recent move lower. The markets sell off to begin the day but the action is across the flat line for much of the day. A computer trade is identified milliseconds before the natty gas inventories which appears to show HFT (high-frequency trading) robots dumping natty gas futures milliseconds before the news release at 10:30 AM EST. The inventories increased which resulted in a natty gas selloff and big bucks for the HFT robot. The robots are superfast operating in a world of milliseconds. A future flash crash is probably far more likely than anyone realizes. Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 crossing down thru the 34 MA signaling bearish markets for the hours and days ahead. The session ends flat with the SPX dipping two points under 1500 at the close. Traders are waiting for the Jobs Report in the morning.
On Friday, 2/1/13, the China PMI is weaker than expected but shows a hair of expansion remaining in place. The HSBC PMI number was better than expected so global markets float upwards on copper buoyancy. Traders continue to follow the good news and toss the bad news aside. Spain lifted the short-selling ban on banks and they are sold off hard again today. The Spain markets dump 5% this week as European leaders tell everyone things are fine. The euro/dollar explodes higher to 1.3675 and the dollar/yen up to 92.2, phenomenal currency moves overnight. The higher euro sends equity futures higher. The U.S. and Japan are in a race to debase while Europe stands by watching. Europe needs growth more than the other areas and the higher euro will only serve to hurt the manufacturers and exporters further. Draghi may have to take action next week. Eurozone unemployment rate is 11.7% remaining stubbornly high. XOM earnings beat but MRK earnings disappoint. The Monthly Jobs Report disappoints with 157K jobs and a tick higher rate at 7.9%. The November and December numbers are revised upwards to over 200K. Traders wanted to see 200K today so instead the focus is on the higher revisions causing traders to buy the market. In addition, the higher rate means the Fed will print money indefinitely. The average hourly work week is flat and average hourly earnings lackluster so employers have no impetus to hire, they are getting by fine without needing any additional employees. The structural unemployment problem in the U.S. grows; 25 million people are either out of work or underemployed. The futures catapult higher on the weak news, the S&P’s up 10 and Dow Industrials up over 100 points. The markets continue to ignore bad news and focus only on positive news bites. Consumer Sentiment and ISM Mfg Index is better than expected which provides further upward momo after the opening bell. Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 piercing up thru the 34 MA to signal bullish markets for the hours and days ahead. The SPX punches out a new 2013 intraday high at 1514.41 and closing high at 1513.17. The Dow Industrials finished over 14K for the first time since 2007 making the headline writer’s job easy this weekend. The all-time Dow high is 14164.53 in October 2007 so the bulls only need about 150 more points. The euro moved above 1.37 before pulling back. Higher euro = higher equity markets. The telecom sector is strong today as folks chase dividend stocks continuing to pump the dividend stock bubble. Copper and commodities move higher over the last three weeks, taking the broad indexes higher, as the global central banker’s easy money policies create new asset bubbles. The utilities sector is lagging today. During trading hours, video from Egypt shows thousands of demonstrators rushing Morsi’s palace. Fire bombs are thrown over the palace gates. A suicide bomber attacks the Turkey Embassy. Turkey is key due to the pipelines that move oil to and from the Middle East and Europe. Brent oil catapults to a 3-month high at 116. WTIC oil moves higher to tag 98 before pulling back. Gasoline prices at the pump will increase due to higher moves in oil recently, many localities already commenting on nickel and more increases appearing overnight. It is remarkable to see the markets turn a blind eye to geopolitical events, not pricing in any worry or fear, sans the oil markets. For the week, the SPX is up 0.7%, the Dow Industrials are up 0.8%, the Nasdaq is up 0.9% and RUT up 0.7%. Tech and small caps are moving coincidentally with the broad indexes not showing leadership that should be expected for strongly bullish markets. The sequestration hits in 26 days.
-------------------------------------------------------------------
On Monday, 2/4/13, Factory Orders.
On Tuesday, 2/5/13, ISM Non-Mfg Index.
On Wednesday, 2/6/13, Oil Inventories.
On Thursday, 2/7/13, ECB Rate Decision and Press Conference. Jobless Claims. Productivity and Costs.
On Friday, 2/8/13, International Trade. Wholesale Trade.
-----------------------------------------------------------------------
On Tuesday, 2/12/13, President Obama’s State of the Union address.
On Wednesday, 2/13/13, Retail Sales. Business Inventories.
On Friday, 2/15/13, Industrial Production. Consumer Sentiment.
--------------------------------------------------------------------
In February, Italy elections.
In February or March, the National People’s Congress convenes. China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward. China will push to a domestic-led economy, private consumption, rather than an export-led economy, but a domestic economy will grow at a slower pace. The GDP projections are of particular interest, 2012 grew at an average 7.8% rate.
On Friday, 3/1/13, the Sequestration hits with one trillion in automatic spending cuts for government.
On Wednesday, 3/27/13, the Continuing Resolution (CR) is required to fund the government.
In March and April, the BOJ head’s will be replaced so stronger QE will continue. Perhaps a low in the Nikkei in January or February may provide an attractive entry for a long trade once the money-printing begins (weaker yen) in earnest.
On Sunday, 5/19/13, the 16.4 trillion Debt Ceiling hits.
In September, Merkel (Germany) seeks re-election and will not want to see Greece exit the euro before the election but will not care afterwards. Perhaps Greece and Germany will both exit the euro in the future.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.