Markets Went Down and Never Looked Back

by: Bill Cara

Friday was ugly. The word must have gone out to take profits because the equity market opened with a large gap down and never looked back.

Given that I just awoke and now have to start a four day conference in just 70 minutes, I’ll make this short.

(Knobias) Economic data today has included Personal Income and Spending data for February. Both Spending and Income data was reported in-line with expectations and the revisions in January data seems to be the only surprise. Final Consumer Confidence data for March was in-line with expectations and showed a slight increase over February’s data. As oil and derivative prices declined, the Energy sector led the way to the downside. Al l ten major economic sectors moved lower today and all moved over 1% to the downside.

In New York at the close this Friday (compared to the prior Friday’s close), the DJIA (-148.38 -1.87% to 7776.18) (7278.38); S&P 500 (-16.92 -2.03% to 815.94) (768.54); and NASDAQ (-41.80 -2.63% to 1545.20) (1457.27) were lower on the day, but with the exception of a few stocks in the DJIA index were higher on the week.

The Toronto Composite (-174.44 -1.94% to 8821.06) (8506.35), and Venture Board (-13.00 -1.33% to 961.02) (901.80) were also sharply down on the day, like a week ago Friday, but much higher Week over Week.

So, the rally goes on and most people are thinking it’s not. Interesting.

The US market had no sector winners on Friday. The worst performer was, of course, Financials (XLF -3.1%), with the losses taken right at the opening bell. REITs ($DJR -5.5%) led the Financials south, just like they did the prior Friday. Smells to me like somebody has a plan to deceive the public into believing this market is going down when actually it is just being pushed down at the end of the week.

Among the nine Cara 100 stocks that lifted on Friday (a week ago there were just 12), there leaders were Tata Motors (TTM +8.6%) and JC Penny (JCP +6.7%). Amazingly, the same thing happened a week ago Friday when TTM at +5.1% was the leader on a day that was down -1.98% for the S&P (vs -2.03% this Friday). Who is writing this script, anyway?

A week ago I wrote, “Something’s up with bonds. For the second straight day, the prices lifted and so did the yields. There was not much of a change on Friday ($USB +0.11% to 130.97), but let’s compare Friday’s close to Wednesday’s close (Monday through Wednesday were normal!)… “ Well, this Friday, there were also more games being played. $USB closed down just -0.02% to 128.55 (for a loss on the week), but it was the T-Bill yields that crashed – just like they did a week ago. The yield dropped Thursday from 0.185 to 0.140, down to 0.125 at Friday’s close.

So, Jamie Dimon, would you care to tell the world what your game is? No? Well I will. The credit markets are being squeezed near the end of the week and the result is a late week sell-off of equities in what is an otherwise heck of a market rally. The public, in a word, is being deceived.

As I wrote in this space a week ago:

But, at least, once this fire as been put out, the equity market will soar. Equity prices at this point have little to do with corporate earnings, or the macro-economic data that economists like Nouriel Roubini have been hammering into your head, and, in my view, they certainly are not going to crash -30% from here as Roubini seems to be shouting daily from his soapbox on financial entertainment TV. Once the toxic assets have been rendered atoxic, the credit default swap insurance problem that is presently sinking the global financial system soon becomes an historical footnote. Life returns to normal – with a few new realities anyway: (i) US Treasury paper and the USD are garbage –gold is the new money, (ii) it will be many years before Americans again trust their politicians or their bankers, and (iii) Beijing now calls the shots in the political power structure of the world because they are now America’s banker as the Fed ipso facto, like Fannie Mae and Freddie Mac, has become an agency of Treasury… The US Dollar managed a small bounce ($USD +0.97% from 83.03 to 83.83) after falling from 89.17 at the close a week ago Monday, which had been seven losses in the previous eight sessions. The other major currencies all closed significantly lower on Friday (Euro -0.61% to 135.82), Cdn Loonie (-0.07% to 80.61), Yen (-1.51% to 104.20), and Pound (-0.57% to 144.24). A week ago Monday, however, these prices were 126.12, 76.89, 101.10, and 137.70, respectively, so the trend is still $USD down and the others up.

So, right from the Dimon playbook, this Friday’s results were: $USD +1.13% to 132.90; $XEU –1.74% to 132.90; $XBP -0.86% to 143.33; and $CDW –0.82% to 80.58. This week, the Yen did manage to gain, for a change, +0.98% to 102.25.

Oil prices ($WTIC -$1.96/bbl to 52.38) managed to eke out a tiny gain from a week ago when the June Crude closed at 52.07/bbl.

A week ago, after a huge rally the previous day, $GOLD closed Friday down -$6.52/oz at 952.34. This Friday, $GOLD was hit -$10.20/oz to close at 924.00, and it had been higher during the week, rallying on Wednesday and Thursday.

The closing DJIA futures were: 7762 (compared to 7215 a week earlier), which was down -87 this Friday but also much higher on the week. So the beat goes on, but the people are led to believe it doesn’t.

As I say; interesting.

Earlier in the day Friday, at the close in Europe, the French CAC, German DAX, and UK FTSE, were down -1.78%, -1.31% and -0.67%, respectively.

I really must go have a shower and then run downtown for 8:30am or I’ll miss my party.