The Takeaway?

Daily State of the Markets 
Thursday Morning – September 9, 2010  

The key question after yesterday’s modest rally is if there was anything to be gleaned from the move. In the early going, the positive result from Portugal’s bond auction seemed to allay fears relating to sovereign debt and the bank stress tests in Europe. However, after the Beige Book introduced us to a new phrase to describe the economy (“widespread deceleration”) and the talking heads brought up any number of macro concerns, we were left to wonder about the credibility of the 46 point move.

Don’t get me wrong; I’m of the mind that there is some upside for stocks still to come. As I’ve mentioned a time or three lately, the postponement of the global economy’s funeral should be good for a move to the top end of the range at the very least. But, there is no question that this market remains data dependent. Thus, any pause in the flow of good news could bring uncertainty back to the forefront.

What’s there to worry about, you ask? Hmmm, let’s see… We’ve got the PIGI’s and their financing needs – remember, 2011 and the debt refundings are just a few short months away. Then there is the sustainability of the recovery both here at home and around the world. There is China’s tightening measures, the jobs picture, the housing market, the election, the questions regarding the costs of health care and financial reform, more government intervention, and the potential tax hikes coming in 2011.

Add to this the potpourri of uncertainty relating to the corrective phase the stock market has experienced and the fact that the public continues to give up on their stock funds (a total of $42 billion has been pulled out of stock funds since April 2009), and it is easy to see why progress to the upside has been tough lately.

We also need to consider the overhead resistance on the charts, the lack of inputs from the economic calendar, and Rosh Hashanah. The bottom line here is the news flow will likely continue to dominate the action and the boys and their toys could easily push things in either direction in near term.

So, what’s the takeaway from yesterday’s action? It was a nice little rebound that could easily be added to or reversed – depending on the news.

Turning to this morning… It’s all about the jobs… The Labor Department reported that initial claims for unemployment insurance for the week ending 9/4 fell by 27,000 to 451K. The week’s total was below the Reuters consensus for a reading of 471K. Continuing Claims for unemployment for the week ending August 28 were a smidge above consensus at 4.478M vs. expectations for 4.448M. For comparison purposes, last week’s revised total was 4.448M (from 4.456M).

As expected, traders like the numbers as the futures have moved up smartly on the news.

Finally, don’t forget the first rule of life, medicine, and money management: Do no harm…

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell…

• Major Foreign Markets:
  • Australia: +0.94%
  • Shanghai: -1.44%
  • Hong Kong: +0.37%
  • Japan: +0.82%
  • France: +0.67%
  • Germany: +0.49%
  • London: +0.88%

   

• Crude Oil Futures: + $0.38 to $75.05
• Gold: + $0.20 to $1257.70
• Dollar: higher against Yen, Euro and Pound
• 10-Year Bond Yield: Currently trading higher at 2.684%

   

• Stocks Futures Ahead of Open in U.S. (relative to fair value): 
  • S&P 500: +9.20
  • Dow Jones Industrial Average: +75
  • NASDAQ Composite: +14.50  

Wall Street Research Summary

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