World Economic Forum in Davos sees trouble ahead.
Thursday, January 28, 2010. 9:15 am.
In its first major debate yesterday, economists, large investors and money managers attending the WEC annual meeting in Davos, Switzerland mostly predicted that economies in the U.S. and Europe will see their economic recoveries stall later this year, and global recovery elsewhere will depend on fast developing countries like China and India.
George Soros said he backs President Obama’s plan to limit trading and risk activities of major banks, an idea that is spreading through Europe as an approach to prevent future problems, but criticized the timing as premature coming before the banking industry has fully earned its way out of loan losses and other problems.
Why did the Fed ignore the housing industry in its statement?
The Fed’s announcement after its FOMC meeting yesterday was interpreted as positive since the phrasing in the closely watched announcement was changed from saying the economic recovery would be “weak for a time” to saying it will be “moderate for a time”.
But did anyone else notice that it completely dropped its remarks made in previous FOMC announcements about an improving housing sector?
Could that have been a last minute decision, as in if you can’t say something good about it don’t say anything at all?
Could be, given this week’s reports that new housing ‘starts’ unexpectedly fell 4% in December, that after several months of increases existing home sales fell a huge 16.7% in December, the largest monthly decline in 40 years, and yesterday’s report that new home sales unexpectedly fell 7.6% in December, following a plunge of 9.3% in November.
It was a strange omission given the importance of the housing industry to the the economy, and the government’s focus on its recovery now that the banks have been saved.
The announcement did confirm that the Fed still intends to end its purchases of up to $1.25 trillion of agency mortgage-backed securities by March 31, a program that has been an important source of mortgage credit over the last year. So at least that is an indication they don’t see the housing industry as likely to head south again
Did last week’s market plunge find downside support?
Last week’s 5.2% three-day plunge halted with the major indexes just about on their 20-week moving averages. That is the support level that has ended all the ‘pullbacks’ so far in this bull market. And so far this week the major indexes have rallied fractionally off that potential support.
Yesterday in the U.S. Market.
Finally a day when market weakness in the early going was followed by strength in the afternoon. And volume picked up some on the up-day, with 1.3 billion shares traded on the NYSE.
Note the volatility after the Fed’s FOMC meeting announcement was released at 2:15 p.m., first a spike down, then a spike-up and then a continuation of the upside to a positive close.
Yesterday’s intraday chart:
The Dow closed up 41 points, or 0.4%. The S&P 500 closed up 0.5%. The NYSE Composite closed up 0.1%. The Nasdaq closed up 0.8%. The Russell 2000 closed up 1.0%. The DJ Transportation Avg. closed up 0.5%.
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Asian Markets finally put in a positive session.
While the U.S. market has been trying to recover this week from last week’s plunge, Asian markets continued with more sharp declines. But last night it had a positive session.
The DJ Asia-Pacific Index closed up 0.9%.
Among individual countries:
Australia closed up 0.6%. China closed up 0.3%. Hong Kong closed up 1.6%. India closed up 0.1%. Indonesia closed up 2.1%. Japan closed up 1.6%. Singapore closed up 1.9%. South Korea closed up 1.0%. Taiwan closed up 1.8%.
If you’d like to see a three-month chart of any or all of the above indexes click here, and then click on any of the markets in the similar list at the left side of the page it takes you to.
Markets this morning.
European markets are up some, on average of about 1/2%.
Oil is up fractionally, up $.33 a barrel at 74.00 at the moment.
Gold is up $3 an ounce at $1,090.
Markets in the U.S.
This week’s heavy schedule of potential market-moving economic reports continues. To see the full schedule of the reports click here, and look at the left side of the page it takes you to.
Monday it was a shocker, that Existing Home Sales plunged 16.7% in December, the biggest monthly drop in 40 years. Tuesday it was that Consumer Confidence rose to 55.9 in January from 52.9 in December. Yesterday it was that New Home Sales unexpectedly fell 7.6% in December, and the Fed’s FOMC announcement which was taken as a positive regarding the economic recovery.
Today’s reports were released at 8:30 a.am. The Commerce Department reported that Durable Goods Orders rose 0.3% in December after a 0.4% decline in November. It was less than forecasts of a 1.7% gain.
And the Labor Department reported that the number of new claims for unemployment fell by 8,000 last week to 470,000, not as positive as the consensus forecast for a decline of 28,000 claims to 450,000.
Earnings reports this morning are mostly better than estimates; Motorola, 3M, Textron, Raytheon, Colgate Palmolive, Eli Lilly, Ford.
(Two of our previous “Stock of the Month” selections (see top of column at right) McCormick & Co (MKC), and Celgene (CELG) reported sharply higher 4th quarter earnings.).
Our pre-open indicators this morning are positive, pointing to the Dow being up 50 points or so in the early going.
Stock Market Patterns.
The next ‘monthly strength period’ is due to begin today, and to run through next Thursday, Feb. 4.
Interesting Chart of the Morning.
I noted above how the big declines last week by the major market indexes (Dow, S&P 500, Nasdaq, Transportation Avg, etc.) stopped last week at the potential support at their 20-week moving averages.
On Mon
day I showed you how last week’s big decline also had the major indexes short-term oversold beneath their short-term 21-day moving averages to a degree likely to bring at least a short-term bounce back up to the m.a., but that the key will be what happens as it approaches the potential short-term resistance at the m.a.
So far this week the market has been making an attempt to rally.
Please scroll down to see other recent ‘Interesting Charts of the Morning’.
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