Big day today!
We have our GDP report at 8:30 but that will be quickly forgotten as Bernanke is called to testify on Capital Hill in what is quickly becoming BankAmericagate and the calls are coming for Bernanke’s learned head, most notably from San Diego Republican Darrell Issa, who has charged: "The Fed engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies."
The Democrat who heads the committee, Edolphus Towns of New York, has called Bernanke to testify on Thursday. "I am not going to prejudge these issues. We are not even close to finishing the Bank of America-Merrill Lynch investigation at this point," Towns said in a statement. The issue has become a political football as lawmakers look to blame someone for the troubled deal amid taxpayer anger over the billions of dollars the government infused into banks to try to ease the world financial crisis.
The goal of the Republicans is to vilify Bernanke (as he is now part of the current administration so they are hoping it rubs off on Obama) while trying not to remind people that they were in charge when this happened. That is truly confounding and it should be some circus today up on Capitol Hill as all the Congressmen jockey for their moment in the spotlight to show how much they care about our nation’s financial crisis by tying up the Federal Reserve with endless requests for documents and testimony at this critical juncture in our "turnaround."
I said to members yesterday, as this news was breaking: "So the spin on all this is going to be that it’s the attack on Bernanke and not the Fed move itself, that caused the sell-off. That will be enough to let them jam up the futures (maybe even a stick close) and keep Asia and Europe in the game, hopefully attracting more "bargain hunters" for US equities." That’s pretty much where we’re at this morning with the futures jammed up more than 1% into Asia’s open (midnight US), where Dow futures were trading 100 points above the 4pm close yet the S&P futures got rejected off that pesky 908 mark and have since fallen back below 900 as of 8:15. Asia responded as expected with 2% gains on the Nikkei and the Hang Seng but Shanghai was flat and the Baltic Dry Index has taken another sharp downturn, back to 3,751.
As you can see from Trader Mike’s Nasdaq chart, we are getting mixed signals but that’s what happens when the markets are manipulated – eventually the charts begin to look unreliable and that causes technical funds to pull back which then gives you the technical correction they’ve been looking for (any fundamental trader worth a damn got out weeks ago), so it all works out quite nicely.
What is not working out nicely is jobs as another 627,000 Americans lost their jobs last week. Since we are 1/20th of the global population and since our economy is actually a little better than most, you can imagine the global carnage this is causing. Small wonder NKE is having trouble. The number was UP 15,000 from last week and, if you were looking for those famous "green shoots" in housing, it is interesting to note that Florida is still listing construction layoffs as a leading cause of employment strife along with agriculture and, of course, manufacturing.
This pushes unemployment up to 9.4% and we are getting little relief from the GDP report, which is being finalized at -5.5%, up slightly from the 5.7% in the last revision. It’s not a good revision as inventories decreased less than once thought, with businesses drawing down $87.1 billion instead of the earlier reported $91.4 billion. That change drove up the government’s estimate for overall GDP but, the truth is the demand for goods is not there.
This big news in Asia today was the Sinopec deal to acquire Addax for $8.8Bn, which I wrote a whole article on so I won’t rehash it here. That news, as well as a timely call to Rent-A-Rebel that saved oil from breaking the $68.50 mark is keeping oil above $69 ahead of the US open. Europe is trading down about 2% this morning as those savvy European traders were not as easily fooled by shenanigans in the futures markets as their Asian counterparts and they are taking the money and running into the last few days of the quarter.
Not helping at all is the sharpest annual drop on record for Industrial Orders posted for April with new orders falling yet another 1% from March and now 35.5% for the year. New orders for intermediate goods slumped 38.3% on the year, while orders for durable consumer goods dropped 26.0% — both the largest declines on an annual basis ever recorded. New orders for capital goods dropped 39.1% on the year, while orders for nondurable consumer goods were 8.9% weaker than in April last year.
Despite the speedy assistance of Rent-A-Rebel attacking yet another pipeline in Nigeria. Criminal Narrators Boosting Crude are screaming that 136,000 barres of oil per day have been disrupted this month in Nigeria as if the person talking in their ear can’t do the math and realize that it represents just one tenth of one percent of the 86Mb daily global supply. No, this is just another ploy to allow the NYMEX pump crew to jack oil up 1.5% in overnight trading and avoid direct prosecution because it’s "only" a 15x overreaction to the fundamental change in supply (and we’re not even going to talk about the 4Mb of surplus capacity on hold by other OPEC members who would love to fill the bill at $69 a barrel). It’s a beautiful system, pay a dozen Nigerian kids $100 each to shoot guns at a pipeline and make $100M on the oil futures overnight. Do that 10 times a quarter and you drop a Billion to the bottom line…
We ended our day yesterday back in cash and fairly neutral and we’ll be watching to see what holds today. It remains tempting to bottom fish but we’d still like to see 8,200 properly tested on the Dow along with 890 on the S&P before we start getting confident.
