Economic Data Cannot Push US Stocks Higher
- Solid US data tries to provide stocks a rally cause but the bid fades and the indices close basically flat.
- No negatives from Europe and even some good bond sales in Spain.
- Manufacturing data rises on optimism about the future.
- Jobless claims get serious, fall to 366K.
- Foreclosures fall to 3 year low.
- Production and Capacity are good enough.
- China markets still struggling.
- Expiration Friday likely not to appreciably change the lay of the land, but we could get some buys out of it.
When good economic data cannot push US stocks higher.
It was a day that was dripping with U.S. economic data, and for the most part it was finger lickin’ good (to borrow an old Kentucky Fried Chicken advertising phrase). Out of the box there were some great reports. Empire Manufacturing came in at a very solid 9.53 versus the 3.0 expected and the measly 0.61 recorded in November. Jobless Claims were all the rage, coming in at 366K. That was much lower than the rebound that was expected back up to 390K. This time of year it is very difficult to get accurate weekly jobs reports because of seasonal hiring. The adjustments tend to throw the data too far one direction or the other. It may have thrown it too far to the downside, but we deserve it. We deserve a bit of respite even if it is just numbers and it will turn right back and let harsh reality slap us in the face. It is still good to see those numbers.
Industrial Production and Capacity were not great, but they were not bad. Capacity came in as expected at 77.8%. Production faded -0.2 when +0.2% gain was expected. But that was really offset by the solid New York Empire Manufacturing number as well as the Philly Fed number for December. It came in at 10.3, much better than the 4.5 expected and the 3.6 in November. Again, manufacturing is making a comeback. Jobs are looking a bit better. Even some pricing was better. The PPI came in at 0.3%, which was hotter than the 0.1% expected and the 0.3% in October. It is still not outrageous at 2.9% year-over-year when the Core came in at 0.1%. Right in line. That puts it around 2.1% year-over-year.
This was more than enough news to offset some further declines in China. Its stock market is falling rapidly once more. It was bolstered by some European data that was not so bad. A Spanish auction went pretty doggone well (“doggone” is a technical term used in the bond market). It went much better than expected with more bonds being sold and more euros brought in. The French 2 year actually fell below 1%, so it was not spiking the other way. There are some positives here. Indeed, looks like the Spanish bonds and economy is viewed more favorably right now than Italy. But it does not really matter; they are all in the game together.
The data was good enough to bump up the futures early on, and that is exactly what they did. Stocks were trading higher early premarket, and then they were higher as the market got underway. And then they sold off. What looked to be good data in the U.S. was simply not good enough to maintain positive action in the stock market. The indices closed to the upside on the day, but they did not close well. In other words, they went from high to low with SP500 bumping into the 1225 level on the high. That is right below the August peak at 1230. That is basically the demarcation point for the August-October range which we also call the “eurozone” for our stock market. It bumped that on the high and faded right back down with the less-than-spectacular intraday action in the U.S. stock market. There were positive closes, however.
SP500, +0.3%; NASDAQ, +0.07%; Dow, +0.38%; SP600, +1.34%; SOX, -0.2%.
The semiconductors continue to lag. They are the anchor chain. Overall a day of positive finishes but not a day of positive action. As the saying goes, they snatched defeat from the jaws of victory. A positive start that faded to, at best, flat across the board.
FRIDAY
It is expiration Friday. The CPI will be out before the open, and that gives us the consumer prices. They are not expected to be anything major. I would not be surprised if they are right in line. Nothing would change them right now, it would seem.
When talking about the leaders, I mentioned a trigger or some impetus to put a bid back into stocks and drive them out of the eurozone. There are still a lot of nice patterns out there that I have gone over, and there are a lot more I could discuss. Then there are stocks that were performing well and are now down at a support level and trying to bounce. If they bounce it could be a very nice move, but there has been nothing to get them going. The good economic news Thursday tried its hand, but was it unable to break the stocks upside. We had better jobs data last week, but it could not keep the move going. We have this kind of back-and-forth, “What do we do?” You put good wares on the table but the buyers do not want to buy them. How do you move forward in that kind of environment?
Volume is very low overall. There is not a lot of trading going on, and toward the end of the year it will be quiet because a lot of books will already be closed ahead of Christmas. That does not mean the market will not go up and down because a light-volume market can move quite nicely for us. We keep looking at good patterns because those are the ones that will pay off in this kind of environment.
Stocks that set up good patterns or come back and test support at nice levels are stocks that people will buy in anticipation of some kind of January effect. If stocks are well-positioned, are in good technical patterns, the big funds will buy them in anticipation of a January effect. That would actually BE the January effect, right? It is that self-fulfilling prophecy: If people believe something will go up, they buy it and it goes up.
There are plenty of good stocks out there in patterns that can move higher despite SP500 and NASDAQ being in the eurozone. The SP600 is trying to put in a higher low right at the top of its range. While we do not trade a lot on the DJ30, they have an impact on other stocks as we have seen in the industrial sector. We do have possibilities for a move even in a light volume, rather thinly-traded market at the end of the year. I have made quite a bit of money around the holidays before. You can get those low-volume moves when the fund managers (or their assistants who are still around when no one else is) come in and buy those stocks and send them to the upside. That is why we are going to stay vigilant.
Friday is expiration Friday, and that is not necessarily the best day to buy. We are coming into the end of the year. I feel that we might get some good buys even with SP500 in that eurozone range. If we see them, we will pick up some positions. We will not have a load of new plays on the report tonight, but we have some good plays already there that we would like to take advantage of if they show the move. We will throw a couple more in the mix just to be ready to move. We do not want to overload ourselves with plays; we have a lot right now as it is. We just want to keep it lean and mean toward the end of the year. As we see how things break with respect to the fund managers coming in next year, we can adjust accordingly.
The plan remains. We have decent patterns in a lot of stocks. We have other stocks that have pulled back over the last three to four days, but they are holding up quite well nonetheless. If they make moves, we can make money off of them. Frankly, that is the name of the game. We do not care what the situation is, and we do not care what the politics are. We just want to make money. We will use stocks in position to make us money as the vehicle to put some coin in the bank.
Stock Splits & IH Alerts, Editor
InvestmentHouse.com
