MarketWrap for 12/15/09-Stocks close down modestly after 4 days of gains....

U.S. stocks on Tuesday ended modestly lower after the government said inflation climbed faster than anticipated in November.  After four sessions in a row of gains, the Dow Jones Industrial Average 10,452, fell 49.05 points, or 0.5%, to 10,452.00. The S&P 500 Index shed 6.18 points, or 0.6%, to 1,107.93. The Nasdaq Composite Index declined 11.05 points, or 0.5%, to 2,201.05.  Financial shares led declines in U.S. stocks as Citigroup Inc. moved toward selling shares to repay bailout funds and credit-card delinquencies increased at JPMorgan Chase & Co. 

The dollar rallied to the highest level in more than two months, while stocks and Treasuries retreated on speculation the U.S. economic recovery will prompt the Federal Reserve to reduce stimulus measures.  Oil gained for the first time in 10 days to close at $70.70 up $1.17 while Gold was off slightly to $1,124.50.

We mentioned this morning in our Sentiment Note to institutional customers that while sentiment remains more neutral than bullish we expect prices to keep working higher (and corrections to be shallow) as it suggest investors still have more sideline liquidity available to purchase equities.

Market Wrap ... Week pretty much flat ...

The week pretty was pretty much a wash for stocks as in the early part of the week equities sold off and by week end had recouped most of the losses.

As we highlighted in some earlier comments the S&P 500 is still above key support levels such as 1,083.  If you are short term trader that’s a key level.  For traders with a medium to longer term focus we suggest watching the 1,050 level followed by 1,026.

So far those levels have not been violated so the bull trend remains intact. That said we suggested earlier in the week and continue to suggest reviewing positions and tightening up stops.

Market internals remain not committal and sentiment is still neutral (ie not overly bullish).  We continue to give the bull run the benefit of the doubt. Next week the same levels will remain in play and should be watched closely.

So if your long "em" - hold "em" for now. We suggest just getting your exit strategies in place should we violate the aforementioned S&P 500 levels.

Americans' net worth on the rise ... but still way down from 2007

According to AP - Inch by inch, Americans are recovering some of their vast loss of wealth from the recession, thanks to gains in stock investments and home values. It's likely to be a long trek. Net worth — the value of assets such as homes, bank accounts and investments, minus debts like mortgages and credit cards — rose 5 percent last quarter, to $53.4 trillion, the Federal Reserve said Thursday. That was the second straight quarterly increase.

Yet even with those gains, Americans' net worth remains far below its revised peak of $64.5 trillion reached before the recession began. That underscores the vast loss of wealth over the past two years. Net worth would need to rise an additional 21 percent just to return to its pre-recession height. And many analysts don't expect a repeat of the strong second- and third-quarter gains any time soon. That's why Scott Hoyt, senior director of consumer economics at Moody's, thinks household wealth won't match its pre-recession peak until about 2012.

"We're clearly moving in the right direction, although we have questions about whether we can get there as quickly as we have in the past couple of quarters," Hoyt said.  Investments delivered by far the biggest boost to net worth in the July-September period. The value of corporate equities jumped $1.04 trillion, slightly less than the previous quarter's rise.

That increase mirrored the stock market's powerful showing. The Standard & Poor's 500 index, a barometer of the market, rose 15 percent in the third quarter. And it's surged about 60 percent since March.  Still, even with an additional 4 percent gain so far in the fourth quarter, the S&P index is still 32 percent off the peak of October 2007. The recession began in December 2007. The gains in net worth are expected to slow, along with the broader economic recovery. Credit remains tight. And consumers still aren't spending freely.

Some analysts fear the Fed's policy of cheap lending and the weak dollar are inflating stock market performance and encouraging too much speculation. They say the gains of recent quarters aren't sustainable.  "We will eventually recover the loss in net worth, but it may take three to five years," said Mark Vitner, senior economist for Wells Fargo Securities in Charlotte, N.C.

Real estate was a smaller part of the increase in third-quarter net worth. The value of American households' real estate holdings rose 2 percent, or $348 billion. Analysts expect prices to dip again this winter as foreclosures spread and economic growth remains modest.  With those low-priced properties dominating sales, Barclays Capital economist Michelle Meyer forecasts an 8 percent drop in prices before they hit bottom next spring. Other analysts expect a drop of 5 to 10 percent before the market hits bottom in the spring.

Americans also are paying off debt at record levels, the Fed said. They reduced mortgages, credit cards and other loans by 2.6 percent in the third quarter and have been cutting household debt levels for a year. That's a healthy sign for personal finances, but a cautionary one for economic growth: Consumers are paring their debt with money they might otherwise be spending.  Even though stocks remain far below their pre-recession levels, employees who have stayed invested in 401(k) plans and continued to contribute have fared better: Major 401(k) providers say nearly 60 percent of such participants now have more money in their accounts than before the market decline.

Alan Hull, of Canton, Mich., said he feels better about the economy but doesn't feel any richer. His 401(k) account has recovered some, but his other investments have a long way to go.  "To say that we are wealthier — that's kind of a misnomer," said Hull, 56, who works in information technology for Ford Motor Co. "But I'm starting to see the light at the end of the tunnel, and I don't feel like it's an oncoming train."

MarketWrap for 12/10/09-Stocks move back into the black for the month...

The Dow Jones Industrial Average rose 68.78, or 0.7 percent, to 10,405.83, pushing it back into the winning column for the month.  The Standard & Poor's 500 index rose 6.40, or 0.6 percent, to 1,102.35, while the NASDAQ composite index rose 7.13, or 0.3 percent, to 2,190.86.   The gains in stocks came as the dollar stabilized and were led by gains of 1% each in health-care and consumer-discretionary sectors.  For months stocks and the dollar have moved in the opposite direction.  Record-low U.S. interest rates have pressured the dollar for much of this year, leading investors to buy assets like stocks and commodities that can earn better returns than cash.  In recent weeks, signs of improvement in the economy have brought expectations that the Federal Reserve might raise interest rates sooner than expected.  That would strengthen the dollar.   A weaker dollar is lifting demand for U.S. goods, which become less expensive for foreign buyers when the greenback falls. The Commerce Department said a rise in exports helped narrow the nation's trade gap to $32.9 billion in October.  Economists had been expecting an increase.  Exports rose 2.5 percent which is the sixth straight monthly increase.  Investors will likely be paying close attention to a policy statement from the Federal Reserve when it determines interest rates next week.

In other trading, Treasury prices fell for a second day after an auction of 30-year bonds drew weak demand. The slump in prices for long-dated bonds pushed yields higher. The yield on the benchmark 10-year Treasury note rose to 3.48 percent from 3.44 percent late Wednesday, while the yield on the 30-year bond rose to 4.49 percent from 4.42 percent.

Gold rose after a four-day slide, while oil fell for a seventh day, losing 13 cents to settle at $70.54 a barrel.

As we mentioned to our institutional customers this morning, the S&P 500 Index still remains in an up trending wedge however for the last two weeks the index has stalled under a secondary downtrend line. While two weeks of stalling at resistance is not a major concern yet it does at very minimum raise a cautionary tone given the S&P 500 has had such a large, uninterrupted advance. Weekly momentum as measured by the Relative Strength Index (RSI) has remained neutral while the S&P 500 has rallied. However until near term supports are broken near 1,050 then 1,026 it is hard to get too negative. So to reiterate some yellow lights are flashing but the bottom line is the trend is still up and remains intact and only a move below the 1,050 then 1,026 level would be viewed as a negative. From a portfolio management perspective we would tighten up stops on profitable positions reduce long side exposure if the above mentioned levels are violated.  

MarketWrap for 12/8/09-Stocks slide for 4th time in past 8 sessions...

Stocks and commodities were weak the entire session today as  cautionary comments about the U.S. debt rating and strength in the U.S. dollar weighed on the minds of market participants.  Broader sentiment remains mixed as investors continue to assess the market's near-term direction.  Weakness in the broader market handed the S&P 500 its second straight loss and its fourth decline in eight sessions. The split between advancing sessions and declining sessions comes as investors try to determine the near-term direction of trade after stocks repeatedly failed to hold new their 2009 highs last week.  The most notable rollover came as stocks faltered after an impressive monthly payrolls report last Friday.  That move may suggest that the positive economic news had already been priced into the stock market and that something more is needed to help stocks hold gains amid a simultaneous advance by the dollar.  Sellers also were active due to news from The Wall Street Journal that Moody's Investors Service believes the U.S. and U.K. need to trim their respective deficits in order to help protect against a downgrade to their triple-A ratings.  

The Dow Jones Industrial Average fell 104.14 points, or 1%, to 10285.97, its biggest decline since Nov. 27.    The S&P 500 Index also closed down 1% to 1091.  The NASDAQ closed down 16 points at 2,173.  Volume was light on the New York Stock Exchange, with 1.18 billion shares changing hands, below last year's estimated daily average of 1.49 billion, while on the NADAQ, about 1.97 billion shares traded, also below last year's daily average of 2.28 billion.

Market Wrap - stocks mostly flat, Fed Ex raises guidance after the bell ...

Friday's mixed finish was extended into today’s action as the Dow Jones Industrial Average ended up a mere 1 point to close at 10,390.  The S&P 500 ended the session down close to 3 points to close at 1,103 while the tech heavy NASDAQ closed at 2,189, down close to 5 points. 

While the overall market lacked direction the financials were noticeably weak for the majority of the trading day and finished off down - 1.6%. The financial sector was weighed down by weakness in shares of banks (-1.6%) and diversified financial services companies (-1.8%). 

Though last week's news that Bank of America (BAC) plans to repay its $45 billion TARP loan helped win temporary favor for financials, today we saw the reverse as news CitiGroup (C) would as well caused concern not excitement. 

Federal Chairman Ben Bernanke again weighed on the recovery suggesting that the economy faces “formidable headwinds,” including a weak labor market and tight credit that are likely to produce a “moderate” pace of expansion.  Speaking at the Economic Club of Washington Bernanke stated, "The economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate,” Additionally he said  inflation remains “subdued” and is likely to move lower. 

In news after the bell … Fed Ex Corp. (FDX), boosted its earnings-per-share outlook for the second quarter.  FDX announced it expects to earn $1.10 per share in the quarter. While this marks a 30% decrease from the year-ago period, the revision was well above earlier estimates.  This news from Fed Ex is likely to take the market out of its quiet range trade tomorrow. 

That said the FDX news will be a good litmus test to see where the markets psyche stands. Does it bid up shares on good news or does the market sell off on this news ? Clearly the former would be bullish and the latter bearish.


As we always say it is not the news that is important but rather how the market reacts to it.   So keep your eyes and ears open as the "Message of the Markets" will be in full force in tomorrow’s trading.

A snaphsot on the current employment picture ...

Consumer spending is a complex beast to gauge as it is influenced by;  unemployment levels, debt service levels, wealth effect, tax and governmental policies (ie. home price and investment values) etc etc. 

In the attached graphic we look at one very important and contributing factor employment levels via continuous and initial claims.  While both shot up to levels never seen before since the government started tracking the statistics (note: these figures are not adjusted for labor market size for nor population), the important point to note is that they have both started to revert back to the mean very quickly suggesting that the employment picture is improving albeit from very bad conditions. 

If these trends continue in this direction we can expect consumer spending to remain strong and support equity prices (albeit with pullbacks)


FusionIQ MarketWrap for 12/4/09-Stocks end volatile day slightly higher...

Stocks rallied at the start of trading today after the Labor Department said the U.S. lost 11,000 jobs last month, the fewest since the recession began and less than one-tenth the 125,000 median estimate in a survey of economists. The unemployment rate dropped to 10 percent.  The S&P 500 swung between gains and losses all day as investors weighed concern the Fed will boost interest rates from near zero to curb speculation. Chairman Ben S. Bernanke said yesterday he doesn’t rule out using monetary policy to pop asset bubbles after officials in emerging markets suggested the central bank’s record-low federal funds rate is pushing prices too high.   For the day the Dow Jones industrials were up 22 at 10,388. The Standard & Poor's 500 index was up 6 at 1,106. The NASDAQ composite index was up 21 at 2,194.   Two stocks rose for every one that fell on the New York Stock Exchange. Volume totaled 1.5 billion compared with 1.1 billion Thursday.  The biggest rally in the U.S. dollar since January snuffed out an advance in commodities and limited the gains in equities due to the unexpected drop in the unemployment rate which started speculation that the Federal Reserve will lift borrowing costs. Gold slid the most in a year and Treasuries tumbled.

FusionIQ Market Wrap for 12/03/09-Stocks fade into the closing bell...

U.S. stocks on Thursday saw  losses into the market's close, with investors anxious ahead of the monthly jobs report ahead of the next session. The Dow Jones Industrial Average ended at 10,366.15, off 86.53 points, or 0.8%. The Dow had fallen just over 100 points a few moments ahead of the closing bell. The S&P 500 Index  fell 9.32 points to 1,099.92, while the NASDAQ Composite declined 11.89 points to close at  2,173.14.  U.S. stocks broke a three-day winning streak after an unexpected contraction in service industries spurred concern about the economic recovery a day before the government’s November jobs report.  Financial institutions led the retreat in the S&P 500 as Bank of America Corp. prepared to sell more than $18 billion in equity to repay government bailout funds. American Express Co. lost 5.3 percent after the Institute for Supply Management’s index of non-manufacturing businesses missed the median economist estimate.  AIG was down 4.17 percent.   Banks, brokerages and the rest of the financial industry in the S&P 500 lost 2.1 percent as a group, the most among 10 groups.  Abercrombie & Fitch Co. led retailers lower after reporting a decrease in November sales.  Sales at U.S. stores open at least a year dropped 26.1 percent at Saks, the New York-based luxury retailer, in November from the same time last year. Comparable-store sales at Macy’s, the No. 2 U.S. department-store operator, dropped 6.1 percent.  President Barack Obama hosted a summit to discuss ways to spur employment and Federal Reserve Chairman Ben S. Bernanke pledged to take job creation into account in formulating interest-rate policy.  Obama called economists, union heads and business leaders such as Eric Schmidt, chief executive officer of Google Inc., and Fred Smith of FedEx Corp., to the White House to solicit feedback on job-creation proposals. The suggestions include incentives to make homes more energy efficient, increased access to financing for small business and tax credits for companies.

ISM Non-Manufacturing Summary

The results of the November ISM nonmanufacturing survey suggest that growth was still moderate and that the labor market is still in bad shape. The nearly 6-point drop in the measure of activity in the survey, which most closely tracks output in the nonmanufacturing sector, is consistent with very little growth in final demand, a finding somewhat at odds with more upbeat data on consumer spending.

The disparity between the surveys of manufacturing and services grew larger in November. In manufacturing, production is strong because firms are gradually moving to stabilize inventories, which is expected to account for a larger share of the increase in GDP growth this quarter versus last quarter.

The details of the survey point toward renewed growth in nonmanufacturing in the months ahead. In particular, the new orders index was little changed near 55, similar to the levels achieved during the latter years of the 2000s expansion. With inventories low, the level of orders should translate into a pickup in business activity.

A particular disappointment was the absence of greater improvement in the employment index, which is the weakest component of the nonmanufacturing survey. The relationship with the ISM nonmanufacturing employment index is loose, and other labor market indicators such as jobless claims point to an improving trend. Still, with the ISM manufacturing employment index also falling in November, the odds of a more significant reduction in job losses appear lower.