A Roller Coaster Market Ride

[Excerpted from Bill Cara's Daily Report]

Stocks began Thursday moving south on lower than expected Existing Home Sales, rebounded and then dropped again, and then rallied off session lows at noon, ending the day with sharp moves down and then higher, closing near the session high.

At the close, the DJIA (7,957.06 +70.49 +0.89%) and S&P 500 (851.92 +8.37 +0.99%) closed well down, and NASDAQ Composite (1,652.21 +6.09 +0.37%) were higher, but not convincingly so.

The Toronto Composite (9,409.50 +130.35 +1.40%) and the Toronto Venture Board (987.94 +8.82 +0.90%) had a third straight day of gains.

Earlier Friday, trading in the major international equity markets was muted in the East and very strong later in Europe: Japan’s Nikkei 225 index (8,707.99 -139.02 -1.57%) gave back all of the previous two days’ gains, but India (11,329.05 +194.06 +1.74%) had a second day of soaring prices. The other markets were less active, and mixed: Australia’s All Ordinaries index (3,668.200 -27.600 -0.75%), Hong Kong (15,258.85 +44.39 +0.29%), and Shanghai (2,448.595 -15.359 -0.62%). In Europe earlier today, prices were very strong: France (3,075.67 7:59am ET +67.05 +2.23%), Germany (4,635.21 7:44am ET +97.00 +2.14%) and UK (4,102.80 7:44am ET +84.57 +2.10%).

In NY Thursday, the strongest sector was Financials (XLF 10.70 +0.48 +4.70%), led by the REITs and Banks ($DJR +4.68% $BKX +3.71%). Consumer Staples and discretionary Spending sectors were flat. Hospitals and Biotech ($RXH -2.76% $BTK -1.40%) were the weakest industry groups.

For the Cara 100 companies, the big winners were the the Indian Bank ICICI and the Brazilian cellulose pulp and paper company Vororantim (IBN +9.3% VCP +9.2%). US steelmaker Nucor and Swiss heavy construction company ABB were losers (NUE -9.2% ABB -2.77%).

US Treasury yields pulled back and bond prices lifted. The 30-year (3.797 -0.37 -0.97%), 10-year (2.927 -0.37 -1.25%), and 5-year (1.888 -0.23 -1.20%) yields dropped as the long bond ($USB 125.22 +0.58 +0.46%) closed higher. The T-Bill yield (0.095 -0.40 -29.63%) collapsed to 9½ basis points, which indicated problems in the credit market.

The $USD had a significant loss (85.45 -0.85 -0.98%) while the Yen was quiet (102.00 -0.10 -0.10%). The Euro (131.47 +1.49 +1.15%), the Pound (147.22 +2.45 +1.69%), and Cdn Loonie (81.77 +1.18 +1.46%) were big winners on the day.

Crude Oil ($WTIC 49.62 +0.77 +1.58%) was another huge winner. In futures this morning, Crude Oil was even higher (50.45 +0.83 +1.67% 07:41AM ET).

$GOLD futures made an impressive gain on Wednesday and again yesterday (904.40 +14.40 +1.62%), up +$21.30/oz in two days. Prices were a bit stronger this morning.

Spot (cash) market prices Friday morning were: Gold (909.30 +3.43 +0.38% 08:09AM ET), Palladium (232 +1 +0.43% 08:08AM ET), Platinum (1178.0 -5.0 -0.42% 08:08AM ET), and Silver (12.7600 +0.0588 +0.46% 08:08AM ET).

Stock futures are pointing to a higher open after Ford Motor (F) posted better-than-expected results for 1Q2009. Futures had been mostly flat as traders awaited details on the government’s stress testing of the largest banks. But, Ford's report that negative cash flow was only $3.7 billion, much less than the $7.2 billion the company burned in 4Q2008. In pre-market trading after the news, F soared to $5.25/sh (+17%).

Amgen (AMGN), Amazon (AMZN), American Express (AXP), The Cheesecake Factory (CAKE), Juniper Networks (JNPR), KLA-Tencor (KLAC), Microsoft (MSFT), and PMC-Sierra all reported after the close Thursday. That earning’s data and guidance, and Friday morning’s Ford news plus the release of Durable Goods Orders and New Home Sales economic data, could lead to more volatility, like Thursday.

DJIA futures were soft earlier this morning (7884 +68 +0.87% 07:15AM ET). Then they got a tad weaker (7873 at 07:58AM ET).

Some traders will be saying TGIF.

Comments

[David White:]

I'm not so sure everything is so rosy. The Durable Goods Orders appeared to shrink less than expected on first glance. However, another way to look at today's durable goods orders with respect to expectations is:

Expected -1.5%. Actual -.8%.

Now add in the February Adjustment given today:
Previously reported Feb. Durable Goods Orders: +3.5%
Revised Feb. Durable Goods Orders: +2.1%
Change: -1.4%

If you then add this to the Mar. result you get -.8% -1.4% = -2.2%
(i.e. -2.2% below the previously reported figure from Feb.)

In other words the total results today are -.7% worse than the position the market expected them to be in.

This is just a quick and dirty way of doing it, but it is an effective guage of reality versus expectations. I think you have to view this as an overall negative for the markets. This might tend to push the markets down after people see it for what it is.

Still one has to say the earnings news has overall been upbeat. I am not so sure how the day will go. We could easily get a sell off into the weekend. We are near the resistance point of about $87 on the SPY. Many people may decide they are better off being out over the weekend. This might give them time to decide how the markets are really going to react to the stress test data. Also it seems likely that some or most of the data will leak out over the weekend if not sooner.

Keep in mind that only one or two of the major banks have to be in trouble for there to be a serious problem. News of this sort could easily send the markets into a tailspin.

There has been a lot of speculation that the CEO of Citi will be asked to resign by the government. This is may be an indication that Citi did not do well on the stress tests. If so, news about a bank of this size being in trouble could easily push the markets downward quickly.

Apr 24 11:27 AM

[GMiki1:]

Nothing is rosy. I was listening to a Howe Street commentary tht noted the historic correlations of dividends to valuations and the current ones are way out of whack. Either dividends have to rise or stock prices have to fall. Significantly. On the gold side, there's China, admitting to putting money into gold reserves. And there's India, right next to Pakistan, which is about to turn Taliban. And India is starting to buy gold again. Gold is now up on the day and might soon ignite a short squeeze for sure.

Apr 24 01:21 PM

[Scooter-Pop:]

Is anyone else seeing a 2nd round terribly devistating news for the Financials? They are bouyed up now only from a Tax Payer Hypo. Employment is the best indicator of an impending Real Rally. I'm hiding in the High Div. Preferreds and GLD (gold). The speculation now leads us to those Sectors at the bottom of the heap, being Autos, Domestic Drillers/Producers and Real Estate (Housing and Comercial), naming a few. Inflation appears to be in check until the Real Rally does begin. When Gietner, and his Fed Bunch, along with Cramer pour the sales job on us, watch out for the Real Bear in this Bull bump. Holdings: GLD, IID, IAD, XTO, XCO, PVA, GILD & MMLP

Apr 25 01:26 PM

[Freya:]

oh well, I guess I'll have to wait till next week for Last Monday's Gap closing on the Dow, which means the SPX will take out 875.

Who knows, Gold might even rally another $20-30.

Of course its not Rosy, thats why its called a "wall of worry".

Apr 24 04:23 PM

[Freya:]

I would expect the last hour to provide the same kind of excitement today too.

G7, IMF, WTO, Stress T's, signs of a better economy, yadda, yadda.

Some sort of Indian Gold rumor/short squeeze etc.

My guess would be an up move in the final hour, with the Dow closing up 180 or more.

Apr 24 10:49 AM