Today's Market WrapUp 03.26.2009 Mon Tue Wed Thu Fri Panzner Archive
Hopeful Signs -- NOT!BY MICHAEL PANZNER
Although long-time Financial Sense visitors are likely familiar with the GAMCO Mathers and Ned Davis Research versions of the graph, Morgan Stanley has put together a more comprehensive and colorfully up-to-date rendition of the now (in)famous chart of total U.S. debt as a percentage of gross domestic product. As you can see, not much has changed over the past two years as far as our precarious financial condition is concerned. (Hat tip to Infectious Greed.)
This week brought forth a slew of economic statistics, with many reported data points beating Wall Street’s consensus estimates. That was enough to trigger calls from a number of mainstream economists that the economy had found a “bottom.” I don’t know what these so-called experts were looking at, but based on the following charts -- of durable goods orders, new single family home sales, Richmond Fed district manufacturing activity, and home prices -- their optimism seems somewhat unfounded.
Over the past several weeks, three central banks -- the Swiss National Bank, the Bank of England, and the Federal Reserve -- decided that they were not having much luck with traditional policy measures and initiated what some have called the “nuclear option”: quantitative easing (otherwise known as cranking up the printing presses). The hope was that by buying mainly longer-dated bonds with money created out of thin air, authorities could unlock frozen credit markets and drive down the cost of borrowing. Unfortunately, while the initial reaction to the announcement from each central bank was not unexpected, longer-term interest rates have since crept higher in all three cases, suggesting that investors are worried about the inflationary consequences of “policymakers gone wild.”
Finally, while no technical indicator is infallible, a quick read of the chart of the 50-day moving average of the CBOE’s composite put/call index (CPCI) vs. the S&P 500 suggests that when the CPCI experiences a ski slope-like decline over the course of several months, it often signals that a near term correction -- or worse -- will soon be at hand. Given what has been happening with this particular indicator lately, that may mean the oversold bounce from the early-March lows is poised to run out of steam.
Stocks ended the day sharply higher, boosted by better-than-expected earnings from Best Buy (+12.6%), data-driven hopes of an economic turnaround, and renewed strength in technology and cyclical shares.
At the close, the Dow Jones Industrial Average was up 174.75, or 2.3%, to 7,924.56. The S&P 500 Index gained 18.98, or 2.3%%, to 832.86. The Nasdaq Composite Index jumped 58.05, or 3.8%, to 1,587.00.
June gold futures slipped $1.60, or 0.2%, to $936.60, while the U.S. Dollar index added 0.4%. Ten-year Treasury bond yields fell four basis points to 2.74% and May WTI crude oil futures rose $1.23 to $54.00/bbl.
Michael Panzner
Copyright © 2009 All rights reserved.
CONTACT
INFORMATION
Michael Panzner
P.O. Box 115
Manhasset, NY 11030
Email | Website |
WrapUp Archive | Financial
Sense Editorial Archive
