Don't Find Yourself on the Sidelines
by Jamie Dlugosch 01/07/09
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World stocks were mostly mixed over night given the concern over global economics. Japan put in a gain of 1.7% on a weaker yen. Hong Kong was down sharply with a 3.4% loss on news that Bank of America is liquidating its stake in a Chinese bank. South Korea was up 2.8% and Australia moved 1% higher. European stocks opened lower. Britain fell by more than 1% with Germany and France down fractionally.
Dow futures are selling off this morning on the Alcoa news. As I stated previously, the New Year rally will require news to be not as bad as expected to hold.
As we move closer to the key Friday employment number look for traders to get a bit more nervous. We had a few sessions of smooth sailing so to give some back here is not the end of the world. Ultimately the economic data will dictate where we go from here.
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Next week we start to hear directly from the companies. My guess is that the news will be just as expected. That means we will have avoided the worst. That is why stocks are up more than 20% from the lows. Guidance will be important and even though job cut announcements like we see from Alcoa are painful, they are required for companies to stand a chance in this environment.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
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In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
