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Will LeBron Market Rally Continue?
Nobody could come up with a good reason for yesterday's big move up for stocks, so let's call it the LeBron James rally. (The buzz/hope in New York was that tonight's announcement from Greenwich, CT meant the "The King" would be coming to play for the pathetic Knicks. I'm guessing he may have been in tony Greenwich to check on his hedge fund performance.)
LeBron or not, stocks enjoyed the first broad rally of the quarter, with US indexes posting their biggest point and percentage gains since May 27th and the third largest gains this year. The Dow rose 274 points or 2.8 percent to reclaim the 10,000 level at 10,018; the NASDAQ jumped 3.1 percent to 2159; and the S&P 500 added 32 points to 1060. Crude oil jumped over $2 per barrel, to $74.07.
The "news" of the day was a Mortgage Bankers Association report of an uptick in refinance activity. The Refinance Index increased 9.2 percent from the previous week and is the highest since the week ending May 15, 2009. Historically low 30-year mortgage rates at 4.6 percent are luring homeowners with good credit and ample equity.
In today's markets, Asian shares traded up, while European stocks increased on the back of separate decisions by the European Central Bank and Bank of England to leave rates unchanged. US stock futures are essentially flat, as investors await June sales results from 28 major retailers. Same store sales are expected to rise over 3 percent.
Wednesday Market Note: The Long, Slow, (Hot?) Road to Recovery
While the service sector grew in June for the sixth consecutive month, the pace slowed to 53.8 percent, down from 55.4 percent in May - and below expectations of 55. In the glass half-full camp, the service sector is expanding and the June level is above the 10-year average of 53. On the half-empty front, the employment index showed contraction at 49.7 percent. The ISM summed up the results by saying that "respondents comments are mostly positive about business conditions; however, there is concern about the effect of employment on the economic recovery."
And now a pause to re-frame the 2010 heat wave for the economy. Investors have been gripped by fear and panic for over a month. The big issues are: a US "double-dip" recession, the banking crisis in Europe, China's economic slowdown, and worries over government policy mistakes that could accelerate any of the above.
While we could see a double-dip, I think it's a remote possibility. Yes, the U.S. economy is slowing and the Chinese economy is also softening, but as I run through the various scenarios, it still appears that the U.S. and global recoveries will remain in place, but the pace will moderate.
Still, downside risks persist in this uncertain environment. I return to last week's jobs report, which presented the major obstacle for the U.S. economy. Without improvements in the labor market, we'll be stuck with a moribund recovery, highlighted by fears of deflation.
On some level, we knew that the hangover from the 20-year credit binge would be painful. The legacy of that binge is the deep problems that will limit economic growth in the near-term. In other words, the heat wave for the economy is likely to persist. Drink lots of water and try to stay cool.
Agricultural Bank of China Goes Public to Test Confidence in Chinese Economy
Customers walk in and out of a branch of Agricultural Bank of China in Beijing on July 6, 2010.
(Credit: AP Photo/Alexander F. Yuan)How strong is the Chinese economy?
What could be the world's largest-ever initial public offering might shine some light on that question.
The Agricultural Bank of China could be priced as early as Tuesday (Wednesday in China). If it hits the high end of its price range, the IPO could gobble up $23 billion, according to the Wall Street Journal ($), topping the Industrial and Commercial Bank of China's 2006 record of $21.6 billion.
If the ABC prices its offering at the mid-point, it could still sell $8.8 billion in its Shanghai offering and $11.3 billion in its Hong Kong offering (it's going public in two places).
The Chinese government, which still wholly owns the ABC as of today, might not want to price shares too high, since there have been a few IPOs that have fallen below their issue prices after its first day of trading.
That's one concern. Another is that heavyweight IPOs this year have been disappointing. In February, China First Heavy Industries became the first mainland company in some time to fail to price a Shanghai IPO at the top of its proposed range.
Also, economic news out of China have not been entirely sanguine. Its consumer price index is rising; its GDP growth this year may be slower than analysts expected. There have been fears of property and credit bubbles for a year, prompting regulators to launch a series of clampdowns on mortgage lending that democratic governments could only gawk at.
Incidentally, the primary concern with the ABC is its over-lending and non-performing loans.
The ABC's price will be a test on confidence in China's economy - but more a sign of the Chinese government's own honest analysis that it can't color with statements and speeches. How high will it dare to go?
Tuesday Market Note: The Week Ahead
Joseph Quaglieri, a trader with Kellogg Capital, looks at a trading monitor from the floor of the New York Stock Exchange last Tuesday.
(Credit: AP Photos/Bebeto Matthews)For those of you keeping track, the Dow fell for a seventh consecutive session, the longest losing streak since October 2008, which was (ahem) at the height of the financial crisis.
The jobs report was grim, but the expectations were so low that the consensus was "it could've been worse!"
Half-Time For Your Money
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
The Saints won the Super Bowl; health care passed; the I-Pad launched; Greece nearly imploded; BP's oil spewed throughout the Gulf; and the stock market ended the first half of the year down more than 7% lower than where it started in January. Ladies and Gentlemen, it's half-time and that means you need to stand up, stretch your legs and figure out how you're doing with your financial life. Here's the half-time pep talk with my friends at CBS .Continue »
Jobs Report Sobering but Could Have Been Worse
(Credit:
iStockphoto)
Unfortunately, we lost 125,000 jobs, which is the first monthly loss this year. Blame Uncle Sam--there were 225,000 census layoffs. The private sector pitched in by hiring 83,000 workers, according to the Labor Department, helping stave off what could have been a more damaging report. Still, private sector employment has slowed. The three-month average is now 119,000, compared to 154,000 from February to April.
Lest you console yourself with the drop in unemployment rate from 9.7 percent to 9.5 percent, I might remind you that the reduction has more to do with people throwing in the towel on their job searches than real improvement.
Another sobering thought: the U.S. economy needs to add something in the neighborhood of 125,000 jobs each month just to keep pace with new entrants to the work force and analysts believe that it will take a bunch of 250,000+ jobs a month to really put a dent in the unemployment rate. We're a long way from that pace of job creation.
Continue »Countrywide Sued Again for Discriminatory Lending
(Credit:
AP)
Bank of America's mortgage unit Countrywide is being sued in Illinois for discriminating against black and Latino borrowers. According to a report in Bloomberg, Illinois's attorney general, Lisa Madigan, has filed a suit alleging that Countrywide disproportionately steered minorities into risky subprime mortgages:
"Countrywide's illegal discriminatory lending practices destroyed the wealth and dreams of thousands of African American and Latino homeowners," Madigan said in the statement. "Bank of America needs to be held accountable by taking financial responsibility for cleaning up the devastation of the predatory company that it chose to take over."
Remember that back in 2006, Eliot Spitzer, when he was still New York's attorney general, sued Countrywide for similar practices. The mortgage lender settled, compensated minority borrowers and adopted measures to prevent discriminatory pricing.
And less than a month ago, Bank of America paid $108 million to settle federal charges that Countrywide collected outsized fees from about 200,000 borrowers facing foreclosure.
And the lending unit is still mired in a massive $8-billion settlement for predatory loans in a suit filed by Madigan and involving 10 other states.
Thursday Market Note: Stocks Off 12 Percent in 2Q
The rest of us must console ourselves by facing the grim reality of the second quarter results: the Dow down 10 percent to 9,774, its first quarterly decline since Q1 of 2009 -- the period during which the index fell to its bear market low. The S&P 500 lost 11.9 percent to 1,030 and is now 15 percent below its April 23 high. The NASDAQ tumbled 12 percent to 2,109. Bond and gold investors were the winners on the quarter: 10-year treasuries gained nearly 6 percent and gold was up 12 percent.
If there is one silver lining to the market's tumble is that it coincides nicely with the calendar. Many retirement plans offer automatic rebalancing, which puts some of your investment decision-making on auto-pilot. Let's say that you had started the quarter with an allocation of 60 percent stocks and 40 percent bonds. Due to the market action, your current allocation may have shifted to 55 percent stocks and 45 percent bonds. Rebalancing would force you to sell 5 percent of your bond position and use that to add 5 percent to your stock position. In other words, you would be selling high and buying low. If your plan doesn't offer automatic rebalancing, you can do it yourself, but only on a quarterly basis; more than that is not necessary.
In today's action, I should note that every trader with whom I spoke this morning is tired and counting down the minutes until tomorrow's employment report. Currently, Asian and European stocks remain under pressure after China's purchasing managers' index was weaker than expected. The data add to investor concern over the pace of global recovery. U.S. stock futures are pointing lower.
Advice For Oil Brokers: No Drunk Trading
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
You can't make this up-really. The UK regulator, the Financial Services Authority (FSA), has banned a 34-year-old oil trader for trading while drunk and fined him $108,000. The FSA said that Steve Perkins was 'not a fit and proper person' to be trading large sums of money in volatile markets. The events in question took place a year ago.
Continue »3 Steps To Lift Your Credit Score
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
Your erstwhile Editor-at-Large continues to confront unsuspecting people on the streets of NYC to dole out financial advice. In the episode, I tackle the thorny issue of credit scores.Continue »
