No News Was Good News

Daily State of the Markets 
Thursday Morning – January 14, 2010  

Good morning. Yes, the nation’s investment bankers took a beating yesterday in front of the new Financial Crisis Inquiry Commission. And yes, the President is indeed going to introduce some sort of fee/tax/levy on the banks later today. But the fact that nothing really big or new (aka a “tape bomb”) came out of either the FCIC testimony or the administration yesterday provided for a sigh of relief among stock traders.

In other words, investors didn’t hear anything from the hearings that would cause them to flee the likes of Goldman Sachs (GS), JP Morgan Chase (JPM), Morgan Stanley (MS), or Bank of America (BAC). No, in this case, no new headlines flashing across the tape was indeed a good thing.

After a solid showing by the bear camp on Tuesday, it looked like the dip-buyers wanted to reestablish themselves right out of the gate yesterday morning. However, the bears took the punch and resumed growling about earnings expectations becoming too exuberant, monetary tightening in China, political headwinds here in the U.S., and the idea that Google (GOOG) may be hightailing it out of the one of the world’s biggest markets.

As the hearings from the FCIC began to get contemptuous yesterday, stocks rolled over and it looked like the bears might finally have something going at long last. With the S&P flirting with its 10-day moving average, the NASDAQ sagging, and no real support zone available nearby, it wouldn’t have been surprising to see the buyers stand aside and the bears to do some downside testing.

However, the dip-buyers once again proved they are a resilient bunch. And then the Fed’s Beige Book report reminded traders that things are improving here in the USofA. The headline from the Fed’s cumulative report from its 12 districts, whose cover just happens to be beige, suggested that the economy was improving modestly. More specifically, the most important line from the report read, “Reports from the 12 Federal Reserve districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report.”

So, with no big surprises from the administration or the FCIC grilling of bankers, the Fed reminding investors that better days lie ahead, and a big batch of earnings on tap from the people who tend to beat their estimates, stocks put on a happy face and recouped the prior day’s losses.

Turning to this morning, we’ve got a pretty big batch of economic data to sift through. First, the Labor Department reported that initial claims for unemployment insurance for the week ending January 9th increased by 11,000 to 444K, which was above the expectations for a reading of 437K. Continuing Claims for unemployment for the week ending January 2nd were below consensus at 4.596M vs. expectations for 4.75M.

Next up, the Commerce Department’s advance report for Retail Sales fell in December by -0.3%. This was well below the consensus for an increase of +0.5%. When you strip out the sales of autos, sales were off by -0.2%, which, again, was below the consensus for an increase of +0.3%. Sales for the month of November were revised higher to show a gain of +1.8% from the initial reading of +1.3%. Ex-autos, November sales were revised to +1.9% from +1.2%.

Finally, the government reported that Import Prices for the month of December were unchanged, which was a tenth better than the consensus for a drop of -0.1%.

Running through the rest of the pre-game indicators, with the exception of Hong Kong, the overseas markets were higher. Crude futures are up with the latest quote showing oil higher by $0.01 to $79.66. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.76%, while the yield on the 3-month T-Bill is at 0.04%. Next, gold is moving up by $2 and the dollar is lower against the Yen, but up against the Euro, and Pound. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a slightly lower open. The Dow futures are currently off by about 10 points; the S&P’s are down about 2 points, while the NASDAQ looks to be about 6 points below fair value at the moment.

Wall Street Research Summary

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