It’s all about the GDP today and the whisper number is a miss of what now seems to be a 1.9% average estimate (down from 2.5% last Q). I’m not quite sure how we get a GDP miss with 68% of the S&P 500 beating estimates but it sure is spooking foreign investors this morning.
[8:30 update: It’s a big miss! 1.3% and inflation is up – Stagflation Rules!]
Asia dropped 1% today, finishing down a point for the week after 2 really nice days. They were down 2% on Wednesday so it’s not awful but there was a lot of nervous profit taking ahead of China’s week-long market holiday. The BOJ held rates steady but warned of future increases, sending chills up the spines of carry traders. Japan’s 2.1% GDP growth is up from zero, so that’s pretty impressive and the Japanese are worried about the lack of inflation after their decade-long deflationary cycle. "The economy is likely to continue its sustained expansion with a virtuous circle of production, income, and spending in place," the central bank said in the report.
Mazda earnings jumped 24%, led by strong North American sales in SUV and compact cars and I mentioned Matsushita’s 41% gain yesterday. PC sales are booming at Acer, the world’s #3 computer company, which bodes well for our HPQ calls. The dark spot on Asian earnings was NTT DoCoMo as Japan’s biggest cell phone carrier posted a 25% drop in income as they fight to keep market share.
European markets were weak ahead of our GDP and the numbers I’m seeing are unlikely to help but watch what happens next week when there is nowhere else for money to go. Japan is closed Monday, Thursday and Friday and China is only open on Monday and there are fears that Chinese officials may take advantage of the holiday to announce Central Bank tightening while the markets have time to digest it.
Commodity prices are coming under pressure in Europe as regulators there are beginning to fine de facto commodity cartels for price fixing. This is coming at the same time as Democrats here are calling for excess profit taxes, well timed in the face of another round of record oil company earnings.
We will be THRILLED to hold 13,000 today – as I said, next week there really won’t be anywhere else for Europeans to put their money so we stand to do well by default but first we have to get there without looking too undesirable:
|
|
|
Day’s |
Must |
Comfort |
Break |
Next |
|
Index |
Current |
Move |
Hold |
Zone |
Out |
Goal |
| Dow | 13,105 | 15 | 12,468 | 12,600 | 13,000 | 13,500 |
| Transports | 2,923 | -35 | 2,825 | 2,900 | 3,000 | 3,250 |
| S&P | 1,494 | -1 | 1,430 | 1,460 | 1,500 | 1,550 |
| NYSE | 9,715 | -31 | 9,218 | 9,465 | 9,600 | 10,000 |
| Nasdaq | 2,554 | 6 | 2,454 | 2,500 | 2,600 | 2,750 |
| SOX | 506 | 3 | 477 | 490 | 500 | 560 |
| Russell | 833 | 1 | 803 | 820 | 850 | 900 |
| Hang Seng | 20,526 | -140 | 20,200 | 20,600 | 21,000 | 22,000 |
| Nikkei | 17,400 | -28 | 17,400 | 17,500 | 18,300 | 18,500 |
| BSE (India) | 13,908 | -320 | 13,200 | 14,000 | 14,725 | 15,000 |
| DAX | 7,377 | -9 | 6,900 | 7,000 | 7,400 | 8,000 |
| CAC 40 | 5,938 | -6 | 5,650 | 5,800 | 6,000 | 7,000 |
| FTSE | 6,440 | -29 | 6,325 | 6,450 | 6,600 | 7,000 |
Well you didn’t think we were just going to blow through the right side of this chart did you? On the whole we’re in pretty good shape as long as we assume the pullback in Asia is really just pre-holiday profit taking. Europe is our main concern and if they hold up it tells us two very important thing:
- The Global economy is very strong
- We don’t really matter anymore.
Remember how the Russian or Italian economy could collapse and you wouldn’t think twice about going long on retail or manufacturing? That’s how the Europeans are starting to view us! In a way it’s a relief, there was a lot of pressure in being a Global leader and we should thank this administration for all the hard work they’ve done to ease us back down the ladder in World stature – they said you couldn’t spend 220 years of global respect building in 8 years but they managed to do it in less than 7 – kudos to all!
The one industry that’s growing and growing in this country for the past 6 years is getting a little tired looking as this latest GDP report indicates the energy industry may be killing the goose that lays the golden eggs. On the whole I didn’t think the GDP report was that bad so we’re not going to panic at the open as we have our mattress plays in place and we need to watch some key indicators before we start to worry.
Let’s watch that $65 line in oil but in a down market I don’t think anyone is going to want to go long on oil into the weekend, it would be a real tragedy if nobody dies or – even worse – if peace were to break out somewhere so let’s join our oil speculating friends in prayer that something truly awful will happen somewhere that will cause the suffering of as many people as possible so they can drive prices even higher and suck more of the disposable income away from the bottom 90% of society before they waste it on food or shcoolbooks. Amen!
