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| Daily Jurojin - Friday, May 1, 2009 |
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Friday, May 1, 2009 Stocks stall ahead of auto-sales dataThe S&P 500 index recoiled Thursday from its highest point since the beginning of December, leaving behind a 15-point rally only to close lower on the day. As the month came to a close the S&P spoiled its neat little rebound taking the edge of what would have been a nice round 10% April gain. Watching the price action all day, it was not as if the Chrysler bankruptcy announcement, which was confirmed before the market even opened, was the culprit.Earnings drops at Exxon and Procter & Gamble didn't sit comfortably with investors by the end of the day. Weakness in energy prices and mounting concern over the viability of certain energy producers at current crude oil prices compounded Exxon's earnings and forced a decline in the sector. Sensible investors using equity options were seen writing call options according to the Wall Street Journal, possibly as in bets that the market will lose traction any day now. For now it does look like equity prices have fully reflected an oversold status and could be in for a pause. We sure don't think that earnings optimism can carry a rally much further. For sure earnings pessimism might have become unduly indignant, but the slowdown in the contraction, which is growing across the globe, is not a recipe for strengthening numbers this year. In Friday's action investors will find out the latest reading on auto-sales. If annualized car sales during April comes in unchanged at 9.9 million units versus March and a disappointing February reading of 9.1 million units, it will be taken as a further sign of a bottom in consumer pessimism. Rising consumer confidence and quarterly consumer spending growth of 2.2% should ensure economists won't be perturbed on Friday morning. Gentle improvements in credit availability alongside increased confidence will need to be weighed against the prospects for the price of gas post-recovery. If you ask us for our wish-list coming out of this recession we'd certainly be asking for a fixed loan rate, a hybrid car, a two-year employment contract and a put option on a home to see us through the next couple of years. There is only so much the government can do to encourage spending while workers face the reality of increasing job losses and declining home values, forcing them to save more of their leftover incomes as they consider a period of joblessness and retirement. Global bond prices declined forcing yields that little bit higher. The all too familiar story of recovery overshadowed a continuing number of existing claims for unemployment in the U.S. to 6.27 million for the 13th straight week. In Europe the rate of unemployment rose to 8.9%, yet still falling bond prices sent domestic yields higher. As we noted in yesterday's Daily Jurojin the Japanese yen continues to decline on fresh signs of an end to domestic contraction. Overnight the June contract slipped to 100.90 and is nearing our profit target of 100.00 against the dollar. The weakness is becoming pronounced despite the aberrations to the stock market rally. We'd note that risk aversion seems to be playing second fiddle to the sigh of relief that at least things aren't worsening. The Supreme Council of the Secret Order of Jurojin |
