Daily Insight: NFIB and What's a Keynesian Central Banker to Do?

U.S. stocks bounced between gain and loss on several occasions yet again yesterday, but eventually rallied to end a two-day slide that had sent the S&P 500 to a seven-month low.

Comments from Fed Chairman Bernanke reportedly put the brakes on an early-morning rally with his comments on the labor market. The Fed head stated that the unemployment rate is likely to remain “high for a while.” But you can’t keep a good market down, most stocks pulled a reverse of what’s played out over the past couple of sessions and rallied late in the day to close at the session high.

In Monday’s letter, following Friday’s loss that brought the S&P 500 back down to the 1060 handle, we mentioned that it wouldn’t be long before a retest of 1040 occurs – that is the intraday low hit on May 25 and the lowest closing level since last November. We came close to that mark yesterday morning, hitting 1042, and rallied from there; although not in a straight line.

Basic material shares enjoyed a really nice day, jumping 2.49%. These shares, which were among the top-performers when the market was in rally mode, had been hit hard, falling 18% since April 26. Technology shares were the laggards, but all 10 major industry groups did rise for the session.

I did notice commentary suggesting that the market rebounded on speculation the Swiss National Bank (SNB) has intervened to support the euro. Speculation? They have been intervening for a while, as we’ve been discussing. The Swiss Franc has plunged 9.5% over the past six weeks due to the SNB selling the heck out of it to support the euro – yeah, euro would probably be down to that 1.15 USD/EUR level (the all out intervention level) without the SNB’s actions.
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Brent Vondera, Senior Analyst
http://www.acrinv.com/

Daily Insight: It's Different and Consumer Credit

U.S. stocks slipped again on Monday, beginning the week much like we did last Tuesday (last Monday being a holiday) as the major indices gained ground at the open before sliding late in the session.

Industrial and financial shares led the broad market lower, again. Industrials are feeling the pressure that weaker Chinese growth and European government debt issues will have on the global economy. Financials took it on the chin after Goldman Sachs was subpoenaed by the Financial Crisis Inquiry Commission for failing to comply with information requests in a “timely manner.”

The S&P 500 index that tracks utility shares was the only major industry group to gain ground. Health-care and telecoms performed well on a relative basis, but did decline slightly.

Stocks closed at session lows for the second-straight session as the latest report on consumer credit, which we touch on below, reminded of household balance sheet problems. Overall consumer credit has declined 6.6% since December 2008 and is down 4.6% at an annual rate since GDP turned positive again in the third quarter of 2009. It is unusual for consumer debt to decline, much less during the initial stages of expansion, but then household debt levels are more elevated than at any time in the postwar era.
Click here to read the full Daily Insight.

Brent Vondera, Senior Analyst
http://www.acrinv.com/