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Daily State of the Markets Sorry to complain on a Friday morning, but one of my biggest pet peeves with the popular market media is their inability to explain why things happen in the stock market. But then again, I guess I shouldn’t complain too loudly as this does give us a raison d’être. In any event, I found it exceptionally odd that most reports of Thursday’s market activity failed to even mention, let alone explain, the fairly obvious reversal of fortunes that occurred. Stocks initially moved higher Thursday morning as worries over the global economy continued to recede after China’s GDP data, the PMI numbers out of Europe, and some rather benign reports on the state of the U.S. economy. Don’t get me wrong; none of the data represented anything to get excited about. But the overall tone seemed to suggest that things were moving forward and there was nary a whiff of anything even remotely related to a double-dip. So, with the heads-stocks-win, tails-stocks-win-too trade still going strong, it wasn’t surprising to see the animal spirits heat up again in the early going – so much so that the venerable DJIA even played a quick game of tag with its cycle highs. And for a while there, anyone brave enough to be thinking about the glass being anything but overflowing was probably feeling like they’d been hit by a train. But then it happened. Maybe it was the fact that the Dow had matched its closing high of April 26th. Maybe it was the jitters over the potential for more currency sparring. Maybe it was the rally in the dollar. Or maybe it was worry over the mortgage mess. Regardless of the reasoning behind the move, the big gain started to slip away and before CNBC could cue up the celebratory ticker about the Dow’s recent accomplishment, the bears had returned. For those of you keeping score at home, we’re going to suggest that the movement in the greenback was once again part and parcel to the decline in the stock market. While it hasn’t gotten much play in the press, it is clear to anyone watching such things that when the dollar goes down, traders buy the risk assets and vice versa. So, with the dollar rising steadily, the DJIA found itself down more than 40 points just after lunchtime. But perhaps the bigger culprit behind the rally-dive-recover action seen Thursday was the math involving QE II. So let’s see if we can make sense of the formula. A rising dollar plus higher bond yields plus decent economic data plus St. Louis Fed President Bullard’s comments about quantitative easing (Bullard said Thursday that there has been no decision yet on the launch of QE II and that the FOMC would likely start with $100 billion and see how it goes) equals, yep, you guessed it; uncertainty. However, by the time the closing bell rang, the rose colored glasses had been repositioned and everything was once again right with the world. And although the bear camp could be heard yammering on about Thursday being some sort of a reversal day (but clearly not a “key reversal” day) we couldn’t help but wonder if trees were actually going to grow to the sky this time around. Turning to this morning… Things are fairly quiet in the pre-market at this point. However, should take note of the big pop in interest rates this morning as the yield on the 10-year has popped up to 2.57%. And while the earnings parade marches on, there is no economic data on the calendar today. Finally, best of luck on this Friday and be sure to enjoy the weekend! Pre-Game Indicators Here are the important indicators we review each morning before the opening bell…
* Report includes items that make comparisons to the consensus estimate questionable Wall Street Research Summary Upgrades: |
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Riverbed Technology (RVBD) – Canaccord Genuity, Jefferies Goodrich (GR) – Cowen & Co. Skyworks (SWKS) – Added to S.T. Buy at Goldman AGCO (AGCO) – Goldman Penn National Gaming (PENN) – Jefferies US Bancorp (USB) – Oppenheimer Baidu (BIDU) – Piper Jaffray LaSalle Hotel (LHO) – RW Baird Under Armour (UA) – Target increased at UBS Union Pacific (UNP) – Wells Fargo
F5 Networks (FFIV) – Barclays Digital Realty Trust (DLR) – Barclays Freeport-McMoRan (FCX) – Canaccord Genuity SunTrust Banks (STI) – Deutsche Bank EMC (EMC) – Oppenheimer Kellogg (K) – RBC Capital Thomson Reuters (TRI) – RBC Capital Union Pacific (UNP) – RW Baird Lattice Semiconductor (LSCC) – RW Baird Wynn Resorts (WYNN) – Soleil Whiting Petroleum (WLL) – Wells Fargo
Long positions in stocks mentioned: RVBD
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