Monthly Archives: May 2015

Daily Market Update – May 14, 2015  (Close)

More retail sales reports are coming and they continue to be disappointing.

The news is basically all the same and what it all has been saying, so far, as that if there is any evidence that people are getting more money, they’re not spending it on discretionary items.

We don’t exactly know where it is going, but it’s not going to the major national retailers that have reported their earnings. Also, if the last quarter is any guide, then the more upscale retailers won’t be where the money is going either, as those had dome fairly well even while more mainstream retailers were flagging.

This morning the pre-open futures seemed to like the news that retailers aren’t doing that well.

To those who believed that there would be increasing consumer led strength in the economy and that strength would then lead to the Federal Reserve raising interest rates, the earnings data is disappointing.

After some early earnings news came some PPI data, which looks at pricing.

Again, there’s absolutely no evidence that inflation is creeping in. If the FOMC is truly going to be data driven, then there’s not much reason to suspect that they will be acting in a way that the data doesn’t support.

So in this case, bad news is interpreted as being something good.

In today’s market it was interpreted as being really, really good.

The reality, though, is that these incredibly low interest rates that we’ve now had for years, haven’t really done what they normally do. They haven’t spurred business expansion and they haven’t spurred home sales. The argument may be, however, that those would have been far worse than where they currently stand following 2008’s financial meltdown.

We’ll never know if that’s the real way it is, but even if that’s the case, it would be hard to identify and real acceleration phase of expansion, as you would normally see. Instead, we’ve had the kind of expansion that may be similar to what a frog doesn’t really get to experience when he’s in a pot that very slowly gets bought to a boil.

This morning the futures were heading toward a triple digit gain and by the end of the trading session they had nearly doubled that gain, never having wavered during the session.. Normally those kind of large moves have some staying power once trading begins, but we saw that not to be the case earlier this week when the market was poised to open with a large loss.

So who was to know as the market got ready to begin, but as the day wore on, there could be no doubt.

With these last 2 days of the week I was just hopeful that this morning’s gains would have some staying power and make it easier to either get rollovers accomplished or see some of those positions assigned. I would much rather see the assignments, but would definitely not scoff at the rollovers.

With today’s record close, yet another one, we’re one important step closer to getting out of the week in decent position, except for those retailers.

With the negative retail news likely to continue as the week comes to an end, it’s understandable how the equity markets could look at the bad news as being good. But as earnings season is coming to its end, you do have to wonder “what’s next?”

For the most part companies have been giving less than optimistic guidance to prepare us for the revenue and earnings shocks of the next quarter. However, as Euro-USD parity is becoming less of a certainty, those guidance projections may end up being too pessimistic and there may be some mid-stream corrections reported as the next earnings season approaches.

Until then and if that happens, it’s still not too clear where the next boost comes from, although interest rate are still likely to be the next reason for weakness, as soon as any life is discovered in the economy.

Daily Market Update – May 14, 2015  (9:00 AM)

More retail sales reports are coming and they continue to be disappointing.

The news is basically all the same and what it all has been saying, so far, as that if there is any evidence that people are getting more money, they’re not spending it on discretionary items.

We don’t exactly know where it is going, but it’s not going to the major national retailers that have reported their earnings. Also, if the last quarter is any guide, then the more upscale retailers won’t be where the money is going either, as those had dome fairly well even while more mainstream retailers were flagging.

This morning the pre-open futures seem to like the news that retailers aren’t doing that well.

To those who believed that there would be increasing consumer led strength in the economy and that strength would then lead to the Federal Reserve raising interest rates, the earnings data is disappointing.

After some early earnings news came some PPI data, which looks at pricing.

Again, there’s absolutely no evidence that inflation is creeping in. If the FOMC is truly going to be data driven, then there’s not much reason to suspect that they will be acting in a way that the data doesn’t support.

So in this case, bad news is interpreted as being something good.

The reality, though, is that these incredibly low interest rates that we’ve now had for years, haven’t really done what they normally do. They haven’t spurred business expansion and they haven’t spurred home sales. The argument may be, however, that those would have been far worse than where they currently stand following 2008’s financial meltdown.

We’ll never know if that’s the real way it is, but even if that’s the case, it would be hard to identify and real acceleration phase of expansion, as you would normally see. Instead, we’ve had the kind of expansion that may be similar to what a frog doesn’t really get to experience when he’s in a pot that very slowly gets bought to a boil.

This morning the futures are heading toward a triple digit gain. Normally those kind of large moves have some staying power once trading begins, but we saw that not to be the case earlier this week when the market was poised to open with a large loss.

So who knows?

With these last 2 days of the week I’m just hopeful that this morning’s gains do have some staying power and make it easier to either get rollovers accomplished or see some of those positions assigned. I would much rather see the assignments, but would definitely not scoff at the rollovers.

With the negative retail news likely to continue as the week comes to an end, it’s understandable how the equity markets could look at the bad news as being good. But as earnings season is coming to its end, you do have to wonder “what’s next?”

For the most part companies have been giving less than optimistic guidance to prepare us for the revenue and earnings shocks of the next quarter. However, as Euro-USD parity is becoming less of a certainty, those guidance projections
may end up being too pessimistic and there may be some mid-stream corrections reported as the next earnings season approaches.

Until then and if that happens, it’s still not too clear where the next boost comes from, although interest rate are still likely to be the next reason for weakness, as soon as any life is discovered in the economy.

Daily Market Update – May 13, 2015  (Close)

Yesterday was no where near as bad of a day as it could have been.

For some reason the bond market turned around after an early surge in interest rates continued from the previous days and the stock market followed that lead, as it turned around another triple digit loss.

Escaping the day with only about a 40 point loss was a gift, coming off Monday’s nearly triple point decline.

This morning began a flow of retail earnings reports that could have either added fuel to the bond market’s belief that higher interest rates are right around the corner or throw water on it.

The retailers, especially well regarded CEO of Macys, Terry Lundgren, were among the first to tell the world that falling energy prices would be good for their retail fortunes.

This morning Macys got the ball rolling about an hour before the official government Retail Sales Report is released.

About 6 months after all of the optimistic forecasts regarding GDP, which is said to be approximately 70% comprised of consumer spending activity, none of the gains have been realized.

This morning Macys didn’t have any good news to share, although it did as many have recently done and it increased its dividend. That seems to be a fairly common action that is taken even in the face of falling revenues and falling profits that makes you wonder about sustainability and disappointment down the road.

This morning, however, prior to the release of that official government report, markets were nicely higher and poised to offset yesterday’s small loss.

Instead, though, when it was all done and throughout the day, the market was just ambivalent and traded within a fairly narrow range.

The next few days, however, will have lots of those retail sales reports coming along and it may be a question of threading the needle to get those numbers just right. Just right would mean not offering such bad earnings news so as to scare stock markets, but also not offering such good news so as to create fears of rising rates.

Ultimately, a loss in top line revenue, like the kind Macys reported today, may be just the thing to keep markets at current levels or even going higher.

That doesn’t make too much sense, but at the moment the data and the emotions that it can create may be at a precarious balance.

This morning my hope was that the market would  look positively on the weakness that may be reflected by retail sales and push shares higher, so that there’s a better chance of getting some assignments this week or at least some rollovers, as the monthly cycle comes to its end.

The first two days of this week weren’t very helpful in that regard, but there’s still plenty of time to set things right.

Macys’ retail weakness did give the bond market a reason to reverse course and for that period of time the stock market was respectable, but later on the bond market regained some footing and the stock markets faltered.

With more retail earnings coming out this afternoon and tomorrow we should all be in store for more of the same during the last 2 days of this week and monthly option cycle.

Daily Market Update – May 13, 2015  (8:30 AM)

Yesterday was no where near as bad of a day as it could have been.

For some reason the bond market turned around after an early surge in interest rates continued from the previous days and the stock market followed that lead, as it turned around another triple digit loss.

Escaping the day with only about a 40 point loss was a gift, coming off Monday’s nearly triple point decline.

This morning begins a flow of retail earnings reports that could either add fuel to the bond market’s belief that higher interest rates are right around the corner or throw water on it.

The retailers, especially well regarded CEO of Macys, Terry Lundgren, were among the first to tell the world that falling energy prices would be good for their retail fortunes.

This morning Macys got the ball rolling about an hour before the official government Retail Sales Report is released.

About 6 months after all of the optimistic forecasts regarding GDP, which is said to be approximately 70% comprised of consumer spending activity, none of the gains have been realized.

This morning Macys didn’t have any good news to share, although it did as many have recently done and it increased its dividend. That seems to be a fairly common action that is taken even in the face of falling revenues and falling profits that makes you wonder about sustainability and disappointment down the road.

This morning, however, prior to the release of that official government report, markets are nicely higher and poised to offset yesterday’s small loss.

The next few days, however, will have lots of those retail sales reports coming along and it may be a question of threading the needle to get those numbers just right. Just right would mean not offering such bad earnings news so as to scare stock markets, but also not offering such good news so as to create fears of rising rates.

Ultimately, a loss in top line revenue, like the kind Macys reported today, may be just the thing to keep markets at current levels or even going higher.

That doesn’t make too much sense, but at the moment the data and the emotions that it can create may be at a precarious balance.

This morning my hope is that the market looks positively on the weakness that may be reflected by retail sales and pushes shares higher, so that there’s a better chance of getting some assignments this week or at least some rollovers, as the monthly cycle comes to its end.

The first two days of this week weren’t very helpful in that regard, but there’s still plenty of time to set things right.

Daily Market Update – May 12, 2015  (Close)

Whatever yesterday didn’t offer, in terms of a catalyst for moving markets forward, today was offering even less by the looks of the pre-opening futures.

On the contrary, markets were heading strongly lower, with the catalyst for that being another spike in bond interest rates. But later in the day, those same bond prices served as the catalyst to erase the very strong early losses.

What the catalyst for either of the bond movements seen during the day or the past couple of days is unclear, but the bond market seems to be putting its money on rates heading higher sooner than we may have all believed.

With retailers beginning to report earnings tomorrow and with the Retail Sales Report being released tomorrow, we’ll see whether the consumer based component of GDP is pointing toward expansion, just as we got to see this morning’s JOLT Survey indicating that there was no such upward wage pressure.

So far there isn’t too much indication of any kind of upward pressure on prices or wages, although there is some recent increase in commodity prices.

If those retail numbers don’t support the thesis that the bond market is backing at the moment, it would be reasonable to expect rates to head back lower, just as they did in March after a spike then, too. The JOLT Survey data may have also been the reason that those rates backed off this morning, as well.

What would remain to be seen, though, is whether the stock market would then rally in light of the fact that bonds would become less desirable in the context of disappointing retail sales. They did so today, although it wasn’t really a rally per se, more a case of just atoning for the significant early losses.

With the pre-open futures pointing to a steep decline to begin the day, that tends not to be the sort of thing that reverses itself once trading begins for real. Although  that’s exactly what did happen a month or so ago, generally that’s not the case.

But it was again the case today.

Thankfully.

While the bond market is predicting that rates are going to head up sooner rather than later, it’s hard to see where that upward pressure is going to come from in the immediate future.

It’s also hard to picture a scenario where the Retail Sales Report or the actual earnings releases from the major retailers are going to give any good reason to send stocks higher.

Numbers that are unexpectedly good will only serve to re-inforce the bond market’s move that reflects increasing inflation pressure.

Maybe what’s needed is something like last week’s Employment Situation Report, where the numbers simply meet expectations and neither surprised nor disappointed.

This may simply be the perfect time for a “no news is good news” kind of economic and earnings reports. For now the status quo would be just fine and that would give the bond market plenty of opportunity to make itself less competitive with stocks as it reconsiders it stance on the timing of interest rate increases.

While the various ma
rkets think about where they’re going and with some prices likely to be pushed further from their strikes, there is at least 3 more days to see some sort of recovery once today’s results are sealed.

That’s still plenty of time for some kind of bounce back from yesterday’s decline and what was a surprisingly benign day today.

I didn’t expect to be doing too much today other than watching the market unfold and hoping that there is some self-limiting mechanism that recognizes that things really aren’t that bad to warrant anything more than a small and short lived kind of adjustment to prices.

Luckily that hoping didn’t go to waste today. We’ll see if it has any staying power tomorrow.