Need to Know
APRIL 11, 2013
6 gut checks before the stock market's opening bell
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Good morning.
It's April and Wall Street is setting record highs on low volume. Maybe you shouldn't overthink it.
Since 1971, April has been the second best month for the S&P 500 and the fourth best for the Nasdaq, according to the Stock Trader's Almanac .
Kevin Flynn at Avalon Asset Management doesn't believe stocks are cheap, doubts the strength of the economic recovery and is pretty skeptical about earnings.
But in a post on Seeking Alpha , he argues that the main ingredients for the current rally are calendar-based: The market last saw an April stumble in 2005; it's the beginning of earnings season, and "the boxes are programmed and ready to buy, and traders are ready to follow them."
Meanwhile, traders have tended in recent years to read too much into market overshoots in either direction, when in fact "it's just a trade," he said.
"It isn't earnings-based, it isn't macro-based, it isn't based on the economy or housing or U.S. oil, or whatever other story might get passed around to justify the current momentum trade," Flynn says. "It's just a bet that nothing big enough comes up ... to derail this week's train."
Key market gauges: U.S. stock index futures were flat to a shade higher a day after the S&P 500 and Dow industrials set record highs.
European shares overcame an early wobble to push higher, while Japan's Nikkei Stock Average pushed to its highest level since July 2008 in the wake of the Bank of Japan's aggressive easing policy.
The dollar continues to hover below the 100-yen level.
Bank of Japan Gov. Haruhiko Kuroda on Thursday attempted to soothe qualms over potentially negative side effects of the bank's aggressive easing strategy, telling reporters it could, for example, adjust policy if it saw an asset bubble taking shape but inflation hadn't yet hit its new inflation target of 2%.
The economy: The number of people applying the first time for unemployment benefits dropped by a larger-than-expected 42,000 in the week ended April 6 to 346,000, the Labor Department said -- the lowest level in three weeks.
The data is rarely ignored, but might get more attention than usual after unexpectedly spiking to a four-month a week earlier. The new figures are likely to be taken as a sign the earlier spike was the result of seasonal disruptions that tend to surround the Easter holiday and spring break.
Separately, March import prices dropped 0.5% thanks to lower fuel costs.
Meanwhile, Philadelphia Fed President Charles Plosser reiterated his call to start scaling back the Fed's bond-buying program.
The buzz: Microsoft Corp. fell in premarket action after Goldman Sachs downgraded shares of the software maker from neutral to sell.
Meanwhile, a 13.9% drop in first-quarter personal-computer shipments is making for some ugly premarket action for computer makers like Hewlett-Packard Co. , which is down more than 5%.
Disaffection with Windows 8 and the rising appeal of tablets and smartphones are all getting part of the blame for the weak PC sales. And 24/7 Wall St. wonders if the data also makes a proposed takeover of Dell Inc. less attractive.
The most interesting thing about the latest Fed minutes may be the snafu that saw the summary sent early on Monday to congressional staffers, trade groups, and, as it was subsequently learned, banks, hedge funds and law firms . The Fed kerfuffle is the top business story on Google business news and it looks like the central bank has some explaining to do .
J.C. Penney Co. continues to trend on StockTwits . Activist investor Bill Ackman, who had vociferously pushed the retailer to hire Ron Johnson as CEO, told Women's Wear Daily he's "not going anywhere" , in his first public comments after the company ousted Johnson and replaced him with his predecessor. Ackman's Pershing Square Capital Management is Penney's biggest shareholder.
The chart of the day: Chris Kimble at the Kimble Charting Solutions blog uses the chart below to lay out the case that the dollar's rare rally versus the yen is good news for equity market bulls.
It's April and Wall Street is setting record highs on low volume. Maybe you shouldn't overthink it.
Since 1971, April has been the second best month for the S&P 500 and the fourth best for the Nasdaq, according to the Stock Trader's Almanac .
Kevin Flynn at Avalon Asset Management doesn't believe stocks are cheap, doubts the strength of the economic recovery and is pretty skeptical about earnings.
But in a post on Seeking Alpha , he argues that the main ingredients for the current rally are calendar-based: The market last saw an April stumble in 2005; it's the beginning of earnings season, and "the boxes are programmed and ready to buy, and traders are ready to follow them."
Meanwhile, traders have tended in recent years to read too much into market overshoots in either direction, when in fact "it's just a trade," he said.
"It isn't earnings-based, it isn't macro-based, it isn't based on the economy or housing or U.S. oil, or whatever other story might get passed around to justify the current momentum trade," Flynn says. "It's just a bet that nothing big enough comes up ... to derail this week's train."
Key market gauges: U.S. stock index futures were flat to a shade higher a day after the S&P 500 and Dow industrials set record highs.
European shares overcame an early wobble to push higher, while Japan's Nikkei Stock Average pushed to its highest level since July 2008 in the wake of the Bank of Japan's aggressive easing policy.
The dollar continues to hover below the 100-yen level.
Bank of Japan Gov. Haruhiko Kuroda on Thursday attempted to soothe qualms over potentially negative side effects of the bank's aggressive easing strategy, telling reporters it could, for example, adjust policy if it saw an asset bubble taking shape but inflation hadn't yet hit its new inflation target of 2%.
The economy: The number of people applying the first time for unemployment benefits dropped by a larger-than-expected 42,000 in the week ended April 6 to 346,000, the Labor Department said -- the lowest level in three weeks.
The data is rarely ignored, but might get more attention than usual after unexpectedly spiking to a four-month a week earlier. The new figures are likely to be taken as a sign the earlier spike was the result of seasonal disruptions that tend to surround the Easter holiday and spring break.
Separately, March import prices dropped 0.5% thanks to lower fuel costs.
Meanwhile, Philadelphia Fed President Charles Plosser reiterated his call to start scaling back the Fed's bond-buying program.
The buzz: Microsoft Corp. fell in premarket action after Goldman Sachs downgraded shares of the software maker from neutral to sell.
Meanwhile, a 13.9% drop in first-quarter personal-computer shipments is making for some ugly premarket action for computer makers like Hewlett-Packard Co. , which is down more than 5%.
Disaffection with Windows 8 and the rising appeal of tablets and smartphones are all getting part of the blame for the weak PC sales. And 24/7 Wall St. wonders if the data also makes a proposed takeover of Dell Inc. less attractive.
The most interesting thing about the latest Fed minutes may be the snafu that saw the summary sent early on Monday to congressional staffers, trade groups, and, as it was subsequently learned, banks, hedge funds and law firms . The Fed kerfuffle is the top business story on Google business news and it looks like the central bank has some explaining to do .
J.C. Penney Co. continues to trend on StockTwits . Activist investor Bill Ackman, who had vociferously pushed the retailer to hire Ron Johnson as CEO, told Women's Wear Daily he's "not going anywhere" , in his first public comments after the company ousted Johnson and replaced him with his predecessor. Ackman's Pershing Square Capital Management is Penney's biggest shareholder.
The chart of the day: Chris Kimble at the Kimble Charting Solutions blog uses the chart below to lay out the case that the dollar's rare rally versus the yen is good news for equity market bulls.
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Kimble Charting Solutions Blog
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The call of the
day: Japan's aggressive easing stance is seen reviving the yen
carry trade and potentially adding fuel to a global hunt for yield that's helped lift
equities and other so-called risky assets.
So how to play it? Investor Dennis Gartman of The Gartman Letter likes gold, but with a twist.
He told CNBC late Wednesday that money is set to go almost anywhere but Japan, while all currencies are set to gain against the yen. Commodities will also enjoy the in-flows, which has set the stage for a strategy of going long gold and shorting the Japanese currency.
"In equal amounts I'm buyer of the GLD and a seller the FXY , the ETF that tracks yen. That makes you long gold in yen," Gartman said.
Random reads: Too bloody for Beijing? Quentin Tarantino's "Django Unchained" was pulled from Chinese theaters on its opening day.
Miranda Kerr isn't leaving Victoria's Secret after all, says Vogue .
Daniel Loeb's first-quarter investor letter .
The upside of austerity? The Eurovision Song Contest , the event that helped inflict ABBA and Celine Dion on the world's eardrums, is facing cutbacks .
--William L. Watts
Follow on Twitter @wlwatts
So how to play it? Investor Dennis Gartman of The Gartman Letter likes gold, but with a twist.
He told CNBC late Wednesday that money is set to go almost anywhere but Japan, while all currencies are set to gain against the yen. Commodities will also enjoy the in-flows, which has set the stage for a strategy of going long gold and shorting the Japanese currency.
"In equal amounts I'm buyer of the GLD and a seller the FXY , the ETF that tracks yen. That makes you long gold in yen," Gartman said.
Random reads: Too bloody for Beijing? Quentin Tarantino's "Django Unchained" was pulled from Chinese theaters on its opening day.
Miranda Kerr isn't leaving Victoria's Secret after all, says Vogue .
Daniel Loeb's first-quarter investor letter .
The upside of austerity? The Eurovision Song Contest , the event that helped inflict ABBA and Celine Dion on the world's eardrums, is facing cutbacks .
--William L. Watts
Follow on Twitter @wlwatts
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