U.S. stocks bounced around the cut line for most of Monday’s session in a show of either remarkable or unbelievable resilience -- considering the developments out of Spain over the weekend could be seen as a harbinger of European banking problems soon to come and mounting tensions in Korea. But the major indices did succumb to weakness late in the day, erasing almost all of Friday’s gain in the final 90 minutes of trading.
Financials, energy and basic material shares led the market lower. Health-care and tech were the best performing groups, but even these were down as all 10 major industry groups declined on Monday. Tech actually spent most of the session in positive territory, up as much as 0.85% even as the broad market struggled to peek above the cut line, but sold off by 1.38% in the afternoon.
Four Spanish savings banks are set to merge in a coordinated effort by the Bank of Spain in an attempt to strengthen their solvency. The four banks hold more than $168 billion in assets, which is kind of a big deal for a $1.6 trillion economy. These banks went on a lending binge during the Southern European real-estate boom and as Spanish unemployment has leapt to 20% from 8% in less than two years the banking troubles are clearly widespread.
On the Korean peninsula, the South has begun to respond, although tepidly, to the March 26 sinking of their warship. The North has reportedly ordered their military to ready for combat. One can hardly take anything news that comes out of the North at face value, but conditions are ripe for trouble.
We’ve mentioned a couple of times now that risk lurks around many corners, just waiting to jump out and scare the complacency out of everyone. A couple of these risks have begun to do so.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
Tuesday, May 25, 2010
Friday, May 21, 2010
Daily Insight: Jobless Claims, Philly Fed and For All the Wrong Reasons
As everyone knows, U.S. stocks got hit hard yesterday, extending the latest losing streak to three sessions but the weakness has really been in play for three weeks, hitting a crescendo since the so-called “flash crash” two weeks back. Yesterday’s open to close decline was actually larger than the May 6 (flash-crash day) move.
Stocks looked ready to stage a comeback on a couple of occasions yesterday, a rally late in the morning session and then again about mid-way into afternoon trading. But a late-session slide, which coincided with news that the Senate came up with the 60 votes necessary to end cloture and clear the way for passage of financial regulation legislation -- which they ultimately passed last night, slammed the market back down to close at the intraday low. The Senate version will have to be reconciled with a House plan passed in December. After that it gets signed.
To no surprise, financials led the market slide. Industrials, energy and basic materials (all the most cyclical industries that are having trouble now that the state of the global economy are in doubt again) weren’t far behind. Telecom, consumer staples and utility shares were the relative winners, but even these were off by roughly 3%.
The broad market – as measured by the S&P 500 -- is now off its recent high by 12%, a decline of more than 10% is considered a correction, as markets follow the Shanghai Composite lower. The Shanghai exchange is down 18% since April 15 and 25% off its near-term peak. The trend of Shanghai leading has been in place since late 2008. I’m not saying this trend is in place for the long term, but it’s tough to ignore for now. As China continues to rein in its stimulus, which has provided a kick to the entire Asian region, commodity-rich economies and technology & certain industrial firms, the market may continue to pull back from the risk trade. Of course, concerns over Europe and the drag those economies will have on global growth are also part of the problem. But Shanghai has been quite the indicator.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Stocks looked ready to stage a comeback on a couple of occasions yesterday, a rally late in the morning session and then again about mid-way into afternoon trading. But a late-session slide, which coincided with news that the Senate came up with the 60 votes necessary to end cloture and clear the way for passage of financial regulation legislation -- which they ultimately passed last night, slammed the market back down to close at the intraday low. The Senate version will have to be reconciled with a House plan passed in December. After that it gets signed.
To no surprise, financials led the market slide. Industrials, energy and basic materials (all the most cyclical industries that are having trouble now that the state of the global economy are in doubt again) weren’t far behind. Telecom, consumer staples and utility shares were the relative winners, but even these were off by roughly 3%.
The broad market – as measured by the S&P 500 -- is now off its recent high by 12%, a decline of more than 10% is considered a correction, as markets follow the Shanghai Composite lower. The Shanghai exchange is down 18% since April 15 and 25% off its near-term peak. The trend of Shanghai leading has been in place since late 2008. I’m not saying this trend is in place for the long term, but it’s tough to ignore for now. As China continues to rein in its stimulus, which has provided a kick to the entire Asian region, commodity-rich economies and technology & certain industrial firms, the market may continue to pull back from the risk trade. Of course, concerns over Europe and the drag those economies will have on global growth are also part of the problem. But Shanghai has been quite the indicator.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Wednesday, May 19, 2010
Market Minute: Tips For Market Volatility
The fact that market volatility has been elevated recently is no secret. Volatility can have a harmful effect on investor behavior. One of the most common mistakes is attempting to time the market, as investors generally react too late to be able to capitalize on gains or avoid major losses (not to mention the significant costs that come with market timing).
It’s no surprise that this behavior is more prevalent in volatile markets since it is our human nature to seek safety in times of trouble. The problem with selling in fear is that you also have to determine the appropriate time to re-enter the market. Unfortunately, most people that wait until “the coast is clear” miss out on the gains and end up buying at high prices. I don’t have to tell you that selling low and buying high is harmful.
Today I would like to present you with a few tips that you may find useful in volatile times. Follow these tips and you will never fall victim to market timing.
Stay the course. Maintaining your target asset mix of stocks, bonds, and cash is the most important part of a long-term investment plan. In fact, 90% of variation in portfolio performance can be attributed to your asset allocation. There is no one-size-fits-all allocation since everyone’s asset mix depends on individual objectives, time horizon, risk tolerance, and current financial situation. Once you (with the help of your financial advisor) determine the appropriate asset allocation for your circumstances, stick to it.
Continue automatic investment contributions. Making regular contributions to your 401(k), IRA, or taxable investment accounts is one of the best and most disciplined ways to grow your wealth. For most people, this means having a predetermined sum transferred directly from their paycheck into an investment account. Others will have automatic transfers from a checking or savings account. Regular contributions result in better average purchase prices – you buy more shares when prices are low and fewer shares when prices are high – and take emotions out of investment decisions.
Tune out the noise. These days there is an amazing amount of news outlets vying for your attention. Newspapers, magazines, and news reporters all try to identify the causes of every market gyration and predict the next move, but it’s impossible to explain market activities until long after the dust has settled. Try to ignore all this noise and keep focused on your long-term goals. As a close friend of mine so perfectly said to me, “I’m going to let you worry about all the nonsense.” Good idea.
Volatility is the norm, with market fluctuations cancelling each other out over the long term. There is never any guarantee in the financial markets, but staying on course over the long run increases the chances of meeting your financial goals.
Peter Lazaroff, Investment Analyst
Daily Insight: Regulatory Regime, Housing Starts and Give Me Yield Baby!
U.S. stocks began the session higher on Tuesday, but prices deteriorated as we headed into the afternoon session. Chances of recovery within the eurozone are falling, which caused traders to run for a little more cover. German Chancellor Merkel sated that she would support a tax on the financial sector to help fund the costs of the sovereign-debt rescue plan.
Combining with this ongoing worry was a surprise ban on naked short-selling and credit-default swaps by German regulators. I’m certainly not going to defend naked positions, but this sudden unilateral decision had on affect on U.S. trading as people believed it would shake up European markets when they opened last night – and indeed they were shaken, down 2.5%-3.0% across the board. Politicians can maintain their attempt to control the markets from responding to terrible policy decisions, but if they take away just one in a number of ways to short policy then traders will just shift their assault to the currency – and the euro surely doesn’t need additional attack.
Further complicating things was an amendment out of the U.S. Senate that would allow states to enforce their own credit-card rate limits regardless of where the issuer is located. Banks currently get around various state usury laws by domiciling in states with the least regulations – imagine that. Differing state laws is about as messy as legislation can get, leading to confusion within the industry. This is on top of the debit-card “swipe” fees – the fees charged to merchants on each transaction, which continues to whack shares of Visa and MasterCard. Financial regulation is really starting roll.
To no surprise, financial shares led the market lower. Consumer discretionary shares also got hit hard, along with tech. Consumer staples and telecoms were the relative winners for a third session. All 10 major groups did decline during the session.
In other regulatory news, U.S. stock exchanges and regulators proposed a six-month pilot program to help guard against events like the “flash crash” that occurred on May 6. Circuit breakers will be put in place on individual stocks (trading paused if a stock price moves 10% or more in a five-minute period). Broader circuit breakers will be rolled out at a later date that will force a pause in market-wide trading. These new circuit breakers are aimed at electronic exchanges. The New York Stock Exchange has had circuit breakers in place for many years, as laid out below the jump.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Combining with this ongoing worry was a surprise ban on naked short-selling and credit-default swaps by German regulators. I’m certainly not going to defend naked positions, but this sudden unilateral decision had on affect on U.S. trading as people believed it would shake up European markets when they opened last night – and indeed they were shaken, down 2.5%-3.0% across the board. Politicians can maintain their attempt to control the markets from responding to terrible policy decisions, but if they take away just one in a number of ways to short policy then traders will just shift their assault to the currency – and the euro surely doesn’t need additional attack.
Further complicating things was an amendment out of the U.S. Senate that would allow states to enforce their own credit-card rate limits regardless of where the issuer is located. Banks currently get around various state usury laws by domiciling in states with the least regulations – imagine that. Differing state laws is about as messy as legislation can get, leading to confusion within the industry. This is on top of the debit-card “swipe” fees – the fees charged to merchants on each transaction, which continues to whack shares of Visa and MasterCard. Financial regulation is really starting roll.
To no surprise, financial shares led the market lower. Consumer discretionary shares also got hit hard, along with tech. Consumer staples and telecoms were the relative winners for a third session. All 10 major groups did decline during the session.
In other regulatory news, U.S. stock exchanges and regulators proposed a six-month pilot program to help guard against events like the “flash crash” that occurred on May 6. Circuit breakers will be put in place on individual stocks (trading paused if a stock price moves 10% or more in a five-minute period). Broader circuit breakers will be rolled out at a later date that will force a pause in market-wide trading. These new circuit breakers are aimed at electronic exchanges. The New York Stock Exchange has had circuit breakers in place for many years, as laid out below the jump.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Tuesday, May 18, 2010
Daily Insight: First Look at Manufacturing and Eurozone Still Pressures
U.S. stocks remained under pressure as the 5% slide in Shanghai overnight (Sunday night) and continued concerns that the European crisis will derail the global economic recovery weighed on investor sentiment. However, the market shook off its morning-session weakness, rallying in the afternoon to erase a 1.8% decline, closing just above the cut line.
Six of the 10 major industry groups gained ground during the session. Telecom and consumer staple stocks led the led the way – so there remains a safe-haven play here (telecoms are not traditional safe-havens, but since the sector is dominated by Verizon and AT&T it is the dividend yields that has investors seeking succor in this area). Energy shares led the four declining groups. Industrials, basic material and financials rounded out the losing sectors.
We’ve talked about this European debt crisis since first bringing it up in the December 9, 2009 letter and really got into it with the February 10 issue when we stated: It was always a fantasy that the EU would escape bailing out Greece, and unless things go very well they’ll be bailing other countries too as the Greek situation is the canary in the coal mine. But we’ve also said that EU trouble has implications beyond that continent as the eurozone is the world’s second-largest importer (a plunging euro will make life more difficult on the globe’s main exporting economies – specifically Asia) and the entire situation puts the hurt on European banks. It appears the market is beginning to think about these implications and unfortunately is likely to keep pressure on riskier assets.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Six of the 10 major industry groups gained ground during the session. Telecom and consumer staple stocks led the led the way – so there remains a safe-haven play here (telecoms are not traditional safe-havens, but since the sector is dominated by Verizon and AT&T it is the dividend yields that has investors seeking succor in this area). Energy shares led the four declining groups. Industrials, basic material and financials rounded out the losing sectors.
We’ve talked about this European debt crisis since first bringing it up in the December 9, 2009 letter and really got into it with the February 10 issue when we stated: It was always a fantasy that the EU would escape bailing out Greece, and unless things go very well they’ll be bailing other countries too as the Greek situation is the canary in the coal mine. But we’ve also said that EU trouble has implications beyond that continent as the eurozone is the world’s second-largest importer (a plunging euro will make life more difficult on the globe’s main exporting economies – specifically Asia) and the entire situation puts the hurt on European banks. It appears the market is beginning to think about these implications and unfortunately is likely to keep pressure on riskier assets.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Friday, May 14, 2010
Daily Insight: Jobless Claims, Import Prices, On the Dole
U.S. stocks spent most of the session bobbing around the cut line (the opening price for new readers), but slid in the final 90 minutes to make it two up and two down for the week thus far.
The fact that regulators have moved beyond Goldman Sachs and are now scrutinizing eight banks with regard to their mortgage-bond deals certainly didn’t help investor sentiment.
Also, a couple of retailers forecast weak same-store sales results for the second quarter, which led to some worries about today’s retail sale report for April.
Finally, more people seem to be talking about what we mentioned yesterday: a European economy that has become heavily dependent on government spending isn’t going to respond well to the necessary austerity plans coming from EU members.
Consumer discretionary shares led the declines (been a while since that happened as performance-chasing behavior in the sector has been running wild), with financials not far behind. Of the 10 major industry groups, only telecoms gained ground for the session.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
The fact that regulators have moved beyond Goldman Sachs and are now scrutinizing eight banks with regard to their mortgage-bond deals certainly didn’t help investor sentiment.
Also, a couple of retailers forecast weak same-store sales results for the second quarter, which led to some worries about today’s retail sale report for April.
Finally, more people seem to be talking about what we mentioned yesterday: a European economy that has become heavily dependent on government spending isn’t going to respond well to the necessary austerity plans coming from EU members.
Consumer discretionary shares led the declines (been a while since that happened as performance-chasing behavior in the sector has been running wild), with financials not far behind. Of the 10 major industry groups, only telecoms gained ground for the session.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Thursday, May 13, 2010
Daily Insight: Mortgage Apps, Trade and The Fabulous Keynesian Experiment
U.S. stocks rallied on Wednesday to have now fully recouped the big losses from late last week – the ubiquitously called flash crash. Another 1.2% pick-up and all of last week’s decline is gained back. More government back-stopping (this time from the EU), a few click of the heels, and voila the worries from just seven days back go poof. Man that was easy.
Stocks picked up momentum after a Portuguese bond sale went well, Spain announced a measure to cut their deficit and the UK election results offered optimism that the new coalition government will make progress on their debt situation. More on this below.
Tech, industrials and basic material shares were the top-performing groups yesterday. Tech has really benefited from the equipment-spending snap back after businesses froze spending for most of 2009; Chinese stimulus measures have also played a major role as Asia is the growth engine, for now. Health-care and consumer staples -- the traditional areas of safety -- were the laggards, but all 10 major groups did gain ground.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Stocks picked up momentum after a Portuguese bond sale went well, Spain announced a measure to cut their deficit and the UK election results offered optimism that the new coalition government will make progress on their debt situation. More on this below.
Tech, industrials and basic material shares were the top-performing groups yesterday. Tech has really benefited from the equipment-spending snap back after businesses froze spending for most of 2009; Chinese stimulus measures have also played a major role as Asia is the growth engine, for now. Health-care and consumer staples -- the traditional areas of safety -- were the laggards, but all 10 major groups did gain ground.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Wednesday, May 12, 2010
Reflecting On The Market Sell-Off
I was out of the office on the two trading days that followed last week’s “flash crash,” which allowed me some time to reflect on the events of that day.
In case you haven’t heard, market indexes dropped precipitously in a matter of minutes last Thursday on basically no fresh news (unless you count the reports that a new Pampers diaper made by Procter & Gamble is causing rashes).
The first conclusion I’ve come to is that last Thursday’s market action clearly demonstrates the inherent risks of our increasingly automated stock market.
High-frequency traders account for 50% to 70% of daily trading volume and, thus, these computerized trading systems provide gobs of liquidity in a normal market. But when the high-frequency crowd jumped ship last Thursday, they took their liquidity with them. I don’t think this right or wrong, fair or unfair. However, I will remember this event the next time I hear someone argue that the “constant” liquidity these computerized trading systems provide justifies their grab-every-fractional-cent-in-sight nature.
Another conclusion I have reached in the aftermath of the “flash crash” is that while human error and computer glitches are accused of being the primary culprits for the epic freefall, I think in some sense the market had been craving a sell-off.
In my April 22 post I suggested that the market would take a breather once earnings season slowed down. There is nothing wrong with sentiment growing bullish, but it’s a problem when markets are willing to shrug off just about any bad news. The bright side of a sharp market reversal like last week’s is that the jubilation dissipates and investors more soberly assess the potential risks at hand.
I’ve said this before and I’ll say it again: stocks rarely go up in a straight line. The S&P 500 has seen five pullbacks of at least 5% since March 2009, none of which ultimately prevented the market from continuing upward. This latest 8.7% drop from the April 23 peak may prove no different than the others.
The final topic I’ve reflected upon is Greece. Before the big plunge, the S&P 500 was already down on concerns about Greek debt problems and the stability of the Euro zone.
I’ve avoided talking about Greece in past weeks simply because I was never that concerned about the situation to begin with. Greece’s economy is just 2.3% the size of the U.S. economy. A default on Greece’s debt would not be big enough to derail the global economy or topple any major financial institutions in the U.S. That said, if a Greek default causes a major bank in, say, Germany to fail then all bets are off.
Still, even if Euro zone economies stagnate for years, the global economy is not highly reliant on them. Only 13.6% of U.S. exports go to Euro zone countries and only 12.7% of our imports come from the Euro zone. Europe’s economy is also of little threat to Asian economies, which are leading the world’s economic recovery. This is not to say that there wouldn’t be any global economic consequences of a Greek default, but I don’t think pain and terror would spread across the globe the way it did following the Lehman Brothers bankruptcy in 2008.
That’s all for this week. Thanks for reading and keep those comments and questions coming!
Peter Lazaroff, Investment Analyst
www.acrinv.com
In case you haven’t heard, market indexes dropped precipitously in a matter of minutes last Thursday on basically no fresh news (unless you count the reports that a new Pampers diaper made by Procter & Gamble is causing rashes).
The first conclusion I’ve come to is that last Thursday’s market action clearly demonstrates the inherent risks of our increasingly automated stock market.
High-frequency traders account for 50% to 70% of daily trading volume and, thus, these computerized trading systems provide gobs of liquidity in a normal market. But when the high-frequency crowd jumped ship last Thursday, they took their liquidity with them. I don’t think this right or wrong, fair or unfair. However, I will remember this event the next time I hear someone argue that the “constant” liquidity these computerized trading systems provide justifies their grab-every-fractional-cent-in-sight nature.
Another conclusion I have reached in the aftermath of the “flash crash” is that while human error and computer glitches are accused of being the primary culprits for the epic freefall, I think in some sense the market had been craving a sell-off.
In my April 22 post I suggested that the market would take a breather once earnings season slowed down. There is nothing wrong with sentiment growing bullish, but it’s a problem when markets are willing to shrug off just about any bad news. The bright side of a sharp market reversal like last week’s is that the jubilation dissipates and investors more soberly assess the potential risks at hand.
I’ve said this before and I’ll say it again: stocks rarely go up in a straight line. The S&P 500 has seen five pullbacks of at least 5% since March 2009, none of which ultimately prevented the market from continuing upward. This latest 8.7% drop from the April 23 peak may prove no different than the others.
The final topic I’ve reflected upon is Greece. Before the big plunge, the S&P 500 was already down on concerns about Greek debt problems and the stability of the Euro zone.
I’ve avoided talking about Greece in past weeks simply because I was never that concerned about the situation to begin with. Greece’s economy is just 2.3% the size of the U.S. economy. A default on Greece’s debt would not be big enough to derail the global economy or topple any major financial institutions in the U.S. That said, if a Greek default causes a major bank in, say, Germany to fail then all bets are off.
Still, even if Euro zone economies stagnate for years, the global economy is not highly reliant on them. Only 13.6% of U.S. exports go to Euro zone countries and only 12.7% of our imports come from the Euro zone. Europe’s economy is also of little threat to Asian economies, which are leading the world’s economic recovery. This is not to say that there wouldn’t be any global economic consequences of a Greek default, but I don’t think pain and terror would spread across the globe the way it did following the Lehman Brothers bankruptcy in 2008.
That’s all for this week. Thanks for reading and keep those comments and questions coming!
Peter Lazaroff, Investment Analyst
www.acrinv.com
Daily Insight: Small Business Optimism, Consumer Confidence and The Killer Crossover
U.S. stocks were unable to build upon Monday’s powerful snap-back as concerns that the Chinese will further tighten lending requirements weighed on the basic materials and energy sectors and doubts began to surface over the effectiveness of Europe’s bailout plan.
Commodity-related (basic materials and energy) have been a play on both massive monetary easing and Chinese stimulus, and now that one seems to be going by the wayside these sectors were yesterday’s worst-performers. Of the 10 major sectors, utility and consumer discretionary shares were the only groups up on the day.
The $38 billion 3-yr auction went very well as buyers stormed in. The bid-to-cover (measure of demand) came in at a near-record of 3.27, and all for 1.41%.
The Chinese stock market is worth watching as it has been a leading indicator for the direction of the S&P 500 over the past two years (only exception being a six-week period last summer). That market is now officially in bear market territory again as the Shanghai Exchange is down 20% from its most recent peak.
So the Shanghai has had two cyclical bull markets (in a secular bear) over the past 18 months – the rallies incited by the government’s very aggressive stimulus package, and the reversals on the talk of and now actual reining in of that policy. The Shanghai had plunged 72% from October 2007 peak to the November 2008 trough. Currently, the index remains 56% below its record high. We’re watching the folly of the most aggressive Keynesian experiment in history and insaniac monetary policy.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Commodity-related (basic materials and energy) have been a play on both massive monetary easing and Chinese stimulus, and now that one seems to be going by the wayside these sectors were yesterday’s worst-performers. Of the 10 major sectors, utility and consumer discretionary shares were the only groups up on the day.
The $38 billion 3-yr auction went very well as buyers stormed in. The bid-to-cover (measure of demand) came in at a near-record of 3.27, and all for 1.41%.
The Chinese stock market is worth watching as it has been a leading indicator for the direction of the S&P 500 over the past two years (only exception being a six-week period last summer). That market is now officially in bear market territory again as the Shanghai Exchange is down 20% from its most recent peak.
So the Shanghai has had two cyclical bull markets (in a secular bear) over the past 18 months – the rallies incited by the government’s very aggressive stimulus package, and the reversals on the talk of and now actual reining in of that policy. The Shanghai had plunged 72% from October 2007 peak to the November 2008 trough. Currently, the index remains 56% below its record high. We’re watching the folly of the most aggressive Keynesian experiment in history and insaniac monetary policy.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Tuesday, May 11, 2010
Daily Insight: Europe's Poker Face, The Unlimited ATM and Today's Data
U.S. stocks recouped about 40% of the prior week’s losses as the market surged following European policymakers’ announcement they’ll go “all in” with regard to bailing out Greece and attempting to contain what sure appears to be a debt contagion.
Industrial, financial and consumer discretionary stocks definitely liked the news – all were up more than 5% for the session. Tech and basic material stocks rallied more than 4%. Energy shares were up more than 3%. Even the worst-performing group during the session, telecoms, managed a 2.4% gain.
“All in.” I heard, or read, someone refer to it this way; that’s a great analogy. We are after all talking about a game of poker here; if the market gets a sense that the EU is bluffing, they’ll go right at the throats of the weakest sovereigns. The stronger governments of German and France are definitely “all in,” the IMF is “all in,” and the ECB may or may not be “all in” – they haven’t yet expressed just how aggressive they’ll be buying up government and private debt as they try to avert what could have turned into a run on southern European banks.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Industrial, financial and consumer discretionary stocks definitely liked the news – all were up more than 5% for the session. Tech and basic material stocks rallied more than 4%. Energy shares were up more than 3%. Even the worst-performing group during the session, telecoms, managed a 2.4% gain.
“All in.” I heard, or read, someone refer to it this way; that’s a great analogy. We are after all talking about a game of poker here; if the market gets a sense that the EU is bluffing, they’ll go right at the throats of the weakest sovereigns. The stronger governments of German and France are definitely “all in,” the IMF is “all in,” and the ECB may or may not be “all in” – they haven’t yet expressed just how aggressive they’ll be buying up government and private debt as they try to avert what could have turned into a run on southern European banks.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Thursday, May 6, 2010
Daily Insight: Oil Slick, Mortgage Apps, Jobs Picture and Service-Sector
The headwinds of European debt concerns and the evaporation of Chinese stimulus continues to assault the markets, although the major indices held in there pretty well considering the drag the Eurozone is going to put on global growth. The run, well maybe a jog for now, for safety persists as Treasury securities recorded a second-straight session of meaningful gain.
The dollar rallied as the euro got slammed again -- pretty much shaping up as our commentary suggested would be the case via the March 24 letter entitled Can the Dollar Rally Continue? (archived on the website) – as even ECB council member Axel Weber acknowledged that Greece’s fiscal crisis is threatening “grave contagion effects.” He’s got it partially right at least, it’s just not the Greek budget but the entire entitlement-centric system is crumbling, and another EU banking crisis is not out of the question. To repeat, so-called rescue packages can ease the concern on a day-to-day, even week-to-week basis, but eventually the Eurozone will have to ultimately face reality; their system is not sustainable.
Eight of the 10 major S&P 500 industry groups decline for the session, led by energy, industrials and consumer discretionary shares. The traditional areas of safety out-performed the market for a second day – health-care and consumer staples were the only groups in the black. Naturally, with this weakness, volume has begun to pick up, hitting levels that we haven’t seen with this consistency since early in 2009.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
Acropolis Investment Management
www.acrinv.com
The dollar rallied as the euro got slammed again -- pretty much shaping up as our commentary suggested would be the case via the March 24 letter entitled Can the Dollar Rally Continue? (archived on the website) – as even ECB council member Axel Weber acknowledged that Greece’s fiscal crisis is threatening “grave contagion effects.” He’s got it partially right at least, it’s just not the Greek budget but the entire entitlement-centric system is crumbling, and another EU banking crisis is not out of the question. To repeat, so-called rescue packages can ease the concern on a day-to-day, even week-to-week basis, but eventually the Eurozone will have to ultimately face reality; their system is not sustainable.
Eight of the 10 major S&P 500 industry groups decline for the session, led by energy, industrials and consumer discretionary shares. The traditional areas of safety out-performed the market for a second day – health-care and consumer staples were the only groups in the black. Naturally, with this weakness, volume has begun to pick up, hitting levels that we haven’t seen with this consistency since early in 2009.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
Acropolis Investment Management
www.acrinv.com
Wednesday, May 5, 2010
Daily Insight: Driven to the Shadows, Lost in Translation and Pending Home Sales
U.S. stocks took a little bit of a beating yesterday, as the market has run into the headwinds of EU debt troubles and China’s early-stage unwind of their stimulus measures via the tightening of lending standards. The broad market has dropped 3.5% over the past seven sessions, but then again it had rallied 80% from the March 9, 2009 13-year low.
As we’ve been touching on, the Chinese are in the process of reining in their stimulus efforts for fear of further inflating the housing market. Traders on the Shanghai Exchange got their first chance to react this week (they were closed on Monday) and pushed the index down another 1.2% to a seven-month low. Also in the region, the Aussie central bank hiked their benchmark interest rate for the fifth time in six months – man, it would be nice to have short-term rates at 4.25%. But maybe a little too much too fast Aussie’s, looks like you’ve been tricked into thinking the Pacific growth story is sustainable; we’ll see as the Chinese lay off the nitrous.
The EU sovereign debt crisis also played a role in spooking traders after Germany’s economic minister added uncertainty to the situation when he stated the $140 billion EU/IMF rescue was not intended to cover Greece’s borrowing needs for the next three years, but possibly just 18 months – more on this below.
Market sentiment will continue to ebb and flow because the EU government debt problem isn’t going away. Talks, plans and even implementations of bailouts may ease investor concerns in the short term but the reality of dealing with these structural issues will be harsh and felt by the global economy.
Basic material shares led the major industry groups lower, with industrials and tech also down big. The relative winners were traditional areas of safety – health-care and consumer staples – but they also closed lower as all 10 major groups declined.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
Acropolis Investment Management
www.acrinv.com
As we’ve been touching on, the Chinese are in the process of reining in their stimulus efforts for fear of further inflating the housing market. Traders on the Shanghai Exchange got their first chance to react this week (they were closed on Monday) and pushed the index down another 1.2% to a seven-month low. Also in the region, the Aussie central bank hiked their benchmark interest rate for the fifth time in six months – man, it would be nice to have short-term rates at 4.25%. But maybe a little too much too fast Aussie’s, looks like you’ve been tricked into thinking the Pacific growth story is sustainable; we’ll see as the Chinese lay off the nitrous.
The EU sovereign debt crisis also played a role in spooking traders after Germany’s economic minister added uncertainty to the situation when he stated the $140 billion EU/IMF rescue was not intended to cover Greece’s borrowing needs for the next three years, but possibly just 18 months – more on this below.
Market sentiment will continue to ebb and flow because the EU government debt problem isn’t going away. Talks, plans and even implementations of bailouts may ease investor concerns in the short term but the reality of dealing with these structural issues will be harsh and felt by the global economy.
Basic material shares led the major industry groups lower, with industrials and tech also down big. The relative winners were traditional areas of safety – health-care and consumer staples – but they also closed lower as all 10 major groups declined.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
Acropolis Investment Management
www.acrinv.com
Tuesday, May 4, 2010
Daily Insight: Spend It Like You Got It and Factories Humming
U.S. stocks were able to shake off some market weakness overseas and China’s continued pull-back of stimulus measures, as they tighten lending standards, to end two-sessions of decline on Monday. The three major indices gained back most of Friday’s losses.
Certainly a bang-up manufacturing report helped to ease some concerns but the Commerce Department showed the income/spending ratio deteriorated again, which means spending is being stolen from the future. These reports pretty much offset each other, if one is thinking beyond the here and now. More on this data below the jump.
A reader expressed surprise that I didn’t touch on the attempted car bombing in Times Square in Monday’s letter, particularly since I’ve spent several years talking about the importance of geopolitical risks/domestic security with regard to economic growth. The markets found it unnecessary to put in any additional terrorist premium as futures trading was not affected in the least, so I decided not to use space on the topic. However, while we’re on it now, even though it didn’t seem like a serious explosive device, one would think it to be a large enough act to raise concern of the larger issue of terrorism, but no worries for this market…yet. When risks lurk around many corners, it’s only a matter of time before some form jumps out and scares the complacency out of everyone.
Industrials, consumer discretionary (spend it like you got it), and financials led the market higher. The S&P 500 index that tracks basic material shares was the only group down for the session.
Click here to read the rest of the Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
Certainly a bang-up manufacturing report helped to ease some concerns but the Commerce Department showed the income/spending ratio deteriorated again, which means spending is being stolen from the future. These reports pretty much offset each other, if one is thinking beyond the here and now. More on this data below the jump.
A reader expressed surprise that I didn’t touch on the attempted car bombing in Times Square in Monday’s letter, particularly since I’ve spent several years talking about the importance of geopolitical risks/domestic security with regard to economic growth. The markets found it unnecessary to put in any additional terrorist premium as futures trading was not affected in the least, so I decided not to use space on the topic. However, while we’re on it now, even though it didn’t seem like a serious explosive device, one would think it to be a large enough act to raise concern of the larger issue of terrorism, but no worries for this market…yet. When risks lurk around many corners, it’s only a matter of time before some form jumps out and scares the complacency out of everyone.
Industrials, consumer discretionary (spend it like you got it), and financials led the market higher. The S&P 500 index that tracks basic material shares was the only group down for the session.
Click here to read the rest of the Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
Monday, May 3, 2010
April 2010 Recap
Market volatility picked up in April as investors grew concerned about the indebtedness of several European countries, a major oil spill in the Gulf of Mexico, and Goldman Sachs’ legal mess. Despite the concerns, the S&P 500 managed to post a 1.58 percent gain for the month.
Corporate earnings reports helped offset some of the negative sentiment, with 77.9 percent of companies in the S&P 500 that have reported beating expectations. According to Bloomberg, earnings estimates for companies in the S&P 500 increased 10 percent on average in April, the largest monthly increase since at least 2006. Earnings have certainly benefited from low expectations and year-ago comparisons, but this era is rapidly coming to a close. On the bright side, positive earnings results and outlooks with little price movement allow the fundamentals underlying the market to catch up to the price action.
A bigger reason for domestic equities’ April performance was the Fed’s decision to keep its benchmark interest rate at a record low to help keep the economy from dipping back into a recession. The Fed continues to paint a “Goldilocks” scenario for the economy in which growth is not too hot and not too cold. Although there are signs of prices picking up in the production pipeline, consumer prices have been showing deflationary signs in recent months. In addition, it’s very unusual for the Fed to tighten until the unemployment rate goes down.
Small caps continued to outperform large caps during April. Smaller firms tend to thrive in low interest rate environments, which allow them to borrow cheaply to fuel their growth. Additionally, new net inflows into small cap funds may also be providing support to small cap stocks, with the four-week moving average inflows topping $701 million in April according to Lipper FMI data. Small caps began the year with outflows exceeding $144 million.
The best performing S&P 500 sector was Consumer Discretionary, which benefited from improving sales data and consumer confidence. Consumer Discretionary and Industrials, which has benefited from global economic improvement, are the top performing sectors year-to-date. Healthcare stocks were the worst performers in April as the sector’s earnings reports exposed the bottom-line effects of the new U.S. healthcare legislation.
Volatility, as measured by the VIX Index, perked up 25 percent. For a market that seemed overly complacent in recent months, the return of volatility can be interpreted as a healthy development. The uptick in volatility coincided with several negative events including fraud charges by the SEC against Goldman Sachs, continued Eurozone debt problems, financial regulation concerns, and tightening by numerous foreign central banks.
Problems in Greece, Spain, and Portugal sent investors fleeing to the safety of U.S. assets. As a result, Treasuries rallied and the dollar strengthened. Mortgages followed Treasury yields lower, with spreads more or less unchanged, as the market yawned in response to the Fed’s MBS-buying program coming to an end. Meanwhile, Commercial MBS gained despite widespread worries about rising commercial defaults and high-yield bonds add to a record run that began in late 2008.
Overall, investors continue to show desire to put cash that yields nothing to work, but they are hesitant to stick with riskier bets in the face of volatility. Investors have plenty of headwinds ahead including the removal of monetary and fiscal stimulus, interest rate uncertainty, weak housing market, national debt burdens, Chinese economic and policy questions, expiration of the Bush tax cuts, and the growth-restraining effects of the rapid rise in commodity prices.
Peter Lazaroff, Investment Analyst
Acropolis Investment Management
www.acrinv.com
Corporate earnings reports helped offset some of the negative sentiment, with 77.9 percent of companies in the S&P 500 that have reported beating expectations. According to Bloomberg, earnings estimates for companies in the S&P 500 increased 10 percent on average in April, the largest monthly increase since at least 2006. Earnings have certainly benefited from low expectations and year-ago comparisons, but this era is rapidly coming to a close. On the bright side, positive earnings results and outlooks with little price movement allow the fundamentals underlying the market to catch up to the price action.
A bigger reason for domestic equities’ April performance was the Fed’s decision to keep its benchmark interest rate at a record low to help keep the economy from dipping back into a recession. The Fed continues to paint a “Goldilocks” scenario for the economy in which growth is not too hot and not too cold. Although there are signs of prices picking up in the production pipeline, consumer prices have been showing deflationary signs in recent months. In addition, it’s very unusual for the Fed to tighten until the unemployment rate goes down.
Small caps continued to outperform large caps during April. Smaller firms tend to thrive in low interest rate environments, which allow them to borrow cheaply to fuel their growth. Additionally, new net inflows into small cap funds may also be providing support to small cap stocks, with the four-week moving average inflows topping $701 million in April according to Lipper FMI data. Small caps began the year with outflows exceeding $144 million.
The best performing S&P 500 sector was Consumer Discretionary, which benefited from improving sales data and consumer confidence. Consumer Discretionary and Industrials, which has benefited from global economic improvement, are the top performing sectors year-to-date. Healthcare stocks were the worst performers in April as the sector’s earnings reports exposed the bottom-line effects of the new U.S. healthcare legislation.
Volatility, as measured by the VIX Index, perked up 25 percent. For a market that seemed overly complacent in recent months, the return of volatility can be interpreted as a healthy development. The uptick in volatility coincided with several negative events including fraud charges by the SEC against Goldman Sachs, continued Eurozone debt problems, financial regulation concerns, and tightening by numerous foreign central banks.
Problems in Greece, Spain, and Portugal sent investors fleeing to the safety of U.S. assets. As a result, Treasuries rallied and the dollar strengthened. Mortgages followed Treasury yields lower, with spreads more or less unchanged, as the market yawned in response to the Fed’s MBS-buying program coming to an end. Meanwhile, Commercial MBS gained despite widespread worries about rising commercial defaults and high-yield bonds add to a record run that began in late 2008.
Overall, investors continue to show desire to put cash that yields nothing to work, but they are hesitant to stick with riskier bets in the face of volatility. Investors have plenty of headwinds ahead including the removal of monetary and fiscal stimulus, interest rate uncertainty, weak housing market, national debt burdens, Chinese economic and policy questions, expiration of the Bush tax cuts, and the growth-restraining effects of the rapid rise in commodity prices.
Peter Lazaroff, Investment Analyst
Acropolis Investment Management
www.acrinv.com
Daily Insight: Q1 GDP and Chicago PMI
U.S. stocks gave back nearly all of the prior two-session rebound on Friday as the broad market declined 2.51% for the week – the first meaningful pullback in 10 weeks. The Dow held just about the 11K mark, but slipped 1.75% for the week. The NASDAQ got thumped by 2.73% last week, but is still up 14% over the past three weeks. The broad market made a key reversal as it hit a new 19-month high, failed to hold that level, and dipped below the prior week’s close.
Financials led the declines, the group generally leads no matter the direction, falling more than double that of overall market. Tech, industrials and consumer discretionary shares rounded out the worst-performers. The S&P 500 index that tracks utilities shares was the sole gainer, up about 0.5%.
Greece struck a EU/IMF deal but it effectively ensures the country will remain a zombie as a huge percentage of its revenue will be necessary to pay these loans back – revenues that will already be depressed as its economy has become ultra-dependent on government spending. The Greek government also pushed out its schedule for getting the deficit within the 3%-of-GDP EU guideline – although “guideline” isn’t the correct word as budgetary rules are not enforced and can’t be based on the zone’s massive entitlement programs. They now say that the threshold will be met by 2014, previously stated to be achieved by 2012, but that’s highly unrealistic as well. The deal will involve direct loans to Greece, for now planned at $145 billion over three years with EU members on the hook for $80 billion of it.
Click here to read the full Daily Insight
Brent Vondera
www.acrinv.com
Financials led the declines, the group generally leads no matter the direction, falling more than double that of overall market. Tech, industrials and consumer discretionary shares rounded out the worst-performers. The S&P 500 index that tracks utilities shares was the sole gainer, up about 0.5%.
Greece struck a EU/IMF deal but it effectively ensures the country will remain a zombie as a huge percentage of its revenue will be necessary to pay these loans back – revenues that will already be depressed as its economy has become ultra-dependent on government spending. The Greek government also pushed out its schedule for getting the deficit within the 3%-of-GDP EU guideline – although “guideline” isn’t the correct word as budgetary rules are not enforced and can’t be based on the zone’s massive entitlement programs. They now say that the threshold will be met by 2014, previously stated to be achieved by 2012, but that’s highly unrealistic as well. The deal will involve direct loans to Greece, for now planned at $145 billion over three years with EU members on the hook for $80 billion of it.
Click here to read the full Daily Insight
Brent Vondera
www.acrinv.com
Friday, April 30, 2010
Daily Insight: Jobless Claims and FOMC is FIDO
U.S. stocks rose again on Thursday, helping the S&P 500 erase more of Tuesday’s slide. – a 1% pick up today will compete the circle. Of the major indices, the NASDAQ gained the most, followed by the S&P500 and then the Dow.
The German Parliament came to consensus on supporting their $11 billion share of the Greek rescue package, which will prove to be the first in a series of installments over the intermediate term. Optimism over the corporate-profit story also goosed stocks, along with Federal Reserve Board nominees that are unlikely to put pressure on Bernanke to tighten anytime before the unemployment rate hits 8% -- more on that below.
Financials, which led the market lower on Monday and Tuesday, was the top-performing sector for a second-straight session. Industrials and consumer discretionary rounded out the top spots. Energy and utility shares were the worst-performing groups, but all 10 majors gained ground on Thursday.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
The German Parliament came to consensus on supporting their $11 billion share of the Greek rescue package, which will prove to be the first in a series of installments over the intermediate term. Optimism over the corporate-profit story also goosed stocks, along with Federal Reserve Board nominees that are unlikely to put pressure on Bernanke to tighten anytime before the unemployment rate hits 8% -- more on that below.
Financials, which led the market lower on Monday and Tuesday, was the top-performing sector for a second-straight session. Industrials and consumer discretionary rounded out the top spots. Energy and utility shares were the worst-performing groups, but all 10 majors gained ground on Thursday.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Wednesday, April 28, 2010
Daily Insight: Richmond Booms, Housing Hesitation, Euro Trash, and The New Vigilante
U.S. stocks took a little hit on Tuesday after Portugal and Greece had their credit ratings cut by S&P -- Greece thrown to junk category and Portugal down two notches to A-as S&P stated the Portuguese government could struggle to stabilize it relatively high debt ratio through 2012.
I’m not sure whether it was the credit downgrades of Portugal and Greece, or the assault on Goldman Sachs by members of the Permanent Subcommittee on Investigations -- a circus event that showed these senators have no clue how market-making or hedging works. Goldman is not a fiduciary no matter how many times a politician wants to paint them as such; they are a market maker, which means they’re on both sides of the trade. Not that the ignorance of the political class should come as a surprise, but maybe market participants are finally acknowledging that these are the same rubes creating upcoming regulations on the financial industry, regulations that will have ramifications well beyond Wall Street. Thus far the go-for-the-gusto market sentiment has blocked clear thinking but it is only a matter of time, the potential peril via this growing wave of populism-by-convenience will be recognized.
Are investors also awakening to the fact that the European debt problems are looking increasingly like contagion? European economies, heavily dependent on government expenditures, will run into additional growth problem no matter how they react to their debt issues, has to get everyone’s attention. If the EU countries in the target circle make the tough choices to get their public finances in some sort of order, then intense near-term and intermediate economic damage will result; if they don’t then higher interest rates and debt burdens will crush them both in the short and longer-terms – either way you look at it, Europe is going to work as a large drag on global growth.
It was a broad-based decline with all 10 major industry groups down. Financials and basic materials were the worst performers, with health-care and telecoms the relative winners.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
I’m not sure whether it was the credit downgrades of Portugal and Greece, or the assault on Goldman Sachs by members of the Permanent Subcommittee on Investigations -- a circus event that showed these senators have no clue how market-making or hedging works. Goldman is not a fiduciary no matter how many times a politician wants to paint them as such; they are a market maker, which means they’re on both sides of the trade. Not that the ignorance of the political class should come as a surprise, but maybe market participants are finally acknowledging that these are the same rubes creating upcoming regulations on the financial industry, regulations that will have ramifications well beyond Wall Street. Thus far the go-for-the-gusto market sentiment has blocked clear thinking but it is only a matter of time, the potential peril via this growing wave of populism-by-convenience will be recognized.
Are investors also awakening to the fact that the European debt problems are looking increasingly like contagion? European economies, heavily dependent on government expenditures, will run into additional growth problem no matter how they react to their debt issues, has to get everyone’s attention. If the EU countries in the target circle make the tough choices to get their public finances in some sort of order, then intense near-term and intermediate economic damage will result; if they don’t then higher interest rates and debt burdens will crush them both in the short and longer-terms – either way you look at it, Europe is going to work as a large drag on global growth.
It was a broad-based decline with all 10 major industry groups down. Financials and basic materials were the worst performers, with health-care and telecoms the relative winners.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
Tuesday, April 27, 2010
Daily Insight: Achtung Baby, Today's Data, CAT's Not All That
U.S. stocks held onto early-session gains for most of the session but eventually succumbed to a bit of weakness as Europe’s sovereign debt issues remained in focus and China appears willing to continue their pull-back of stimulus measures.
Stocks got off to a good start after Caterpillar’s results were released during pre-market trading but the results didn’t justify the reaction, unless you’re talking about the go-for-the-gusto behavior of this stock market that has people ignoring the signs of weakness. (If you want more specifics on these results, I’ll post some comments at the end of the letter.) But the recent weakness in Chinese stocks, off 8% in 10 sessions as traders fear removal of the stimulus measures, and a spreading contagion in Europe was just enough to sap momentum late in the session.
Consumer discretionary, industrial and basic materials were the only three of the major industry groups to close higher yesterday. Consumer discretionary shares remain on fire, up 125% from the March 2009 low and up 25% since February as the momentum trade comes in. Are you kidding me? These shares are now just 10% below their all-time high hit in 2007, but this time the unemployment rate is 10% vs. 5%, incomes ex-transfer payments are down instead of rising and the cash-out refi is dead. Performance chasers don’t care about these realities; their actions are blind to anything but quick money. Some things never change, and never will.
Financials led the decliners, with health care and utility shares the next worst performers.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
Stocks got off to a good start after Caterpillar’s results were released during pre-market trading but the results didn’t justify the reaction, unless you’re talking about the go-for-the-gusto behavior of this stock market that has people ignoring the signs of weakness. (If you want more specifics on these results, I’ll post some comments at the end of the letter.) But the recent weakness in Chinese stocks, off 8% in 10 sessions as traders fear removal of the stimulus measures, and a spreading contagion in Europe was just enough to sap momentum late in the session.
Consumer discretionary, industrial and basic materials were the only three of the major industry groups to close higher yesterday. Consumer discretionary shares remain on fire, up 125% from the March 2009 low and up 25% since February as the momentum trade comes in. Are you kidding me? These shares are now just 10% below their all-time high hit in 2007, but this time the unemployment rate is 10% vs. 5%, incomes ex-transfer payments are down instead of rising and the cash-out refi is dead. Performance chasers don’t care about these realities; their actions are blind to anything but quick money. Some things never change, and never will.
Financials led the decliners, with health care and utility shares the next worst performers.
Click here to read the full Daily Insight
Brent Vondera, Senior Analyst
www.acrinv.com
Monday, April 26, 2010
Preference for Value
We are frequently asked why we favor ‘value’ stocks over ‘growth’ stocks. In this article, we attempt to define growth and value stocks with two examples, provide an overview of the academic underpinnings that support value investing, explain why we believe that value investing is more intuitive than growth investing and conclude with why we still maintain growth stocks in our client portfolios.
Click here to view the full article.
David Ott
www.acrinv.com
Click here to view the full article.
David Ott
www.acrinv.com
Daily Insight: The Great Unwind, Durable Goods and New Home Sales
U.S. stocks were able to shake off the increasingly early signs of government debt-related contagion in Europe as a great durable goods orders report and a bounce in new home sales – albeit from at least a 47-year low – helped the market focus on things more positive. The gains among the benchmark indices made for the fourth winning session this week and the 11th of the past 13.
Energy shares were the clear leader, up 2.29% on Friday, as the price of crude has quickly returned to $85/barrel. Eight of the 10 major industry groups closed higher. Telecoms and consumer staples were the only groups down on the session.
For the week, the S&P 500 added 2.10%; the Dow rose 1.68%; and the NASDAQ Composite gained 1.97%. The S&P 400 (mid cap) rallied 3.56% and the Russell 2000 (small cap) jumped 3.82%. The S&P 500 has now rallied 80% from the nefarious March 9, 2009 low of 666.
Greek government-bonds continue to get hit as Germany plays a game of chicken – a game Greece is going to win, but only in the short term. Germans don’t like bailing Greece out of their troubles because they’ll be on the hook for most of the cost; to begin with, Germans seemed fairly reluctant to go with this Euro System anyway, unwilling to give up their Deutsche Mark all the way up to the Euro’s initial adoption in 1999. Greek 10-year bond spreads have hit 626 basis points (that’s 6.26 percentage points above German bunds), which means a yield of 9.03%.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
Energy shares were the clear leader, up 2.29% on Friday, as the price of crude has quickly returned to $85/barrel. Eight of the 10 major industry groups closed higher. Telecoms and consumer staples were the only groups down on the session.
For the week, the S&P 500 added 2.10%; the Dow rose 1.68%; and the NASDAQ Composite gained 1.97%. The S&P 400 (mid cap) rallied 3.56% and the Russell 2000 (small cap) jumped 3.82%. The S&P 500 has now rallied 80% from the nefarious March 9, 2009 low of 666.
Greek government-bonds continue to get hit as Germany plays a game of chicken – a game Greece is going to win, but only in the short term. Germans don’t like bailing Greece out of their troubles because they’ll be on the hook for most of the cost; to begin with, Germans seemed fairly reluctant to go with this Euro System anyway, unwilling to give up their Deutsche Mark all the way up to the Euro’s initial adoption in 1999. Greek 10-year bond spreads have hit 626 basis points (that’s 6.26 percentage points above German bunds), which means a yield of 9.03%.
Click here to read the full Daily Insight.
Brent Vondera, Senior Analyst
www.acrinv.com
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