Daily State of the Markets 12/28: Snowed In?
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Good morning. Once again the bears had an opening on Monday. With China surprising nearly everyone on Christmas day by raising interest rates for the second time since mid-October, our furry friends had ample ammunition to spread some fear. However, it appears that our furry friends must have been snowed in Monday morning and just didn't have the energy to make it into work.
While most analysts had expected China to hike rates again before the end of the year, the timing of the move seemed to catch everyone off guard. Thus, it is easy to jump to the conclusion that Chinese officials are worried and have decided to get aggressive. And given that this could be considered a divergence from the stated goal of returning monetary policy to a more "prudent" mode, it would not have been surprising to see stocks take a hit on the move.
One argument for the reason stocks failed to take a dive on Monday would be the fact that the east coast was buried in snow. However, given the state of technology these days, I'm guessing that if traders really wanted to get the selling party started they could have easily done so from their Droids or iPads, or laptops.
Another thought as to why the rate hike in China didn't cause much of a stir is that the Chinese are merely returning their monetary policy to more normal levels. Thus, the fact that China is moving from a "moderately loose" monetary policy and moving toward a "more prudent" stance means that officials aren't exactly declaring war on inflation/asset bubbles at this point. And remember, the time to invoke the "don't fight the fed" rule is when a central bank is "on a mission" and not when they are simply adjusting policy for conditions.
One other thought as to why all the indices save the DJIA found their way into the green by the end of the session on Monday has to do with the alligators and the dippers. I don't know about you, but I've spent much of the last two weeks working on positioning portfolios for the New Year. Therefore, this is the time when the asset allocators (aka the "alligators) are busy moving things around. And since bonds are very overvalued while stocks are, at worst, fairly valued, those making allocation decisions are said to be moving money into U.S. stocks.
On that note, it is also interesting to recognize that 2011 is being talked about as the year of the U.S. in equities. Thus, it appears that the dip-buyers continue to do their thing each and every time stocks meander into the red for any length of time. And while we could certainly see this continuing into the New Years Eve celebrations, the real question is if the buyers will continue after the page on the calendar is turned.
To be sure, stocks are overbought and sentiment has reached extremes. As such, we need to understand that the market is vulnerable to disappointment at this stage. Therefore, while it is the season to celebrate and it does look like the first half of 2011 could be fun for equity investors; this is no time to become overly complacent.
Turning to this morning... Things are exceptionally quiet during this holiday-like week although the markets continue to have a buoyant feel so far.
On the economic front... We dont't have any data to reveiw before the bell, but we will get the Case-Shiller Home Price Index at 9:00 eastern and then Consumer Confidence at 10:00.
Thought for the day: You can choose a peaceful mode at any point of any day...
Pre-Game Indicators
Here are the Pre-Market indicators we review each morning before the opening bell...
* Major Foreign Markets:
o Australia: closed
o Shanghai: -1.74%
o Hong Kong: -0.93%
o Japan: -0.61%
o France: +0.42%
o Germany: +0.08%
o London: closed
* Crude Oil Futures: + $0.20 to $90.40
* Gold: + $14.30 to $1378.60
* Dollar: higher against the Yen, lower vs. Euro and Pound
* 10-Year Bond Yield: Currently trading lower at 3.339%
* Stocks Futures Ahead of Open in U.S. (relative to fair value):
o S&P 500: +1.66
o Dow Jones Industrial Average: +22
o NASDAQ Composite: +3.70
Wall Street Research Summary
Upgrades:
* General Motors (NYSE: GM) - Initiated Buy at BofA/Merrill
* General Motors (NYSE: GM) - Initiated overweight at Barclays, Credit Suisse
* HiSoft Technology (Nasdaq: HSFT) - Initiated outperform at BMO Capital
* LPL Financial (Nasdaq: LPLA) - Initiated Buy at Goldman Sachs, UBS
* Terremark Worldwide (Nasdaq: TMRK) - Target increased at Kaufman Bros
Downgrades:
* None
Long positions in stocks mentioned: None
For more "top stock" portfolios and research, visit TopStockPortfolios.com
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While most analysts had expected China to hike rates again before the end of the year, the timing of the move seemed to catch everyone off guard. Thus, it is easy to jump to the conclusion that Chinese officials are worried and have decided to get aggressive. And given that this could be considered a divergence from the stated goal of returning monetary policy to a more "prudent" mode, it would not have been surprising to see stocks take a hit on the move.
One argument for the reason stocks failed to take a dive on Monday would be the fact that the east coast was buried in snow. However, given the state of technology these days, I'm guessing that if traders really wanted to get the selling party started they could have easily done so from their Droids or iPads, or laptops.
Another thought as to why the rate hike in China didn't cause much of a stir is that the Chinese are merely returning their monetary policy to more normal levels. Thus, the fact that China is moving from a "moderately loose" monetary policy and moving toward a "more prudent" stance means that officials aren't exactly declaring war on inflation/asset bubbles at this point. And remember, the time to invoke the "don't fight the fed" rule is when a central bank is "on a mission" and not when they are simply adjusting policy for conditions.
One other thought as to why all the indices save the DJIA found their way into the green by the end of the session on Monday has to do with the alligators and the dippers. I don't know about you, but I've spent much of the last two weeks working on positioning portfolios for the New Year. Therefore, this is the time when the asset allocators (aka the "alligators) are busy moving things around. And since bonds are very overvalued while stocks are, at worst, fairly valued, those making allocation decisions are said to be moving money into U.S. stocks.
On that note, it is also interesting to recognize that 2011 is being talked about as the year of the U.S. in equities. Thus, it appears that the dip-buyers continue to do their thing each and every time stocks meander into the red for any length of time. And while we could certainly see this continuing into the New Years Eve celebrations, the real question is if the buyers will continue after the page on the calendar is turned.
To be sure, stocks are overbought and sentiment has reached extremes. As such, we need to understand that the market is vulnerable to disappointment at this stage. Therefore, while it is the season to celebrate and it does look like the first half of 2011 could be fun for equity investors; this is no time to become overly complacent.
Turning to this morning... Things are exceptionally quiet during this holiday-like week although the markets continue to have a buoyant feel so far.
On the economic front... We dont't have any data to reveiw before the bell, but we will get the Case-Shiller Home Price Index at 9:00 eastern and then Consumer Confidence at 10:00.
Thought for the day: You can choose a peaceful mode at any point of any day...
Pre-Game Indicators
Here are the Pre-Market indicators we review each morning before the opening bell...
* Major Foreign Markets:
o Australia: closed
o Shanghai: -1.74%
o Hong Kong: -0.93%
o Japan: -0.61%
o France: +0.42%
o Germany: +0.08%
o London: closed
* Crude Oil Futures: + $0.20 to $90.40
* Gold: + $14.30 to $1378.60
* Dollar: higher against the Yen, lower vs. Euro and Pound
* 10-Year Bond Yield: Currently trading lower at 3.339%
* Stocks Futures Ahead of Open in U.S. (relative to fair value):
o S&P 500: +1.66
o Dow Jones Industrial Average: +22
o NASDAQ Composite: +3.70
Wall Street Research Summary
Upgrades:
* General Motors (NYSE: GM) - Initiated Buy at BofA/Merrill
* General Motors (NYSE: GM) - Initiated overweight at Barclays, Credit Suisse
* HiSoft Technology (Nasdaq: HSFT) - Initiated outperform at BMO Capital
* LPL Financial (Nasdaq: LPLA) - Initiated Buy at Goldman Sachs, UBS
* Terremark Worldwide (Nasdaq: TMRK) - Target increased at Kaufman Bros
Downgrades:
* None
Long positions in stocks mentioned: None
For more "top stock" portfolios and research, visit TopStockPortfolios.com
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
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Credit Suisse, UBS, Kaufman Bros., Bank of America, BMO Capital, Standard & Poor's, Barclays, Crude Oil
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