CNNMoney’s La Monica: Stocks Shouldn’t Be So High Without Imminent Recovery

“When it comes to predicting the outlook for stocks, you can quote Doris Day and Judy Holliday. Cry if you want to, the party’s over for stocks.

At least that’s the viewpoint of Paul La Monica, assistant managing editor for CNNMoney.

The Federal Reserve and European Central Bank have provided the spiked punch bowl that’s prompted the recent stock market boost. But they can’t keep the juice flowing much longer, warns La Monica. Take a step back and look at the ongoing challenges facing stocks and you wonder how they’ve done so well this year. ”

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“Central banks around the world have taken steps to simulate their respective economies, but monetary policy won’t spur more robust global growth, Citigroup analysts say.

The U.S. Federal Reserve has said it will buy $40 billion worth of mortgage-backed securities a month from banks on an open-ended basis, a policy tool known as quantitative easing that pumps liquidity into the financial system to spur investing and job demand.

The European Central Bank (ECB) has unveiled a scheme to buy sovereign debt in the open market to lower borrowing costs in troubled countries, while the Bank of Japan recently announced plans to expand the size of a monthly bond-purchasing program to jolt its economy.”

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Source 

“We have seen a number of leading indicators recently (for example, we were first to note the FedEx implications for GDP) that point to a rapidly rising probability of recession. Today, via Bloomberg Brief, is a look inside the Philly Fed state economic indexes. To be specific, we look at the six-month ahead outlook for each state. Only once in the last 30 years did 20 states possess a negative outlook and the overall economy avoid recession.

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“Today’s AM fix was USD 1,760.00, EUR 1,360.33 and GBP 1,088.03 per ounce.
Yesterday’s AM fix was USD 1,774.50, EUR 1,361.44 and GBP 1,092.54 per ounce.

Silver is trading at $34.31/oz, €26.61/oz and £21.28/oz. Platinum is trading at $1,619.50/oz, palladium at $663.50/oz and rhodium at $1,225/oz.

Gold fell $0.10 or 0.01% in New York yesterday and closed at $1,770.50. Silver hit $34.958 in Asia and fell to $34.27 in early New York trade and it then bounced back higher, but finished with a loss of 0.49%.

Gold edged down today due to dollar strength and profit taking as speculators and some investors booked profits on 16% price gains from this year’s low.

Gold continues to see smart money diversification as central banks from the ECB and the Fed to the BOJ have all announced ‘stimulus’ or money debasement measures which has led investors to seek gold as an inflation hedge.”

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“WASHINGTON—An insider of the secretive world of high-frequency trading is set to attack that industry Thursday on Capitol Hill, giving lawmakers a potential road map to address practices that critics say can put ordinary investors at a disadvantage and the financial system at risk.

Since rapid-fire trading firms now provide many of the buy and sell orders that support the market, investors are at the mercy of automated systems that can run amok during volatile times, according to Dave Lauer, who last year quit his job as a trader for an elite Chicago high-frequency trading outfit.

Mr. Lauer is part of a growing chorus of industry insiders blowing the whistle on approved trading techniques that they say are designed by the traders who derive the most benefit. Mr. Lauer is now a consultant on market-structure issues for Better Markets, a Washington, D.C., advocacy group funded by a hedge fund.

He plans to tell senators how he came to believe that high-speed trading has made the market less fair for many investors, according to his advance testimony for a Senate panel on computerized trading.”

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Gapping up

APOG +16.3%, SCS +6.8%, AIR +5.4%, PRAN +5.2%, QCOR +4.4%, CIM +3.7%, ACOM +2.9%

PNK +1.7%, AWK +0.9%,

Gapping down 

ASTI -7.6%, MLHR -7.3%, HZNP -7.2%, XPO -5.6%, NSC -5.1%, BBBY -5.1%, CQP -4.8%,

CSX -4.2%, KSU -3.5%, BBL -3.2%, TCRD -3%, BHP -2.7%, TOT -2.7%, RIO -2.6%,

UNP -2.4%, MT -1.8%, DB -1.5%, RDS.A -1.4%, JCP -1.2%,

ADBE, ATK, AWK, C, CLH, COH, GS, HAL, LM, LTD, MAR, MS, NSC, NVE, QCOR, TYC,

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In Play ,

On the Wires 

” Bank of America is planning to cut 16,000 jobs by year end as it speeds up a company-wide cost-cutting initiative amid declining revenues, The Wall Street Journal reported on Wednesday.”

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” Nomura is making wide-ranging cuts in its European investment banking division on Thursday, according to sources, with up to 30 percent of jobs likely to go.”

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“Earlier this morning, Markit published its Flash Eurozone PMI, a key indicator of economic activity.  And it was ugly.  The composite index fell to 45.9 from 46.3 in August.  This is a 39-month low.

The services sub-index was at a 38-month low of 46.0.

However, manufacturing Flash PMI climbed to 46.0, which is a 6-month high.

From Markit Chief Economist Chris Williamson:”

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B.I. is calling it a 1996 moment. Which way will the greenback break ?

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“(Reuters) – Nike Inc is beefing up its capacity to use its cash to purchase its own shares, with the board of the world’s largest sportswear maker approving an $8 billion buyback program.

The new $8 billion four-year repurchase program for Nike’s class B stock will follow the company’s current $5 billion buyback plan once that program is completed during the second quarter of fiscal 2013, Nike said on Wednesday.

“Over the past 10 years, Nike has returned $10 billion to shareholders through the repurchase of more than 167 million shares,” Chief Executive Mark Parker said in a statement, adding that share buybacks are a prudent use of Nike’s cash.”

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“FRANKFURT (Reuters) – The world’s largest chemicals makerBASF SE agreed to take over U.S. crop protection company Becker Underwood from buyout firm Norwest Equity Partners for $1.02 billion to boost its farming pesticides division.”

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“NEW YORK (MarketWatch) — ConAgra Foods Inc. CAG +0.04% said Thursday its first-quarter profit nearly tripled to $250.1 million, or 61 cents a share, from $93.8 million, or 23 cents a share, in the year-ago period. Adjusted profit rose to 44 cents a share from 31 cents a share. Sales increased by 6.7% to $3.31 billion. Wall Street analysts expected the food producer to earn 35 cents a share on sales of $3.24 billion, according to a survey by FactSet. ConAgra raised its adjusted fiscal 2013 profit outlook to $2.03 to $2.06 a share, ahead of the analyst forecast of $1.98 a share. ConAgra hiked its quarterly dividend by a penny a share to 25 cents a share.”

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Norfolk estimates their earnings to come in between $1.18-$1.25 vs consensus of $1.63 per share.

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“The biggest advances in commodities this year may be over because of mounting concern that policy makers aren’t doing enough to bolster economic growth at a time when producers are expanding supply.

The Standard & Poor’s GSCI gauge of 24 raw materials will end the year at 677, 3.1 percent higher than now, based on the median of 10 investor and analyst estimates compiled by Bloomberg. The index is 1.8 percent lower since the European Central Bank announced an unlimited bond-purchase program Sept. 6 and 3.8 percent below its level when the Federal Reserve pledged a third round of debt-buying Sept. 13.”

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“The euro dropped the most in two months against the dollar as an index of services and manufacturing in the region shrank to a three-year low.

The 17-nation currency declined for a third day versus the yen as the data added to evidence the debt crisis is sapping growth in the euro area. The yen and the dollar strengthened against most of their major counterparts after separate reports showed China’s manufacturing and Japanese exports declined, spurring demand for assets perceived as safer. Australia’s dollar and South Africa’s rand led losses among higher-yielding currencies.

“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”

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“Spain sold 4.8 billion euros ($6.2 billion) of bonds, the most since January, as the Treasury focused on short-term notes that would be targeted for central- bank buying in the case of a bailout.

The Madrid-based Treasury sold 3.94 billion euros of a new three-year benchmark at an average yield of 3.845 percent and 859 million euros of its 10-year benchmark at an average of 5.666 percent. That was the lowest since January and compares with 6.647 percent when it was last sold on Aug. 2.”

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