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5/17/2012 1:39 PM
America gets caught in the storm
By Charles Payne, CEO & Principal Analyst & WSS Research Team
It's a potent mix and it's taking a toll on the market. Slower growth in what had been the driving forces in the global economy the last few years, coupled with European woes and increased questions about policy in America, continue to pressure the market. Maybe it's even cruel that the market doesn't simply collapse instead of drawing out the anguish. Apple is leading the wide destruction of tech stocks which all belies the "hoopla" over Facebook's IPO. If we are down again today it would be 10 out of 11 sessions, the first time that has happened since July 2002.
I think the only catalyst to save the market now is news from the Fed or ECB - and that could happen sooner rather than later. News from CAT (slowing global machinery sales growth) hurting URI is creating an amazingly cheap stock, and the same narrative is being played out with other positions - the thing is cheap can get cheaper in a market with no conviction. It's a market where all the experts have given up on their work and look to a few hedge fund managers to lead the way. Of course there is a national malaise as well that drags on demand.
By David Urani
Okay, let's just start with the daily Europe freakout du-jour to get it out of the way. Bankia, the Spanish bank that was nationalized last week is seeing customers leave in droves, with $1.6 billion having been pulled out in the past week. In conjunction, Moody's is ready to downgrade 21 Spanish banks. Spain's IBEX 35 and Italy's FTSE MIB markets are each down more than 1%.
Now, let's get to the really pressing matter for the US markets today which is a dismal Philly Fed manufacturing report. We're just starting to get some substantive economic data rolling in for this month, and while it's been a bit lukewarm so far the Philly Fed has now chipped in with what I think most of us were bracing for; it is one of the first indicators that the whole mess in Europe is indeed dragging on our economy. The index fell to -5.8 for May from 8.5 in April, and of course a negative reading means activity contracted; the Street expectation was for it to rise to 10.0.
Looking into the components, the picture just isn't pretty as new orders, employment and prices received all fell into the negative zone. The one small bit of solace comes from shipments which inched up to 3.5 from 2.8 but remains not too far above 0.
Now anyone who thinks the US may have been isolated from Europe can start to second guess. One group who is apparently now second guessing the economy is the gold bugs. Check out the intraday move on gold right at 10:00 when the Philly Fed was released:
Not only is the money-under-the-mattress crowd getting antsy but more importantly all the metals traders know that Ben Bernanke is watching (it's the Philadelphia Federal Reserve's report, after all). That means QE and cheap money are even more likely to come back to the table. This is on the tail end of yesterday's Fed meeting in which more members saw monetary easing as an option in the event of a stalled recovery.
One final thought on initial jobless claims. The 370k reading was even with last week, but for me it actually means that claims increased. You see, the Department of Labor revises the prior week up every time, like clockwork. Just as last week's number was revised to 370k from 367k, this week's number is sure to be bumped up next week. Thus, I am 99% sure claims actually increased.
Is your mouth watering yet for the big FaceBook IPO tomorrow???
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