Rebound Continues But the Rubber Match is Still On
- Rebound continues, but the market is split in its enthusiasm.
- Late rally brings NASDAQ and growth back up to positive, barely.
- Buffett’s ‘itchy trigger finger’ helps market upside.
- Income jumps, wage growth modest: transfer payments (taxes) make the difference.
- Chicago PMI surges to 71.2. Impressive.
- Spending declines as consumers size up the inflation issues.
- Short sales decline to a 3 year low.
- Rebound continues but the rubber match is still on as new money hits for March and some window dressing to end February.
MARKET SUMMARY
Good data, ‘oracle’ comments help market higher but not across the board.
Where to start. Stock futures were up early in the morning as stocks were set to continue their run. The data and news did not hurt. Incomes jumped well past expectations (1.0% versus 0.3%), the so-called oracle Buffett said he has an ‘itchy trigger finger’ for more acquisitions, that they ‘have to’ occur. With Buffett shopping for buys and more good economic data, stocks took the pre-market gains and cashed them in on early upside.
Chicago PMI hit a half hour into trade with a 71.2 reading, a high not seen since summer 1988. That helped stocks a bit more, but not for long. They did not roll over and flop, but the highs were hit in the first half hour of trade. They then spent the time through lunch testing. NASDAQ and growth turned negative. SP500 flirted with the red zone but never hit it. Then an afternoon recovery took hold with SP500 and DJ30 (up nearly 100 points) leading the way. They were able to drag all of the indices but SOX positive by the close.
Positive, but hardly impressive for the growth indices as NASDAQ and SP600 traded virtually flat. A good recovery, but remember, they gave up good gains in order to make that recovery. Not really an equitable trade but I suppose it beats a failure to rebound.
All told the ‘rubber match’ continues with the indices, even the day leader DJ30 (+0.79%), still well below the February highs that are going to be very important as stocks continue to bounce in recovery after that tumble lower early last week.
TUESDAY
A few things on tap for Tuesday. First, Monday saw some window dressing in many areas and sectors. We talked with fund managers and traders seeing window dressing even out in emerging market funds. Second, the first of the month has seen new money come in for the past several months. Thus the market can show another pop as on Monday, and that might get SP500 within spitting range of its February peak at 1343 closing. That is where it starts to get more interesting as they say.
Plenty of bullishness continues to force bears to the market. Bloomberg ran an article today just on this topic. For now there are still plenty of skeptics and bears. The retail investor is still for the most part completely absent from the markets. That means there is still plenty of fuel for the upside as the bears join and the retailers come back in. At some point they are all converts and the ammunition is gone. Maybe before that the dollar crashes and inflation explodes. Interesting indeed.
Nearer term it is the NASDAQ gap down point and the February peaks that pose the most important roadblocks or maybe a better way to put it is gates to further upside. They will either open or slam shut. What we are watching for is how NASDAQ reacts at the gap point and how financials respond when they hit their February highs (remember the regional banks are almost there already). Not convinced they will make it through. Lower highs here would set up another pullback and this one might be deeper.
Might be. All tests to this point have been just that, tests. Small tests. They buyers continue to lob money at the market on dips, and with March topping the calendar Tuesday, expect more money lobbed into stocks. After that then we see if the market has any strength. Of course if money does not come in that is a story in itself as the market will struggle or hold position versus rising as has been the typical new month action.
Jon Johnson
