Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

Some folks just have a way with words.

From “Technically Speaking, Market Analysis and Theory”, the blog of Ron Sen, M.D., on the chart of the 10-year note yield as it takes off:

Here’s the yield on the Ten-year note. The Federal Reserve says inflation is contained. The bond market argues differently. You print dollars like a banana republic, and it shows up somewhere. Mark Boucher’s ‘coconut economy’ in The Hedge Fund Edge (one of the best investment books I’ve ever read) illustrates this well.

I went to the grocery store the other day and hamburger was $3.99 a pound. When I started private practice 15 years ago, my malpractice insurance was about $6,000 dollars a year, now it’s over $22,000. When I started college in 1973, tuition, room, and board were about $5100 dollars. The likely choices for my twins this fall are either Dartmouth, Duke, BC, or Tufts, ranging from $43,000 to 45,000 a year. John Succo, a hedge fund manager, informed me that using pre-hedonic statistics, the CPI is increasing about 8 per cent annually now.

I’m not talking gloom and doom, or Dow 5000; I am saying that listening to the endless cheerleading from Wall Street will make you crazy and poorer. So as they say, “don’t pee on my leg and tell me it’s raining.”

From Matt Davio’s blog, just before the market close today:

The rejection has become even stronger, and the selling is beginning to cause some real concern among traders. Perhaps it should…this is the first time since January 3, 2000 that we’ve seen the S&P hit a new yearly high, then reverse to close lower with the largest intraday range in at least 30 days - in other words, a strong rejection of a new high. In the past decade, this has happened 5 times and the S&P was lower 3 days later 4 of those times by an average of -3.4%.

The Senate almost slipped up and got something done this week - although I’m not sure it would have really accomplished anything anyway. But you’ll be comforted to know that by week’s end, the Silly Senators remembered just how useless they really are, and gave up on the idea.

The S&P 500 slammed into both ends of its cage today, trying to break free, but was unable to escape.

Chart courtesy of StockCharts.com

The market got another bad case of interest rate jitters today, which sent stock prices lower across the board. The Dow Industrials fell 96 points (-0.9%) to 11120, the S&P 500 unloaded 14 points (-1.0%) to 1296 and the Nasdaq fell 22 points (-0.9%) to 2339. The Russell 2000 dropped 10 points (-1.3%) to 756. The Dow Transports lost 0.8% and the Utilities got whacked again, falling 1.8%. Bonds had a rough day, sending yields much higher, especially on the long end of the curve. The picture shows the 6-month at 4.85%, 2-year at 4.88%, 5-year at 4.89%, 10-year at 4.96% and the 30-year cracked the 5 percent barrier at 5.04%.

Market internals were, well, pretty poor. As bad as we’ve seen them in quite a while. But volume didn’t go through the roof, actually falling slightly on both exchanges. Advance/declines were worse than 1 to 4 on the NYSE and 6 to 13 on the Nasdaq, with up/down volume 1 to 6 on the NYSE and 2 to 7 on the Nasdaq. New highs/lows were 161/104 on the NYSE and 177/40 on the Nasdaq.

The group scoreboard showed red, red, and more red. Leading the move lower were gold & silver stocks (-2.5%), steel stocks (-2.4%), semiconductors (-1.8%), oil services (-1.8%), networkers (-1.8%), internets (-1.7%), utilities (-1.6%), commodities (-1.5%), REITs (-1.5%) and natural resources (-1.4%). Plenty more groups suffered losses greater than one percent. Not a real good day.

Energy prices were slightly lower, with crude down 50 cents to $67.45/barrel, gasoline down a penny to $1.98/gallon and natural gas slipping to $6.67/mmBTU. The dollar got a boost from the higher yields, sending the dollar index up to 89.68. Gold pulled back to $588/ounce and silver fell a few cents to $12.02/ounce.

BMB Note: Hmm. Not a real good day. But a disaster? Not just yet. Volume was relatively light, and the damage done certainly wasn’t severe at this point - the S&P moved from the top end of its recent range (around 1310) back to the bottom (around 1295). That’s about it.

The persistent move higher in interest rates is a concern, however, as we look down the road. As BMB has mentioned here before, and as was referenced earlier in the week, the stock market is at the mercy of energy prices and interest rates for the time being. The climb in interest rates, while it may have its pullbacks, is starting to gain momentum, especially with central banks around the globe raising rates in unison. The higher rates will have an effect sooner or later. Money is still in plentiful supply, but it’s getting more expensive to get your hands on it. On the flip side, the higher rates will be great news for savers, assuming they can stay one step ahead of the inflation that no one admits exists. But the fact that savers/investors can finally get halfway decent returns on their cash will also reduce their incentive to invest in stocks. It has already done that in BMB land, where short-term US Treasuries have come into play. 3-month and 6-month T-Bills are currently yielding 4.5-4.7%, and are likely to move higher as the Fed hikes continue.

Reported on CNBC that the oil ETF has been approved by the SEC and will begin trading Monday on the AMEX under the symbol “USO”.

More if/when I find it…

Update: There’s this info at Marketwatch.com.

Things got off to a fair start this morning, but have turned south since then. Just as we suspected might happen, the relatively strong jobs report has sent bonds lower and yields higher, and stocks are taking a hit. The major indices are now trading near their lows of the session, but we are nearing that time of the morning when things have tended to make yet another reversal…

The majors are in the red by a half-percent or so, and advance/decline figures have moved well into the red to their lows of the day thus far. Group action has most everything red as well, with gold & silver stocks, steel stocks, oil services and natural gas stocks getting the worst of it, followed closely by utilities and semiconductors.

Bonds are getting smacked around again, and the 10-year yield has pushed up to 4.93%, with the 30-year moving through 5 percent to 5.01%.

Energy prices are down just slightly. The dollar is getting a little help from the higher rates, and gold and silver prices are pulling back.

According to the Labor Department, 211,000 non-farm payroll jobs were added in March, and February’s job increase was revised upward to 243,000 vs. 225,000. The reported unemployment rate fell to 4.7%.