U.S. stocks rose on Monday, extending the best quarterly performance for the S&P 500 since the final three months of 1998. The index has jumped 16.2% over the past three months, following five-straight quarters of decline and at its worst was down 57% from the October 2007 peak.
The broad market ended its first consecutive weekly decline since the market doldrums of February and those who want in found that mild move lower as an opportunity. We also have the second quarter coming to a close tomorrow so one certainly can’t rule out some window dressing among mutual fund managers – one wouldn’t want to appear underweight stocks during such a strong quarter, now would they.
Financials, energy and utility shares led yesterday’s market higher. All 10 major industry groups gained ground; health-care and consumer staples, while up, were the laggards.
Even as the major indices posted nice gains, lackluster volume remains the trend as just 1.02 billion shares traded on the Big Board; there is certainly a lack of conviction out there as volume has been particularly weak for three weeks and trading has been sideways since May 8. A period of low volume should remain the rule as is usually the case for the summer months.
The dream shoots, I’m sorry the green shoots, better begin to show themselves in a pronounced manner or this market is going to have another rough period some time in the near future even with the liquidity trade that remains in play. We’ve yet to see anything that resembles a normal business cycle turnaround. One would certainly think we’re to have a robust economic rebound on our hands very soon with the massive stimulus that is in the global system, but I remain concerned that government action may cause businesses to further delay capital outlays. We need the business side of the economy to step up because its going to take the consumer a while to gets things right again.
Market Activity for June 29, 2009
Activity in Crude
Oil futures for August delivery are back on the march, rising 3.3% yesterday to close the session at $71.50 per barrel. What drove yesterday’s rise? It’s tough to say for sure what causes a daily move, but I doubt it was increased optimism over global growth. Heck, it was just Friday when concerns over near-term economic prospects increased again.
One thing is pretty certain; the energy market has begun to pay attention to Nigerian militant attacks – additional attacks over the weekend forced Shell to close production wells.
There were also talks between OPEC and the European Union in which they both seemed to agree that the weakened state of the global economy can support $70-80 per barrel – why the EU offers the cartel such fodder is beyond me. It may simply have been a blanket statement from the Europeans, but you can probably bet OPEC will use it as a source to justify production cuts the moment economic activity looks set to rebound. The market realizes this and crude caught a bid as a result.
The Week’s Data
On the economic front, we received a couple of lesser watched regional manufacturing readings. Both showed factory activity improved from deep depths but remain at recessionary levels.
The market waits for more substantial data, and we’ll get it in this holiday-shortened week.
This morning the April reading on the S&P Case/Shiller Home Price Index is expected to show the seventh month of year-over-year decline of at least 18% – it’s been more than two years now since the figure has posted an increase on a 12-month basis and 2 ½ years since posting a monthly increase.
As we always point out though, this is a fairly narrow index – it includes the 20 largest metro areas, but many are those in which the greatest level of speculation took place in the boom years. As a result, these are also the areas currently burdened with the highest foreclosure rates and thus the steepest price declines.
Also today we get the Chicago Purchasing Managers Index (PMI), which is the most watched factory gauge outside of the nationwide ISM figure. This reading has been more subdued than many of the other factory indices as it is most exposed to the auto sector. Due to those auto-industry woes we shouldn’t expect Chicago PMI to make it close to 50 (the line of demarcation between expansion and contraction) but if it moves to 42-43, this will be a big plus. Conversely, if the reading remains in the 30s the market will be disappointed and may sell off even if this is the final day of a big quarter.
On Wednesday we’ll receive the preliminary employment reports in the Challenger Job Cuts Announcement index and the ADP Employment Change reading. ADP is expected to show the economy shed 390,000 payroll positions in June, which is more than is expected for the official data.
We’ll also get that ISM number, giving us the June reading on overall manufacturing activity for the nation.
On Thursday, we’ll get an overdose of employment data as the usual jobless claims reading is released, but in a rare Thursday appearance (due to the market close on Friday) we’ll receive the official monthly payroll data (June) as well. The market expects a decline of 350,000 positions, and if accurate it will mark the second-straight month of improvement from the outsized losses of 550K-740K that was the trend over the previous six months. A level of 350,000 brings us back to the peak level of losses that are seen during the more typical recession, which is the situation we currently find ourselves.
This job number is the big one and will set the stage for how the market reacts as we come back from the July 4 holiday.
Have a great day!
Brent Vondera
The broad market ended its first consecutive weekly decline since the market doldrums of February and those who want in found that mild move lower as an opportunity. We also have the second quarter coming to a close tomorrow so one certainly can’t rule out some window dressing among mutual fund managers – one wouldn’t want to appear underweight stocks during such a strong quarter, now would they.
Financials, energy and utility shares led yesterday’s market higher. All 10 major industry groups gained ground; health-care and consumer staples, while up, were the laggards.
Even as the major indices posted nice gains, lackluster volume remains the trend as just 1.02 billion shares traded on the Big Board; there is certainly a lack of conviction out there as volume has been particularly weak for three weeks and trading has been sideways since May 8. A period of low volume should remain the rule as is usually the case for the summer months.
The dream shoots, I’m sorry the green shoots, better begin to show themselves in a pronounced manner or this market is going to have another rough period some time in the near future even with the liquidity trade that remains in play. We’ve yet to see anything that resembles a normal business cycle turnaround. One would certainly think we’re to have a robust economic rebound on our hands very soon with the massive stimulus that is in the global system, but I remain concerned that government action may cause businesses to further delay capital outlays. We need the business side of the economy to step up because its going to take the consumer a while to gets things right again.
Market Activity for June 29, 2009
Activity in CrudeOil futures for August delivery are back on the march, rising 3.3% yesterday to close the session at $71.50 per barrel. What drove yesterday’s rise? It’s tough to say for sure what causes a daily move, but I doubt it was increased optimism over global growth. Heck, it was just Friday when concerns over near-term economic prospects increased again.
One thing is pretty certain; the energy market has begun to pay attention to Nigerian militant attacks – additional attacks over the weekend forced Shell to close production wells.
There were also talks between OPEC and the European Union in which they both seemed to agree that the weakened state of the global economy can support $70-80 per barrel – why the EU offers the cartel such fodder is beyond me. It may simply have been a blanket statement from the Europeans, but you can probably bet OPEC will use it as a source to justify production cuts the moment economic activity looks set to rebound. The market realizes this and crude caught a bid as a result.
The Week’s Data
On the economic front, we received a couple of lesser watched regional manufacturing readings. Both showed factory activity improved from deep depths but remain at recessionary levels.
The market waits for more substantial data, and we’ll get it in this holiday-shortened week.
This morning the April reading on the S&P Case/Shiller Home Price Index is expected to show the seventh month of year-over-year decline of at least 18% – it’s been more than two years now since the figure has posted an increase on a 12-month basis and 2 ½ years since posting a monthly increase.
As we always point out though, this is a fairly narrow index – it includes the 20 largest metro areas, but many are those in which the greatest level of speculation took place in the boom years. As a result, these are also the areas currently burdened with the highest foreclosure rates and thus the steepest price declines.
Also today we get the Chicago Purchasing Managers Index (PMI), which is the most watched factory gauge outside of the nationwide ISM figure. This reading has been more subdued than many of the other factory indices as it is most exposed to the auto sector. Due to those auto-industry woes we shouldn’t expect Chicago PMI to make it close to 50 (the line of demarcation between expansion and contraction) but if it moves to 42-43, this will be a big plus. Conversely, if the reading remains in the 30s the market will be disappointed and may sell off even if this is the final day of a big quarter.On Wednesday we’ll receive the preliminary employment reports in the Challenger Job Cuts Announcement index and the ADP Employment Change reading. ADP is expected to show the economy shed 390,000 payroll positions in June, which is more than is expected for the official data.We’ll also get that ISM number, giving us the June reading on overall manufacturing activity for the nation.On Thursday, we’ll get an overdose of employment data as the usual jobless claims reading is released, but in a rare Thursday appearance (due to the market close on Friday) we’ll receive the official monthly payroll data (June) as well. The market expects a decline of 350,000 positions, and if accurate it will mark the second-straight month of improvement from the outsized losses of 550K-740K that was the trend over the previous six months. A level of 350,000 brings us back to the peak level of losses that are seen during the more typical recession, which is the situation we currently find ourselves.This job number is the big one and will set the stage for how the market reacts as we come back from the July 4 holiday.Have a great day!
Brent Vondera
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