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Article Index

Stock Market Today: Biggest Winners and Losers

By , Contributing Writer, Money Morning -

The stock market today rallied for a second session on hopes lawmakers in Washington will ink a fiscal cliff deal before year's end.

In afternoon trading Tuesday all three major index were sharply higher. The Dow Jones Industrial Average soared some 90 points by 2:30 p.m., the Standard & Poor's 500 Index climbed 11, and the Nasdaq jumped 33. That followed Monday's gains of 100.38 points, 16.78 points and 39.27 points, respectively.

With few economic releases scheduled for Tuesday, investors' focus was pinned on Washington. House Speaker John Boehner, R-OH, and U.S. President Barack Obama continued to haggle over a fiscal cliff deal, with the president making a counter offer late Monday.

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Stock Market Today: U.S. Markets Flat; Focus Shifts to Europe

By , Contributing Writer, Money Morning -

The stock market today opened quietly in the United States as investors prepared for a very busy week ahead.

Just after the opening bell on Wall Street, all three major indexes were flat.

As Barron's noted, the average daily volume on the NYSE last week fell to 3.3 billion shares, compared with 5.5 billion that changed hands during the same period in 2009, when we were slowly emerging from the Great Recession.

The "fiscal cliff," which could drain $607 billion from the U.S. economy through tax increases and spending cuts, dominated U.S. news and moved markets.

But the fiscal cliff, along with the $16.4 trillion national debt and the growing federal deficit, took a back seat Monday as the focus shifted to Europe.

Anxious market participants kept a wary eye on Italy after Prime Minister Mario Monti announced he is resigning, citing a loss of support in Parliament. Italian bonds plummeted with the yield on the 10-year rising the most since August.

French, Belgian and Austrian 10-years dropped to euro-era lows, and Spain's debt also declined.

Bucking the trend was Greece, where bonds gained after the ailing country pushed further out the deadline for buying back some of its mountainous debt.

Elwin de Groot, a senior economist at Rabobank Nederland in Utrecht, Netherlands, told Bloomberg News: "We are seeing a selloff but I wouldn't call it a panic yet. The auction this week could be an interesting litmus test for investors. This has also created uncertainty for
Europe-wide policymaking."

Italy's deep-rooted economic troubles and political drift have been taken too lightly, a bevy of analysts warned.

As Nomura Securities' Silvio Peruzzo wrote in a note to clients, "Markets have grown too complacent about Italy, in our view."

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Stock Market Today: Gauging the Fiscal Cliff Effect

By , Contributing Writer, Money Morning -

U.S. markets were mixed and relatively quiet Monday as investors digested the weekend news that fiscal cliff talks had failed to lead to a deal - possibly even derailing earlier progress.

Just before 2 p.m. on Wall Street, the Dow Jones Industrial Average was down 26 points, and the Standard & Poor's 500 Index and Nasdaq were both treading slightly lower.

On the economic calendar to kick-off the busy week were reports on October construction spending, November manufacturing and auto sales.

What's Moving the Stock Market Today

  • Manufacturing Data
Data released Monday from the Institute for Supply Management revealed the U.S. manufacturing sector dipped back into contraction in November. Businesses reined in spending and curbed expansion projects while they anxiously await the looming blows from the fiscal cliff.

The ISM's manufacturing purchasers' index fell unexpectedly last month to 49.5 from 51.7 in October, marking the lowest reading since July 2009. Forecasts were for a reading of 51.5. A reading above 50 suggests expanding activity. Monday's reports gave no such hints.

According to economists surveyed by Dow Jones Newswire, demand has slowed in the second half of 2012. The culprit is the imminent fiscal cliff.

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Stock Market Today: Fiscal Cliff Fears Can’t Stop This 160% Gainer

By , Money Morning -

The stock market today opened flat before turning negative as negotiations on the fiscal cliff have not progressed, outweighing Greece's new deal concerning its debt.

  • Greece Close to Massive Bailout- Late Monday the International Monetary Fund, Eurozone finance ministers, and Greece came to an agreement that drastically eases the terms regarding Greece's repayment of debt and sets the stage for a third bailout. The deal lowers interest rates for bailout loans, suspends interest payments for a decade, pushes the deadline back for final repayments until the 2040s, and initiates a bond buyback program. Greece is also now on the brink of receiving a $44.7 billion loan beginning Dec. 13. "The big challenge now is to implement the decisions," Greek Finance Minister Yannis Stournaras said. "Greece has huge potential." The agreed upon measures aim to bring Greece's debt-to-GDP ratio down to 124% by 2020 from the projected level of 190% in 2014. The deal was accomplished by installing unprecedented measures such as carefully monitoring how Greece spends the debt, keeping an account strictly for debt servicing, and insisting that Greece completes the bond buyback before receiving more aid. "Euro-zone countries have put their money where their mouth is," Carsten Brzeski, an economist at ING Group NV in Brussels told Bloomberg News. "However, it is clearly not a carte blanche for Greece but rather a very tight leash."
  • Fiscal Cliff Talks Resume- Congress returned from its Thanksgiving recess and the fiscal cliff will be at the forefront of discussions this week. After last week's short burst of optimism there has not been any further progress on a deficit reduction deal. But for now consumers seem unfazed by the whole debacle, as today the consumer confidence index reached levels not seen since February 2008. The onset of higher taxes coupled with deep spending cuts was thought to lower consumer confidence, but instead consumers spent a record amount of money through Black Friday and Cyber Monday. The consumer confidence gauge interestingly showed expectations for six months from now, when we could be off the fiscal cliff, unexpectedly rose. The percentage of respondents expecting more jobs to be available in six months rose to its highest level since February 2011, and the percentage expecting to buy a home in the next six months hit a new all-time high. "The consumer is in a better place than several years ago," Michael Gapen, a New York-based senior U.S. economist at Barclays PLC (NYSE ADR: BCS), told Bloomberg. "A lot of the numbers are improving, whether it is household balance sheets or the state of the housing market or employment."
While the market is trying to turn positive, here is one stock surging on a medical breakthrough, another soaring on a settlement with Google Inc. (Nasdaq: GOOG), and a third that is up after announcing a special dividend.

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Stock Market Today: Why We'll Continue to "Drift Sideways"

By , Money Morning -

The stock market today opened higher before falling once again as fiscal cliff concerns continue to weigh on investors' minds.

  • Stocks continue to slide- After Cisco Systems Inc. (Nasdaq: CSCO) reported its fiscal first-quarter earnings the markets started the day positive, but quickly turned red. One week after the election, fiscal cliff concerns continue to mount as the president and Congress meet later this week to hopefully negotiate a deal. So far no progress has been made on the debt reduction talks and until that happens don't expect the markets to change course. "We will continue to drift sideways until we see some progress on the fiscal cliff negotiations," Peter Jankovskis, co-chief investment officer for Oakbrook Investments told Bloomberg News in a phone interview.
A major reason for the post-election sell-off is the prospect of higher taxes next year, and yesterday U.S. President Barack Obama made it clear his agenda on that issue has not changed.

  • President calls for $1.6 trillion more in revenue- When President Obama meets with congressional leaders on Friday he will ask for double the amount of revenue that was discussed at budget talks in 2011. On Tuesday, the president met with union leaders and other liberal groups and stated he will now seek $1.6 trillion in additional revenue over the next decade. That will be accomplished partially through higher tax rates, something Republicans have not yet said they would agree to. But Republicans have offered to accept extra revenue if Democrats can agree to making structural changes to entitlement programs. "New revenue must be tied to genuine entitlement changes," Senate Minority Leader Mitch McConnell, R-KY, said Tuesday. "Republicans are offering bipartisan solutions and now it's the president's turn. He needs to bring his party to the table." An agreement, which included $800 billion of extra revenue, between House Speaker John Boehner, R-OH, and President Obama failed when the President asked for $1.2 trillion in additional revenue. That deal would have lowered the deficit by $4 trillion over ten years, and now President Obama is seeking $1.6 trillion, a number much higher than Republicans will likely agree to.

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Why the Dow Fell Yesterday

By , Money Morning -

Concerns over how politicians will handle the fiscal cliff was the biggest driver behind why the Dow fell yesterday, tumbling more than 300 points in its biggest loss this year.

Political worries were exacerbated by worse than expected monthly sales from McDonald's Corp. (NYSE: MCD) and fears that Apple Inc. (Nasdaq: AAPL) had entered a bear market.

The fiscal cliff continued to dominate investor sentiment today as both Republicans and Democrats expressed their intentions of working together to find a solution to the impending crisis but failed to offer any concrete evidence of their willingness to budge from long-held positions.

Afraid that Republicans and Democrats will not compromise, even when the stakes are high, investors are bailing out. It is too close to the end of the year-too close to bonus time-to be a hero now.

In his victory speech following his re-election on Tuesday, U.S. President Barack Obama said that he is "looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together."

Senate minority leader Republican Mitch McConnell said, "To the extent [the President] wants to move to the political center, which is where the work gets done in a divided government, we'll be there to meet him halfway."

Jim Manley, a former aide to Senate majority leader Democrat Harry Reid, hoped that President Obama would become more personally involved in the negotiations on the resolution of the fiscal cliff.

"He's simply going to have to take a more active and forceful role," Manley told Bloomberg News. "He never got involved in the nitty-gritty of the legislative process. In light of the hyper-partisanship that still surrounds Capitol Hill, he's going to have to change, and he's going to have to take more of a lead in breaking the logjam."

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Stock Market Today: Looks Like Europe is Still a Huge Mess

By , Money Morning -

The major headlines in the stock market today include: the ECB's about to release its balance sheet - which is quite scary, Spain is about to request a full-fledged bailout, and disappointing motor vehicle sales follow an unexpectedly good manufacturing report.

Here's a closer look.

  • Europe is nowhere near fixed- Stocks opened higher Tuesday on hopes that Spain would request a bailout for the entire country and not just the banks. This drove the markets higher but stocks have since pared gains after digesting the release of the European Central Bank's balance sheet which showed $21 trillion in assets and $22 trillion in liabilities. Never mind that there are more liabilities than assets and no equity to speak of, the questions economists are asking is where is all this money, who is accountable for it and can we even trust these numbers to be accurate.
Perhaps the most troubling news from overseas is the record unemployment of 11.4% in the Eurozone. Spain and Greece continue to have unemployment above 25% and Spain's youth unemployment is above 50%. "Youth unemployment, especially if prolonged, threatens to harm the self-esteem and economic potential of young people now and in the future," Jonathan Todd, a spokesman for the European Commission, said in a statement on Monday after the release of joblessness figures. "This could also pose a serious threat to social cohesion and increase the risk of political extremism," he said. "E.U. institutions and governments, businesses and social partners at all levels need to do all they can to avoid a "lost generation,' which would be an economic and social disaster."

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Stock Market Today: 3Q Ends with Worst Business Activity in 3 Years

By , Money Morning -

The major headlines in the stock market today include: The third quarter stumbles to a close as economic activity shrunk for the first time in three years, concerns over Spanish banks persist and personal income falls.

  • Third quarter ends with a dud- Stocks opened lower Friday as investors confront news that economic activity is shrinking for the first time in three years. Investors also remain worried over Spain's economic turmoil and are awaiting results from stress tests of Spanish banks. The market rallied yesterday after Spain's austerity budget was announced but uncertainty still outweighs any optimism concerning Europe. "The focus is back on Europe at this point," Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina, told Bloomberg News. "It's this ebb and flow of crisis- response-complacency. You get everything fine for a while and then increase in stress."
  • Business activity contracts for first time in 3 years- The Chicago Purchasing Managers' index fell to 49.7 in September, its lowest level in three years. The reading measures manufacturing and non-manufacturing activity in the Chicago region and is considered a mirror of national activity. Any reading under 50 signals contraction and this was the first time activity shrank since September 2009. The sharp decline from last month's 53 was very unexpected and shows the economy has not improved over the past four years. Breaking down the report, the employment index came in at a two-and-a-half year low and new orders, backlogs and deliveries had their-three month moving averages at the lowest since the third quarter of 2009. "The chain that links all this stuff together is just a loss of confidence as we head toward the end of the year in fiscal policy," Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York told Bloomberg. "Businesses have been cutting back on their investment spending."

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The Real DOW is at 8,800 Right Now

By , Global Investing Specialist, Money Morning -

What I have to say today might shock you. But by all historical valuation metrics, the Dow Jones Industrial Index is worth 8,800.

Taking in the recent close of 13,458, that means the Dow Jones is overvalued by 53%.

Let me explain how I arrived at that unsettling conclusion.

Primarily, it's because historically the Dow has risen pretty closely in tandem with nominal Gross Domestic Product.

That makes sense, because corporate profits in the long run have to track GDP fairly closely, and stocks can't soar forever if profits don't follow.

In fact, from 1917 to 1994, the stocks vs. GDP metric practically matched, with periods of overvaluation in the 1920s and 1960s, and periods of undervaluation in the 1930s and late 1970s.

In short, the correlation was nearly perfect for 77 years-until it wasn't.

For this you can thank Alan Greenspan, the erstwhile "Maestro."

The Greenspan Fed Changed the Game

On February 23, 1995 then-Fed chairman Alan Greenspan, in his semi-annual Humphrey-Hawkins Act testimony to Congress, announced that he was ending his period of money tightening that had taken the federal funds rate up to 6% and would start letting rates decline.

Spurred by this news, the Dow Jones Industrial index that afternoon touched 4,000 for the first time.

But at 4,000, the Dow was not undervalued. Loosening the money supply wasn't necessary.

After all, it had peaked at 2,722 only seven years earlier and had then suffered a decline of 1,000 points in a few weeks, including the notorious "Black Monday" crash. At 4,000 it had gone well beyond what in 1987 appeared an unsustainable high, and appeared fairly fully valued.

Of course, Greenspan's Senate testimony did not appear important at first - the Fed had raised and lowered interest rates many times before.

But on this occasion, thanks to more cheap money, the stock market took off.

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Stock Market Today: GDP Revised Lower, Can Stocks Hold Gains?

By , Money Morning -

The major headlines in the stock market today include: Second-quarter GDP is revised even lower, durable goods orders fall and jobless claims remain high.

Yet, stocks are up thanks to news from overseas...

  • Final GDP reading reveals even weaker economy- The United States second-quarter gross domestic product grew at a lethargic 1.3% rate compared with the original 1.7% estimate. The downward revision was impacted by the drought but nonetheless the economy has stalled. "Consumption is not good," Thomas Simons, an economist at Jefferies Group Inc. in New York told Bloomberg News. "Consumers are still driving GDP but only at a very modest pace." This rate was much lower than the 2% growth of the first quarter and now makes the scenario of going off the fiscal cliff much scarier. If that happens economists say the U.S. will most likely head into a recession. From the latest GDP numbers it looks like we are already headed in that direction.


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Stock Market Today: Will These Fear Factors Kill the Rally?

By , Money Morning -

The major headlines in the stock market today include: Stocks try to hold on to a third straight week of gains, manufacturing slumps to three-year lows, jobless claims remain depressing, and these two stocks deserve a closer look.

  • Stocks try to rally- It has been over a week since QE3 was announced and the markets recently have been sluggish. After a strong rally leading up to the announcement of QE3, stocks cooled off this week amid the continuing global uncertainty. Today's trading session opened with all three major indexes rising higher as they try to start September with three straight weeks of gains. If the markets hold on to their early gains it will be a solid start to the month. The bullish trend is threatened though as anxieties increase over the looming fiscal cliff and the ongoing trend of lousy economic data.

  • Jobless claims troubling again- The labor market and unemployment are the main reasons the U.S. Federal Reserve cited in their decision to implement QE3. Yesterday's (Thursday) initial jobless claims back up that move but economists will want to see improved numbers in the near future if QE3 is ever going to be considered successful for the economy. Last week's jobless claims fell to 382,000 from the previous week's 385,000 but still missed economists' projections for initial claims around 375,000. Another troubling sign is that the four-week average which is considered a less volatile figure rose by 2,000 to 377,750, the highest level since June. "Businesses clearly remain reluctant to aggressively boost their workforces amid the current risks associated with the soft economy and significant uncertainty surrounding fiscal policy next year," Jim Baird, chief investment strategist at Plante Moran Financial Advisors told MarketWatch.

  • Markit shows manufacturing weakest in 3 years - Manufacturing measured by the Markit Purchasing Managers Index remained at 51.5 in September. That was also the average for the third quarter and well below the 54.2 measure for last quarter. A reading above 50 indicates expansion but this number was not encouraging as it was the lowest quarterly average since the third quarter of 2009. "I don't think the economy is going anywhere fast. The jobs market is still very difficult and manufacturing, which was a key pillar of the recovery is beginning to crack," Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania told Reuters.
In the stock market, these two companies have started the day off strong:

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Why There’s No Jail Time for Wall Streeters

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Wall Street is a "protected" operation. Protected means cops are aware of illegal activity, but are paid off to look the other way and even protect businesses from potential harm.

So, if you're waiting to get back into the markets once the trash has been taken out, you're about to find out your wait may be a lot longer than you expected.

The scheming racket that too many aspects of Wall Street have become reminds me of an old Clint Eastwood movie.

It's the one where Dirty Harry goes into a porno shop with a hooker hotel above it and the thug behind the desk tells him, "You can't come in here, this is a protected joint."

But Harry sets him straight. "To them you're something," he says, "but to me you're just a maggot that sells dirty pictures."

While Wall Street doesn't sell dirty pictures, it does sell the prospect of a glossy future full of positive investment returns when their "products" are embraced, as in bought and sold-- but mostly bought, for the investor's long-term good, of course.

In Wall Street's world, the beat cops are their regulators, including the SEC and the CFTC. Above them are the Federal Reserve and an untold number of politicians and legislators who pimp and pander on behalf of banksters by writing laws with loopholes so their donating "constituents" can always get out of jail free.

There are plenty of examples, but the mortgage-backed securities bubble and its related fallout is, to date, the biggest and most obvious example of how protected the Street is.

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