Today’s Markets
- In Asia, Japan +0.1%. Hong Kong -0.9%. China +0.2%. India -0.6%.
- In Europe, at midday, London -0.9%. Paris -0.7%. Frankfurt -1.1%.
- Futures at 7:00: S&P -0.51%. 10-yr +0.2%. Euro -0.44% vs. dollar. Crude -0.9% to $98.20. Gold -0.63% to $1534.30.
Wednesday’s Economic Calendar
- Wednesday’s economic calendar:
7:00 MBA Mortgage Applications
10:00 Quarterly Services Report
10:30 EIA Petroleum Inventories
12:20 PM Fed’s Hoenig: Economic Outlook
1:00 PM Results of $21B, 10-Year Note Auction
2:00 PM Fed’s Beige Book
Although it is moving in the right direction, the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established. At the same time, the longer-run health of the economy requires that the Federal Reserve be vigilant in preserving its hard-won credibility for maintaining price stability. As I have explained, most FOMC participants currently see the recent increase in inflation as transitory and expect inflation to remain subdued in the medium term. Should that forecast prove wrong, however, and particularly if signs were to emerge that inflation was becoming more broadly based or that longer-term inflation expectations were becoming less well anchored, the Committee would respond as necessary. Under all circumstances, our policy actions will be guided by the objectives of supporting the recovery in output and employment while helping ensure that inflation, over time, is at levels consistent with the Federal Reserve’s mandate.
The New York Stock Exchange publishes end-of-month data for margin debt on the NYXdata website, where we can also find historical data back to 1959. Let’s examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter…
…The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its real all-time high. A similar surge began in 2006, peaking in July, 2007, three months before the market peak…
…After the market low of 2009, margin debt again went on a tear until the contraction in late spring of 2010. The summer doldrums promptly ended when Chairman Bernanke hinted of more quantitative easing in his August 27th Jackson Hole speech. The appetite for margin instantly returned.
Unfortunately, the NYSE margin debt data is a few weeks old when it is published. In nominal terms, margin debt at the end of April, the latest available data, was at a level comparable to February 2008, just weeks before the Fed arranged the Bear Stearns buyout by JP Morgan Chase. The May margin numbers will almost certainly reflect the recent market correction. What remains to be seen is whether a continuation of the correction will occasion a feedback loop — an increase in margin calls that would, in turn, trigger more selling.
The Federal Reserve has done more than enough to get the economy back on track, and it will do no more, a top Federal Reserve official said in an interview Tuesday.
Federal Reserve Bank of Dallas President Richard Fisher said that when it comes to the central bank bond buying program referred to as QE2, “it’s over at the end of June,” as planned. “My vote will be not to extend it, and I doubt there will be much discussion about extending it” among other policymakers, Fisher said.
“We’ve done an awful lot” to aid the economy in light of zero percent interest rates and large scale purchases of things like Treasury and mortgage-related securities, Fisher said. “We’ve provided the fuel. The real issue is who is going to step on the accelerator” and boost economic activity, he said.
The central banker noted consumers and firms are still traumatized by the economic and financial difficulties of recent years, and that’s part of why growth levels are still struggling. But he does expect activity to pick up: “The next half of the year will have better growth than we’ve seen recently,” Fisher said. “It’s not going to be robust” and he expects to see a “jerky motion” to activity. The official also noted unemployment won’t fall as fast as many would like to see.
How bad is it for the bulls out there? Pretty bad. Each day in our Stock Odds report we look at the stocks in the Russell 1000 that had the biggest moves on the day as well as those that are currently riding the longest winning or losing streaks. Today’s report shows that there are only two stocks in the index that have been up more than two days in a row. The first is Digital Realty Trust (DLR), which is a name most readers have probably never heard of. The company, which is a REIT that operates technology related sites, has actually been up in each of the last four trading days. The second stock is Wal-Mart (WMT), which is a name that investors don’t exactly run to when they think the economy is on a roll. It has now traded higher for three days in a row.
Yesterday, (Monday) the percentage of stocks that are currently oversold exceeded 50% for the first time since March 16th. As shown in the chart below, over the last year, prior spikes where the percentage of oversold stocks exceeded 50% led to at least short term rallies in the S&P 500. After five straight weeks of losses, bulls are hoping that history repeats itself.
WASHINGTON — The debit card battle that has engulfed lobbyists and lawmakers in the nation’s capital all year will come to a head on Wednesday, with a vote set for 2 p.m.
At stake are roughly $16 billion a year in “swipe fees” that merchants pay to banks for the privilege of allowing their customers to shop with plastic. New federal rules aiming to rein in those fees are slated to take effect on July 21, and as the clock ticks down to a final vote, an already bizarre Washington lobbying scramble is getting weirder and wilder.
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon asked Federal Reserve Chairman Ben S. Bernanke whether regulators have gone too far by reining in the U.S. banking system and are slowing economic growth.
Dimon asked whether the central banker has measured the cumulative effects of new capital requirements, mortgage standards and other rules imposed on the system in the wake of the U.S. financial crisis. Dimon, 55, spoke yesterday in a question-and-answer session after Bernanke addressed a conference of bankers in Atlanta.
Dimon asked Bernanke if he “has a fear like I do” that overzealous regulation “will be the reason it took so long that our banks, our credit, our businesses and most importantly job creation to start going again. Is this holding us back at this point?”
The Saudi monarchy’s decision to roll tanks into neighboring Bahrain to help quell an uprising — as well as the rebellions in Libya and Syria — may give some investors pause. Not Burbank, a hedge-fund manager who made his name by earning a 220 percent net return in 2007 after shorting subprime mortgages.
He sees little chance that the Saudi regime will be overthrown or that crude prices will collapse. As the insular kingdom opens up to foreign investors — it didn’t permit outsiders to buy Saudi stocks until 2008 — Burbank says now is the time to plow into the country’s petroleum-rich economy.
He’s acquiring stakes in publicly traded petrochemical companies, banks, construction firms and even health-care providers. The Saudi investments made up about 11 percent of Passport’s $2.1 billion flagship fund, Global Strategy, as of May.
Bonus: Steve Jobs pitching Apple’s new headquarters to the Cupertino City Council. Includes slideshow, black turtleneck and jeans. No “One more thing.” (H/T TechCrunch)
Extra Bonus: NYC Intersection from Above (H/T Kottke)
3-Way Street from ronconcocacola on Vimeo.