Friday, August 16, 2013

6 Gut checks pre open


6 gut checks before the stock market's opening bell


By Shawn Langlois

 

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Good morning.

No doubt, it's been a lousy couple of days, punctuated by Thursday's swift rise in yields. But don't act so surprised. "The Treasury selloff ... has been telegraphed since the Age of Pericles," according to blogger Joe "Upside Trader" Donohue .

Instead, just pull up one of those fake lap pillows , think more globally (Nigeria? ) and take a deep, cleansing yoga breath.

While rising rate environments can occasionally trip up equities (see chart of the day), the overwhelming evidence suggests that they don't. In fact, global stocks have averaged gains of about 17% annually during the 15 periods of rising 10-year Treasury yields, trouncing their long-term average by some eight percentage points.

Key market gauges: Some weird action in China saw the Shanghai Composite  lose 1%, then jump as much as 5.6%, before finally settling down in flat territory. Wrong orders and monetary-easing scuttlebutt were thrown out there as possible causes . The rest of Asia  closed mostly in the red, while New Zealand stocks were rattled by a big shaker .

Futures on the Dow  and the S&P  aren't doing much to convince us that a rebound from a back-to-back triple-digit loss is on the way.

Gold  is up a touch today, putting it on pace to finish the week up around 4%. It's been an even better stretch for silver , which is heading toward a 12% pop over the past five days. Read: Metal stocks .

The economy: The best chance to salvage a dismal week of data comes in the form of housing starts, which are due out at 8:30 a.m. Eastern. Economists project the number climbing to an annual rate of 915,000 in July, from 836,000 in June, while building permits are seen rising to 953,000 from 918,000 in June. We'll also get the University of Michigan/Thomson Reuters preliminary consumer sentiment index as well as some productivity numbers. Read: Spotlight on the economy .

The buzz: Dell  sprung up out of nowhere with its earnings report late Thursday, It posted a sharp drop in profit  that's keeping the stock under pressure premarket, even though the results weren't quite as bad as expected.

Both Applied Materials  and Nordstrom are getting beaten up a bit after they handed in lackluster results, while Aspen Technology  is roaring 11% higher premarket thanks to a boost from its numbers.

Walmart , after its closely-watched earnings disappointment  cast shadows over the broader market Thursday, holds the top spot on the StockTwits trending list, followed closely by BlackBerry  and Target .

A story handing Steve Jobs's "the world's greatest living innovator" crown to Tesla's  Elon Musk -- whose "innovative brilliance spans the worlds of physical and digital goods" -- is climbing the charts on Reddit .

Airplane hammocks.

— Bored Elon Musk (@BoredElonMusk) August 15, 2013

The chart of the day: As mentioned earlier, rising rate environments are generally good for stocks, but not always. With this chart, the AllianceBernstein blog illustrates what happens when things don't go so well. The worst drop took place in the middle of the 1971-1975 rising-rate period (green line), when the oil embargo ravaged stocks. By the end of the cycle, though, they had recovered to finish up 11%. During the 1993-1994 Fed tightening spree (dark blue line), stocks closed slightly higher. Only the 1989-1990 savings-and-loan kept stocks in red territory.

AllianceBernstein
In other words, even the extreme examples aren't so bad and "with the U.S. economic recovery still fragile and inflation quiescent, we see little reason to expect a repeat of the worst scenarios -- barring any unforeseeable financial or geopolitical crises," wrote Chris Marx, senior portfolio manager of global equities.

The call of the day. It's been almost two months since Dennis Gartman occupied this space with his call about stocks going "a great deal higher." Well, he's singing a different tune today. "The market is telling me that I'm wrong. I'm going to the sidelines," he told CNBC after the close on Thursday. While some of his moves have been working, he acknowledged that "my trades in the stock market? Terrible. I want out." He said he'll reassess the whole thing after Labor Day, and so should you.

Random reads: So much for diplomatic immunity. Romanian princess arrested for her role in an Oregonian cockfighting ring .

Oh, that's where I left it. Scientology's 'alien space cathedral and spaceship landing pad'  in the New Mexico desert

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If it looks like a dog, and barks like a dog, it probably isn't an African lion .

The glamorous life of the Ku Klux Klan. Somehow, this is exactly how I imagined it .

Mapping inequality in Manhattan .

Another shark attack, this time it's a snorkeling German in Maui . But it's worth the risk to score a wave like this ridiculous left . Here's some footage captured by drones.

Need to Know starts early and is updated as needed until the opening bell, but sign up here  to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise  on Twitter.

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