Market appears no closer to climbing out of same band of range-bound trading
By ANDREW MARKS 01 March 2010
A two-week long rally on Wall Street slipped back into neutral territory as February drew to a close at the end of last week. And as the new month begins, US equities appear no closer to climbing out of the same band of range-bound trading the stock market has been stuck in since last November.
‘It’s a positive sign that the sell-off didn’t have enough conviction to turn into a full-blown correction,’ said Art Schecter, an equity manager at Lambeth Capital Advisors, of the stock market’s 8 per cent fall that ended two weeks ago. ‘But at the same time, the market’s bears can say the same thing about this latest rally: investors don’t have enough conviction to support a sustained rally that does anything more than get us part of the way back,’ he observed.
Investors appear stuck between the competing glass half-full and glass half-empty hypotheses being championed on the one side by those with bullish views of the economy’s recovery and private sector’s improving fundamentals, and those with a bearish perspective focused on the powerful headwinds that could send the fragile economy back into a recession.
The market’s meteoric 60 per cent climb from March to October last year is beginning to seem like a lifetime ago to many traders. Indeed, despite a brief trip to the 1,150 mark on the S&P 500 in early January, the broad-based large cap index has advanced all of 0.1 per cent since mid-November. In the same time span, the blue chip Dow Jones Industrials has managed all of a minuscule seven point, 0.05 per cent advance.
Although momentum has swung back and forth between bullish and bearish sentiment on a nearly daily basis of late, stocks are in fact trading right in between the January highs in the S&P 500 of 1,150 and the recent February lows of 1,044.
The only definitive change in trading patterns of late has been the unwelcome addition of volatility, which has become a regular feature of the stock market’s psychology since fears over the rise of severe sovereign debt troubles - and their effect on the global economy’s ability to recover from a world-wide recession first erupted last December with Dubai’s near-default on US$59 billion of outstanding loans.
‘That woke many investors to the reality that the financial crisis did not just vanish overnight and we face many risks and challenges in the year or two ahead before we can even begin to put the fallout from the collapse of the global credit markets behind us,’ said David Rosenberg, chief economist and market strategist at Gluskin Scheff.
Bullish economists believe the sovereign credit issues of Europe’s smaller economies will stay contained and that emerging economies will spur global growth even as Europe sputters, boosting earnings growth for American companies beyond expectations.
But with government stimulus and quantitative easing policies starting to downshift while significant doubts remain over the US economy’s ability to sustain growth without the government’s emergency measures, newly risk-averse investors have been hesitant to do more than buy on dips.
Indeed, Wall Street traders took little encouragement from Friday’s announcement of an uptick in the revised fourth quarter GDP numbers to 5.9 per cent growth, from 5.7 per cent first reported in January. This is because, as Eric Gimiani, a trader at Quartz Capital Advisors, noted: ‘Everyone knows nearly all of the growth came from government spending, and that stimulus hit its peak in the fourth quarter and is now on its way down. We need businesses to start spending and the consumer to start spending again to take up the slack, and we’re not seeing it yet.’
Stocks managed a slight advance on Friday, as the US dollar’s rally stumbled. Blue chips picked up 4.23 points, or 0.4 per cent, to close at 10,325.26. The S&P 500 edged up 1.56 points, or 0.14 per cent, to finish at 1,104.49, and the technology-heavy Nasdaq Composite added 4.04 points, or 0.18 per cent, to 2,238.26.
For the week, the Dow lost 0.7 per cent, the S&P 500 dropped 0.4 per cent, and the Nasdaq dipped 0.3 per cent. All three logged a gain for the month, however, led by the Nasdaq’s 4.2 per cent. The S&P 500 was next, with a 2.9 per cent gain in February, while the Dow brought up the rear, up 2.6 per cent.
It seems unlikely that the coming week packs enough market-moving punch to shift stocks off the tread mill and on to the open road in either direction.
But never say never in a week featuring, as its main event, the February jobs report.
‘That’s the key piece of economic data in the ongoing struggle to determine when the US has finally turned the corner on this recovery,’ says Mr Gimiani. ‘The housing market is important, as is consumer spending and manufacturing numbers, but until we see jobs growth it will be tough to generate lasting confidence in the economy’s recovery,’ he said.
The February jobs report, in which the consensus among Wall Street economists is for 30,000 job losses, is due out on Friday. But before then, Wall Street will have plenty of other important data to sift through.
Today brings the ISM manufacturing report, personal income and construction spending, followed by February car sales tomorrow. Wednesday’s economic docket features the ISM non-manufacturing and the Fed beige book, as well as the ADP private sector employment snapshot.
On Thursday, reports on productivity and costs, factory orders and pending homes sales are due.
There are also a few noteworthy companies announcing earnings in coming days. Staples announces its earnings tomorrow, Costco Foot Locker and Royal Bank of Canada on Wednesday, and Anheuser-Busch Inbev on Thursday.
Traders said they’d also been on the lookout for events unfolding in Europe, as Greece seeks to raise capital to pay off its mountainous debts, and on the dollar, which rose 1.8 per cent against the Euro last week.
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Investors mark time as stocks see-saw
Market appears no closer to climbing out of same band of range-bound trading
By ANDREW MARKS
01 March 2010
A two-week long rally on Wall Street slipped back into neutral territory as February drew to a close at the end of last week. And as the new month begins, US equities appear no closer to climbing out of the same band of range-bound trading the stock market has been stuck in since last November.
‘It’s a positive sign that the sell-off didn’t have enough conviction to turn into a full-blown correction,’ said Art Schecter, an equity manager at Lambeth Capital Advisors, of the stock market’s 8 per cent fall that ended two weeks ago. ‘But at the same time, the market’s bears can say the same thing about this latest rally: investors don’t have enough conviction to support a sustained rally that does anything more than get us part of the way back,’ he observed.
Investors appear stuck between the competing glass half-full and glass half-empty hypotheses being championed on the one side by those with bullish views of the economy’s recovery and private sector’s improving fundamentals, and those with a bearish perspective focused on the powerful headwinds that could send the fragile economy back into a recession.
The market’s meteoric 60 per cent climb from March to October last year is beginning to seem like a lifetime ago to many traders. Indeed, despite a brief trip to the 1,150 mark on the S&P 500 in early January, the broad-based large cap index has advanced all of 0.1 per cent since mid-November. In the same time span, the blue chip Dow Jones Industrials has managed all of a minuscule seven point, 0.05 per cent advance.
Although momentum has swung back and forth between bullish and bearish sentiment on a nearly daily basis of late, stocks are in fact trading right in between the January highs in the S&P 500 of 1,150 and the recent February lows of 1,044.
The only definitive change in trading patterns of late has been the unwelcome addition of volatility, which has become a regular feature of the stock market’s psychology since fears over the rise of severe sovereign debt troubles - and their effect on the global economy’s ability to recover from a world-wide recession first erupted last December with Dubai’s near-default on US$59 billion of outstanding loans.
‘That woke many investors to the reality that the financial crisis did not just vanish overnight and we face many risks and challenges in the year or two ahead before we can even begin to put the fallout from the collapse of the global credit markets behind us,’ said David Rosenberg, chief economist and market strategist at Gluskin Scheff.
Bullish economists believe the sovereign credit issues of Europe’s smaller economies will stay contained and that emerging economies will spur global growth even as Europe sputters, boosting earnings growth for American companies beyond expectations.
But with government stimulus and quantitative easing policies starting to downshift while significant doubts remain over the US economy’s ability to sustain growth without the government’s emergency measures, newly risk-averse investors have been hesitant to do more than buy on dips.
Indeed, Wall Street traders took little encouragement from Friday’s announcement of an uptick in the revised fourth quarter GDP numbers to 5.9 per cent growth, from 5.7 per cent first reported in January. This is because, as Eric Gimiani, a trader at Quartz Capital Advisors, noted: ‘Everyone knows nearly all of the growth came from government spending, and that stimulus hit its peak in the fourth quarter and is now on its way down. We need businesses to start spending and the consumer to start spending again to take up the slack, and we’re not seeing it yet.’
Stocks managed a slight advance on Friday, as the US dollar’s rally stumbled. Blue chips picked up 4.23 points, or 0.4 per cent, to close at 10,325.26. The S&P 500 edged up 1.56 points, or 0.14 per cent, to finish at 1,104.49, and the technology-heavy Nasdaq Composite added 4.04 points, or 0.18 per cent, to 2,238.26.
For the week, the Dow lost 0.7 per cent, the S&P 500 dropped 0.4 per cent, and the Nasdaq dipped 0.3 per cent. All three logged a gain for the month, however, led by the Nasdaq’s 4.2 per cent. The S&P 500 was next, with a 2.9 per cent gain in February, while the Dow brought up the rear, up 2.6 per cent.
It seems unlikely that the coming week packs enough market-moving punch to shift stocks off the tread mill and on to the open road in either direction.
But never say never in a week featuring, as its main event, the February jobs report.
‘That’s the key piece of economic data in the ongoing struggle to determine when the US has finally turned the corner on this recovery,’ says Mr Gimiani. ‘The housing market is important, as is consumer spending and manufacturing numbers, but until we see jobs growth it will be tough to generate lasting confidence in the economy’s recovery,’ he said.
The February jobs report, in which the consensus among Wall Street economists is for 30,000 job losses, is due out on Friday. But before then, Wall Street will have plenty of other important data to sift through.
Today brings the ISM manufacturing report, personal income and construction spending, followed by February car sales tomorrow. Wednesday’s economic docket features the ISM non-manufacturing and the Fed beige book, as well as the ADP private sector employment snapshot.
On Thursday, reports on productivity and costs, factory orders and pending homes sales are due.
There are also a few noteworthy companies announcing earnings in coming days. Staples announces its earnings tomorrow, Costco Foot Locker and Royal Bank of Canada on Wednesday, and Anheuser-Busch Inbev on Thursday.
Traders said they’d also been on the lookout for events unfolding in Europe, as Greece seeks to raise capital to pay off its mountainous debts, and on the dollar, which rose 1.8 per cent against the Euro last week.
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