1/3/12…the good, the bad, and the ugly!

 

This week’s holiday shortened economic calendar is jammed packed with important indicators. The highlight of the week will be the December Employment Situation Report (Friday). We will also get the December ISM Manufacturing Survey and November Construction Spending (Tuesday), the December ADP National Employment Report, November Factory Orders, and December Motor Vehicle Sales (Wednesday), and the December ISM Non-Manufacturing Survey (Thursday). In addition, the Federal Reserve will release the minutes to the December 13th FOMC meeting (Tuesday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

 

Bloomberg Top Stories:

*Stocks Gain as U.S. Futures Climb on Manufacturing Growth; Treasuries Drop

*World’s Biggest Economies Face $7.6 Trillion Bond Tab as Rally Seen Fading

*Smallest S&P 500 Gain Since ’05 Seen by Strategists After U.S. Beats World

*Global Manufacturing Displays Resiliance to Europe’s Debt Crisis

*Monti Prescribes Italian ‘Aspirin’ for New Year’s Debt Ache

*UBS Cuts Funding Cost as Banks Start Year With First Sale of Covered Bonds

*Money Funds’ Future Hinges on Former Invesco Executive as Regulators Spli

*GE Leads $620 Billion in 2012 Maturing Debt as Yields Rise

*Natural Gas Bears Reduce Short Bets as Prices Dip Below $3 –Obama…where are you???

*Drought-Easing Texas Rain Means Feeder-Cattle Price Gain

*Dollar’s Demise Exaggerated as 14% Gain Since 2008 Proves Currency’s Value – go figure!

*Global Growth Slows to 3.9% as O’Neill Sees BRICs Diminished by Population

*Whitney Apocalypse Fades as 2012 Default Spike Seen Unlikely

 

Volume was steady for a fifth straight session at 2.24B shares from 2.26B shares, very weak, but then it was the last trading day of the year. Regardless, it was a weak session. Once again the activity is all high frequency traders and is exactly why you cannot play this market. NYSE stocks executed on the Big Board were also weak but rose to  588M shares from 531m shares! 32 of the last 35 sessions have been less than 1B! Advance/Declines were slightly negative: -1.1:1 vs +3.7:1 vs -4:1 vs +1.1:1 vs +2.2:1 vs +3:1 vs  +1.7:1 vs +7.5:1 vs -4:1 vs +1.7:1 on NYSE and -1.1:1 vs +2.6:1 vs -4:1 vs -1.1:1 vs +1.1:1 vs +2:1 vs 1:1 vs +4.7:1 vs -4:1 vs +1.3:1 on Nasdaq. Breadth was similar: -1.2x vs +10.2x vs -22x vs -1.5x vs +3.4x vs +4.5x vs +1.4x vs +35x!!! vs -3.1x vs +1.9x on NYSE and -1.5x vs +5.2x vs -9x vs +1.2x vs +2.2x vs +3.6x vs -1.6x vs +11x!!! vs -5x vs +1.4x on Nasdaq. New 52 week highs surged to 209 from 161 while new lows dropped sharply to 91 from 135.The ratio has dropped from 6x positive to 1.7x positive! The S&P VIX rose modestly to 23.40 +.75. CAUTION still advised!!!

Here are the results of the past TEN sessions: Dow -0.6% vs +1.1% vs -1.1% vs flat vs +1% vs +0.5% vs flat vs +2.9% vs -0.8% vs flat; Transports -0.5% vs +1.4% vs -1.6% vs flat vs +0.5% vs +0.9% vs +0.6% vs +3.4% vs -2.3% vs +1.5%; S&P 500 -0.4% vs +1.1% vs -1.3% vs flat vs +0.9% vs +0.8% vs +0.2% vs +3% vs -0.8% vs +0.3%; Nasdaq Composite -0.3% vs +0.9% vs -1.3% vs +0.3% vs +0.7% vs +0.8% vs -1% vs +3.2% vs -1.2% vs +0.6%; Nasdaq 100 -0.3% vs +0.8% vs -1.1% vs +0.2% vs +0.9% vs +0.8% vs -1% vs +1.4% vs +3% vs -1% vs +0.5%; Russell 2000 -0.5% vs +1.3% vs -2.1% vs +0.5% vs +0.3% vs +0.7% vs +0.3% vs +4.2% vs -1.9% vs +0.8%; NYSE Financials -0.2% vs +1.5% vs -1.7% vs -0.6% vs +0.7% vs +1.8%!!! vs +0.3% vs +3.7% vs -1.9% vs +0.4%  Leaders: BAC +1.8% vs +3.3% vs -3.6% vs -2.1%; C +2.4% vs -2.9% vs -2%; GE -0.9% vs +1.4% vs -1.1% vs -1.2%; C -1.7%.Very mixed bag!

 

European equity markets mixed, Asia rallying: FTSE +1.2%; CAC40 -0.7%; DAX +0.7%; Nikkei closed; Hang Seng +2.4%!!!; Korean KOSPI +2.7%; Indian Sensex +2.7%…strange Asian bourses all up by about the same amount??? U.S. Futures strong: DOW +180; SPX +18; NDQ 34!!! Bonds pummeled but with 10’s and 30’s still below 2% and 3% respectively. 10 yr 1.94% -9/16. RECORD low 9/23 of 1.6855%; 30 yr 2.96% -1-3/8!!!; Long TIP 0.78% -15/16. 0.57% at high five weeks ago. The 5 yr TIP yields MINUS 0.88%!!!; 10 yr -0.10%!!!. 3 mo. Libor 0.58%, and 0.81%. Bills +0.01% one month. 3 months 0.02%. 6 months 0.06%.

Gold rallied in the final session of 2011, but remains below $1600 and the 200 day and has since 12/19. It closed at $1566.80 +$25.90 and is now $1592.10. +$25.30! The record high is $1923.70, a buying climax on 9/6. RES is 1690, the 40 day and $1695, the 50 day m/a and $1627, the 200 day. Crude closed modestly weaker, well below $100, reversing Tuesday’s surge to $101.34 but is still well above the /200 day ($95.74) closing $98.83 -.72. Last Tuesday was the first close above $100 since 12/13 and highest since 11/16! It is now $101.14 +$2.31!?!  Major sup is the 40/50 day m/a at $98.32-97.08. Res/Sup at $100.

 

 

…that would be the returns on stocks at yearend. Take a look at these pathetic results, the good being the quarterly performance which peaked near the end of October, the bad, the monthly return and the ugly the lack of performance for the entire year, except for single digit growth in the Dow and Nasdaq 100. Is there a sea change coming? Note the addition of the stealth winner, Dow Utilities, which had a great month, quarter and year!

 

12/31/11            1 Month            Quarter             2011

DOW                +1.7%               +12.0%             +5.5%

Transports         +1.5%               +19.9%             -1.7%

S&P 500           +1.1%               +11.2%             FLAT

Nasdaq Comp    -0.8%                +7.9%             -1.8%

Nasdaq 100       -1.1%                 +6.5%             +2.7%

Russell 2000     +0.8%               +11.2%             -5.5%

NYSE Finance   +0.3%                +6.8%             -18.1%

DOW Utilities   +4.7%               +19.8%            +14.7%

 

If you missed the run-up in utilities, don’t feel stupid…they were in a stealth rally for the entire year but suffered FOUR major corrections: mid-March, which destroyed first quarter performance, Mid August which dropped to levels of August 2010, then again at end of September, and once again in mid-November, appearing to correlate with other equity indices…then out of nowhere a huge surge beginning on Dec. 21…the question is: are they vulnerable now? It would appear so.

 

The second-best performer was the Dow…surprisingly given that the S&P 500 ended the year FLAT, or worse than a money market fund! But what caused this? It appears that we threw in the towel on GROWTH and switched to income! But the dividend yield on the Dow has now dropped to 2.60% making it vulnerable to a correction. So now we have both Utilities and the Dow telling us growth is dead…by the way the S&P 500 finishing the year unchanged yet the next best performer shows that its dividend yield also helped…although it is now down to 2.12%. In case you are now thinking of plunging into Utilities, their yield is now just 3.9% meaning the run may have ended and in any case they are very ‘toppy.’

 

But the worst performers (aside from financials which many forecasters saw as the best performing sector for this year, and paid a huge price for that assessment), were the two Nasdaq indices and the Russell 2000 small cap…but even the performance in these three indices varied greatly in the quarter, and for the year with only the Nasdaq 100 posting a positive annual gain but very unimpressively!

 

Overnight, U.S stock index futures are very strong, but this is likely to awaiting the ‘January effect’ of reinvestment of 401(k);s etc…if this disappoints, Q1 could be very bearish and with the global economic picture and U.S. political environment very unsettled, TB thinks that 2012 could be as difficult as 2011 if not more so!

 

You decide…but move cautiously! Things are very fluid!

 

 

. . .   – – –  . . . note that the same old SOS applies…perhaps more so!

Hope you had a great New Years’ and that the bowl games went your way…with pro football now in its twilight with just the playoffs and Superbowl left, the question of what to do with our time becomes an issue. Focus now shifts to basketball with the NBA shortened-season and culminating in March Madness, winter is now in full effect…other than the absence of any significant snow in Minnesota and many other northern states, while skiers flock to New Mexico and Colorado.

Tomorrow is the Iowa Caucus…think about this: despite the record for predicting the next president or candidate at least, only about 100,000 will turn out…as one reporter noted: that is the population of Pomona, California. Does anyone care what they think? No, but Iowa….

 

What’s a mother to do???

 

Hope you have a great holiday-shortened week!

 

TB

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