Daily State of the Markets
Thursday Morning – March 3, 2011 Good morning.
Regardless of whether you look at charts, read the tape, or listen to the talking heads all day; the bottom line as it relates to the stock market is clear right now. Market participants are simply on the fence about whether to stick with the upbeat picture being painted by the economic data or to succumb to the enticing arguments of the dark side and assume that things are going to go slip-sliding away on the Middle East’s oil slick.
Wednesday’s action was a perfect example of the dilemma at hand. While the economic data was nothing short of encouraging, the news out of Libya was disturbing. And then the rumblings about potential problems in places that actually matter, such as Saudi Arabia, was enough to keep traders hopping in the oil pits.
The good news is that the tick-by-tick, inverse linkage between the price of crude oil and the stock market was not completely in sync on Wednesday. If it had been, we might have seen some awfully red numbers by the time the closing bell rang as the price of light, sweet crude for April delivery closed over $100 a barrel for the first time since before the Credit Crisis got rolling in September 2008.
No, it appeared that traders tried to look at the bright side for a while yesterday morning as the ADP report showed a healthy uptick in private sector job growth. And since the job picture has been a thorn in the side of this economic recovery, some momentum on this front might go a long way in helping the current upswing in activity stick. But no sooner had Ben Bernanke said nice things about the economy in his repeat performance on Capitol Hill than we got word that Gadhafi was firing rockets at Libya’s second largest oil facility.
With intense fighting between troops loyal to K-Daffi and the rebels attempting to throw the bum out being distributed by just about every electronic device with a wi-fi connection, the terms “additional risk premium” seemed to make sense to anyone trading oil contracts. And while stock traders were doing their darndest to look on the bright side, it wasn’t long before those nasty sell programs had pushed the indices to within a hair of big trouble on a chart basis.
The glass-is-half-full crowd will suggest that Wednesday was a moral victory for the bulls because the gang in the bear camp had ample opportunity to knock the stuffing out of their opponents. Again, if higher oil prices are indeed going to slay the global economy, then a quick glance at a chart of anything related to crude (USO is an quick and dirty proxy for the price of oil) will make my point clear. In other words, with the indices straddling the line of support at last week’s lows, it shouldn’t have taken much to send the bulls running for the hills.
But instead of a very ugly technical breakdown, the indices were able to somehow finish the session still sitting on the fence. And while it is encouraging that the bulls were able to keep from falling into the dark side, we must recognise that it wouldn’t take much to push them over the edge. That is, unless something good were to happen in relation to oil or MENA (Middle East/Northern Africa). But that couldn’t happen, could it?
Turning to this morning… It appears that something good can actually happen during times of crisis. There is word this morning of a peace deal for Libya being brokered by Venezuela’s Hugo Chavez. While there is no official confirmation, oil is lower and stocks are higher.
On the Economic front… The government reported U.S. Nonfarm Productivity in the fourth quarter rose by +2.6%, which was above the estimates for reading of +2.4%. On the inflation front, Unit labour Costs were reported to have fallen -0.6% versus the expectations for -0.5%. Q3’s reading was unrevised at -0.6%.
Next up, Initial Claims for Unemployment Insurance for the week ending 2/26 were reported to have fallen by 20K to 368K. This was well below the consensus estimate for 398K and last week’s total of 388K. Continuing Claims for the week ending 2/19 came in at 3.774M vs. 3.80M and last week’s 3.833M.
Thought for the day: Instead of just muddling through, why not make a concerted effort to enjoy the day?
Here are the Pre-Market indicators we review each morning before the opening bell…
Major Foreign Markets:
- Australia: +0.09%
- Shanghai: -0.34%
- Hong Kong: +0.32%
- Japan: +0.89%
- France: +1.35%
- Germany: +1.38%
- London: +1.25%
Crude Oil Futures: -1.26 to $100.97 Gold: +$19.10 to $1418.80 Dollar: higher against the Yen, Euro and Pound 10-Year Bond Yield: Currently trading at 3.524 Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +12.10 Dow Jones Industrial Average: +91 NASDAQ Composite: +18.9Wall Street Research Summary
General Growth Properties (GGP) – Credit Suisse PPL Corp (PPL) – FBR Capital Nalco Holdings (NLC) – JPMorgan Apple (AAPL) – Mentioned positively at Oppenheimer Globe Specialty Metals (GSM) – Target increased at Oppenheimer AvalonBay (AVB) – Target and estimates increased at RBC Coventry Health Care (CVH) – Stifel Nicolaus UnitedHealth (UNH) – Stifel Nicolaus WellPoint Health (WLP) – Stifel Nicolaus Health Care REIT (HCN) – UBS LM Ericsson (ERIC) – UBS Downgrades:
Motorola Mobility (MMI) – Cowen Taubman centres (TCO) – Credit Suisse Weatherford International (WFT) – Sterne, Agee AT&T (T) – Mentioned cautiously at UBSLong positions in stocks mentioned: AAPL
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