We got a ton of economic data today. But traders are obsessing over something a hedge fund manager said at a conference on Wednesday evening.
First, the scoreboard:
- Dow: 16,446.8 (-167.1, -1.0%)
- S&P 500: 1,870.8 (-17.6, -0.9%)
- Nasdaq: 4,069.2, (-31.3, -0.7%)
And now the top stories:
- Rich Barry, an NYSE floor governor, articulated what everyone was thinking via his NYSE MAC Desk Mid-Day Update email: “Weighing on the market are bearish, (panicky?), statements made by a very well-respected, smart hedge fund guru who said such things as: “The market is kind of dangerous in a way.”; and “I think it’s nervous time because the US economy is not growing as fast as we thought it would.” He also claimed that he is more concerned about deflation than inflation at this point … The result was reminiscent of the old EF Hutton TV commercials, “When EF Hutton talks, people listen.” The only problem is that people did more than listen – they started whacking bids with reckless abandon.”
- Barry was quoting David Tepper, the billionaire behind hedge fund Appaloosa Management who spoke Wednesday evening at the SALT Conference in Las Vegas. Tepper had been very vocal about his bullishness during much of the current bull market. So, his caution certainly raised eyebrows.
- Arguably, the bigger market story is the rally in Treasury securities. The 10-year yield tumbled to as low as 2.4716% earlier today from an intraday high of 2.5606%. “If we go down [more] on Treasury yields, we will see one of the biggest short-covering scrambles of all time,” said bond fund manager Jeffrey Gundlach on Wednesday in San Diego.
- There was a ton of economic data released this morning. One report worth highlighting is initial weekly jobless claims, which plunged to 297,000, the lowest level since May 2007. Continuing claims fell to 2.667 million from 2.676 million last week. This is the lowest level since December 2007. “In our view, this report reflects a further improvement in the separations side of the labour market, which now stands near pre-recession levels,” said Barclays’ Cooper Howes.
- Adding to the good news were better-than-expected manufacturing reports. The Empire Manufacturing survey index exploded to 19.0 in May from 1.29 in April. The Philly Fed Business Outlook index slipped to just 15.4 in May, which was better than the 14.0 expected by economists.
- The good news was reinforced by comments from Cisco CEO John chambers. “Our U.S. Enterprise and Commercial are usually a very good indicator of GDP slowly increasing or GDP decreasing, and we saw a turn up in U.S. in Enterprise and Commercial back in summer of 2012,” said Chambers during the company’s earnings conference call. “So, that feels good and you combine that with the CEOs I talked to, most of us feel 2.5%, 3% for the next nine months is very doable number. Not many things to do backflips on, but reasonable progress.” CSCO’s better-than-expected earnings announcement helped the stock rally by more than 6% today.
- On the disappointing side of things was the NAHB housing market index, which fell to 45 in May from 46 in April. Economists were forecasting a print of 49. “Builders are waiting for consumers to feel more secure about their financial situation,” NAHB chief economist David Crowe. “Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence.”
- Don’t Miss: DAVID TEPPER: ‘I Am Nervous. I Think It’s Nervous Time.’ »
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