Thursday Morning – August 6, 2009
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Good morning. I guess we have to give the bears credit for trying. But the bottom line is that even with the deck stacked almost entirely in their favor from the short-term perspective via an extreme overbought condition, soaring sentiment, a calendar which suggests the dog days of summer are upon us, and some crummy economic data, our friends in fur came away with not much more than a moral victory yesterday.
Yes, I know that the NASDAQ lost -0.91% and that the Russell 2000 fell by -0.83%. Yes I do recognize that the bulls appear to be growing weary. And I will admit that the day’s economic data wasn’t exactly stellar as there was nary a green shoot to be found. But even with interest rates spiking on concerns over next week’s record auction size, the banks found a reason to rally on Citi’s (C) plan to sell 20 businesses and the Dow wound up giving back a not-so scary 39 points.
Frankly, this is the type of scenario where the bears are usually able to capitalize on something bad that comes out of the woodwork like the ISM Non-Manufacturing data coming up short of the mark. This is the type of scenario where the bulls would usually stand aside and let their counterparts have their day in the sun. And this is the type of scenario that in even the strongest environments usually produces a little pullback of at least 3% or so.
While I suppose the glass-is-half-empty crowd could always find a way to get their act together in the next day or two, it is beginning to feel like the bears might just be down for the count. And although it sounds like every investor on the planet would welcome a pullback of almost any magnitude in order to get more money invested, it is beginning to feel like stocks will just go up – or at least, not go down by any meaningful degree – ad infinitum.
Okay, after being in this business for more than 25 years, I recognize how silly that sounds. But with the recession ending, earnings coming in better than expected (so far, 73% of companies have beaten estimates, which is WELL above average), and fund managers needing to get cash off their books and into stocks in order to keep those bonuses that everybody in Washington hates flowing, there is no telling how long the bears might stay down.
However, everybody knows that the Big Kahuna of economic reports is due out on Friday morning, when the Labor Department will release the July jobs data. Analysts expect the total number of job losses to continue to contract, with the current consensus looking for job cuts on the order of -345K. Anything significantly worse would likely give those in the rebound camp a reason to pause and provide the bears with the opportunity they’ve been looking for.
Turning to this morning, we’ve got the same-store sales numbers coming in from the nation’s retailers and word that Morgan Stanley will buy back its TARP warrants from the gov’t for $950M. On the economic front, Initial Claims for Unemployment came in a bit better than expected at 550K vs. 595K while Ongoing Claims for Unemployment Insurance was reported a little higher at 6.31M vs. 6.25M.
Running through the rest of the pre-game indicators, the major overseas markets are up nicely across the board. Crude futures are moving down with the latest quote showing oil trading off by $0.26 to $71.71. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.76%, while the yield on the 3-month T-Bill is trading at 0.17%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a better open. The Dow futures are currently ahead by about 47 points; the S&P’s are up by about 6 points, while the NASDAQ looks to also be about 6 points above fair value at the moment.
We are all in this together… So, until next time, “may the bulls be with you!”
