Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What to Watch as the Fed Abandons U.S. Stocks

Stock-Markets / Stock Markets 2011 Jun 20, 2011 - 05:06 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleJon D. Markman writes: Without any more help from the U.S. Federal Reserve, U.S. stocks are on their own - and they're in for a rocky ride.

Markets have slumped as the Fed has not indicated it will initiate another round of quantitative easing, and last week was a sign that there's more volatility ahead.


Stocks were as jittery as June bugs, jumping higher in the first couple of days and the last couple of days on signs of improvement in the economy, but sinking hard in the middle on renewed fears about European debt woes.

In the end the major U.S. indexes were up by a whisker for the week. The Dow Jones Industrial Average rose 0.4%, the Standard & Poor's 500 Index rose 0.01%, the Nasdaq fell 1% and the Russell 2000 small caps rose 0.3%. On Friday, 67 stocks on the three U.S. exchanges hit new highs, while 170 hit new lows.

Contributing to the jumpiness was a key data point released on Friday: the University of Michigan survey on U.S. consumer sentiment. The index took a larger-than-expected face-plant in June, sinking to the lowest level of the past few months and logging the first decline since February. Consumers are definitely becoming more pessimistic, or at least less optimistic, than they had been earlier in the year.

The numbers show that confidence has not run off the road, but preliminary data shows that the first half of this month has been scary for people -- and scared people don't go out and buy cars, make lavish vacation plans or buy big pieces of jewelry as birthday gifts. They pull in their buying appetites a bit, and that can impact retailers' and manufacturers' earnings.

Who can blame consumers, though, right? There are threats of downgrades to the U.S. debt rating, the Fed chairman in a speech called the recovery -- which he helped engineer --"frustratingly slow," and there has been an endless string of natural disasters.

On the positive side of the ledger, gasoline prices have fallen hard, which takes away the evil "pump tax" that cuts into households' budgets.

Now looking a little more broadly, one more report came across the wire late last week that you need to know about.

The U.S. leading index of economic indicators rose 0.8% in May, which was above expectations and the largest advance since February. The main reason was an increase in building permits, capital goods orders and a slight decline in jobless claims.

Now when you put these data points into a cocktail shaker and pour it out, it seems that the overriding sentiment is worry. That's probably why the number of Google searches for "double dip recession" has surged and the old "Misery Index" -- inflation plus the unemployment rate -- has hit a 28-year high.

My sense in talking with customers, friends, cab drivers, grocery store clerks, random parents at my son's high school graduation and watching trending Twitter topics is that people are not as gloomy as all these indicators seem to suggest. It really takes a lot to knock down the spirit of Americans in the summer, when school is out and the sky is blue, MLB pennant races are heating up, and thoughts turn to Fourth of July barbecues and vacations.

Yet we need to respect the fact that due to the thinning number of jobs, the lack of wage increases, the squabbling in Congress, the mess in Europe and paralysis at big companies ranging from Research in Motion Ltd. (Nasdaq: RIMM) to Bank of America Corp. (NYSE: BAC), no matter how good people feel at their core they may simply be unwilling or unable to spend as much as they have in years past. And there is no getting around the fact that this is going to condemn the United States to a couple of years of sub-par gross domestic product (GDP) growth.

From a stock market perspective, investors have felt as if they had one ace in the hole at times like this. They have always figured that if things get really bad the U.S. Federal Reserve Bank will play its quantitative easing card again, print more money and all will be well in the realm of finance.

But Fed Chairman Ben Bernanke has spent the past few weeks trying to dampen that expectation, and my guess is that signs of a renewed economic slowdown will not prompt a knee-jerk reaction from the central bank when its two-day policy meeting finishes up on Wednesday.

Moreover, the statement issued by the Fed's rate-setting committee is likely to acknowledge a deceleration in momentum, and the chairman will restate the same in his news conference. Yet because the Fed thinks that the slowdown is due to temporary factors like the bad weather and the supply disruption stemming from the Japanese earthquake, it is not going to offer any hint of a new round of quantitative easing -- especially since there is growing evidence that the last round did not help much.

Traders love this market volatility, while investors should be looking actively for bargains. Wall Street is a zero-sum game; for one party to win, another must lose. The markets may be in a bit of a no-man's land at the moment, but this sort of jumpiness creates the sort of fog that experienced investors leverage to their advantage. People with conviction about value and opportunity make their greatest strides at times like this when the herd lacks direction.

While bargain hunting, the one thing investors should watch with an eagle eye is the 1,250 area of the S&P 500. That is the line in the sand for the intermediate-term trend. If bulls do not buy the market by the 1,247 level -- a couple of points below the 1,250 level -- then they will be making a clear statement that the entire QE2 rally in U.S. stocks from September of last year may need to come undone.

Bottom Line:U.S. stocks are going to be on their own during the next few weeks, with no pats on the head or backstopping by the Fed. That should provide more volatility than ever, and thus opportunities for traders and long-term investors. Look for utilities, consumer staples and healthcare to outperform, and tech to suffer.

The Week Ahead
June 20: No economic releases scheduled.

June 21: Existing home sales for May.

June 22: Federal Reserve's Open Market Committee will announce its short-term target for interest rates and issue a statement on the health of the economy. Fed Chairman Ben Bernanke will speak at a press conference afterwards at 2:15 pm ET.

June 23: Initial unemployment claims for the past week; New home sales for May

June 24: Durable goods orders for May; GDP estimate for the first quarter.

[Bio Note: Money Morning Contributing Writer Jon D. Markman has a unique view of both the world economy and the global financial markets. With uncertainty the watchword and volatility the norm in today's markets, low-risk/high-profit investments will be tougher than ever to find.

It will take a seasoned guide to uncover those opportunities.

Markman is that guide.

In the face of what's been the toughest market for investors since the Great Depression, it's time to sweep away the uncertainty and eradicate the worry. That's why investors subscribe to Markman's Strategic Advantage newsletter every week: He can see opportunity when other investors are blinded by worry.

Subscribe to Strategic Advantage and hire Markman to be your guide. For more information, please click here.]

Source :http://moneymorning.com/2011/06/20/the-one-thing-to-watch-as-the-fed-abandons-u-s-stocks/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in