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My stars... S&P have downgraded GE and GE Capital (but have retained the AAA rating on both). For the moment GE and its finance have been placed on 'negative outlook' - which is S&P's internal speak for "We are too gutless to have downgraded this piece of crap before it blew up... the stock's down 50%, but things might get worse from here".
One of GE's primary income streams is selling stuff to the US government so that the US government can cause other people's children to be ripped into steaming bloody piles of meat. That is the only client of GE that will exhibit less price-sensitivity as time goes by; the rest of GE's businesses are dead in the water, and GE Capital should have been cut to junk a year and a half ago.
As I have said before, S&P and Moody's and Fitch are all absolutely useless - the 'service' they provide is in no way fit for purpose, and utterly fails to provide any insight. If you want to know what something will be rated by S&P in a month's time, look at the trajectory of its share price (or bond price) over the last six months.
Perhaps that's where people get the idea that markets are efficient - they are a better predictor of bond risk than S&P and the rest of the conflicted, hopeless ratings agencies. Frankly, that's not much of a test: there is a small wad of dried chewing gum on the bottom of my sneakers that has a better track record than S&P, Moody's and Fitch.
Economic News
The Philadelphia Fed index of activity rose to -32.9; like all diffusion indices, this is worthless. I seldom bother even reporting on it.
Even worse than that though, is the stupid - and misleadingly titled - 'Leading Economic Indicators' series. It is a curve-fitter's wet dream - an overspecified linear regression with 10 'explanatory' variables (all of which are actually endogenous). It 'fits' history because of the overspecification - despite having explanatory variables that are of different order of integration. In other words, it was assembled by someone who didn't understand economic theory or statistical theory - someone from the school of statistics-generation who could not give a shit if the methodology is ridiculous, so long as the R2 is good enough for the 'statistic' to be marketable to journalists.
So anyway - I refuse to report on the LEI. It was released today as well - if you think it means anything, then go look it up.
New Jobless claims fell to 550000 (the market had expected a fall to 556000); the continuing claims number fell from its prior 26-year high.
Frankly, US government statistics are not worth the bandwidth they're transmitted on; the changes to methodology have rendered current statistics completely non-comparable with historical data.
For example: John Williams (not the guitarist from Sky, nor to the composer of the tune to Star Wars) from Shadow Government Statistics has shown that if you calculate the unemployment rate using the same methodology as was used up until the Clinton years, the reported unemployment rate in the US would be 16.5%.
You might say "Well, the calculations were changed to give a better picture of [X or Y]"; to which I say "Fine - but then you have to go back and calculate what the unemployment rate would have been - based on this methodology - in 1933".
To do otherwise is to compare different measures of the same thing.
As an example - let's say that you were interested in shoe sizes. We want to know the average shoe size of guys like me.
Let's say that for fifty years running the shoe size associated with feet the size of mine is reported as "12". Then all of a sudden I report that my shoe is a size 46.5, you would think perhaps that I had gigantic flippers. (Sidenote: I wish I had gigantic flippers...)
If it turned out that the basis for measurement had changed (from US sizes to Euro sizes), you would need a conversion algorithm to make any sort of valid comparison.
And of course it would be absolute nonsense to say "the average shoe size for 6-foot-2 men was 12 in 1998, but rose to 46.5 by 2008".
But that is precisely what has happened to the US unemployment rate, to US GDP, and to US price indices. Not to the same extent as my shoe-size example - that would be too obvious.
By pretending that prior measures of [insert your indicator of choice] over- or under-estimates the 'actual' level of the indicator concerned, you create a 'methodological breakpoint'. You can then go back and re-calculate the data, but invariably the back-dating is only done for ten or so years.
In any case, people don't recall the new number - they remember what they read about at the time.
When making comparisons between periods for which the data has not been reconstructed, journalists (and some analysts) make comparisons without having the intelligence to understand that they are comparing apples with hotdogs. So people write "In 1933 the unemployment rate was 27% and - using your new shiny methodology - you're reporting 6-and-a-bit... so things must be waaaay less bad, no?"
The lack of historical context for 'revised' economic data is an absolute key plank of government efforts to divert public awareness of the failure of politically-driven economic policy.
Well, I say 'failure' with my fingers crossed,, because I think that economic policy is formulated with the overarching goal of transferring wealth and power to politically-favoured groups. in that sense, policy has fulfilled its aims perfectly.
Headline Indices
The Dow Jones Industrial Average dropped 219.35 points (2.49%) to 8604.99 points. The index high for the day was 8883.36, set ten minutes after the open, while the low of 8527.41 occurred with 34 minutes left in the session.
Total volume traded in the 30 components of the index was 1.07bn shares. Decliners outpaced gainers by 5 to one, with 25 decliners to 5 advancers. Declining volume was greater than advancing volume by 994.52m to 78.52m shares. The main decliners (in percentage terms) were -
- General Motors (GM) -0.71 (16.2%) to $3.66 on volume of 41.57m shares;
- General Electric (GE) -1.43 (8.2%) to $15.96 on volume of 151.59m shares;
- Intel (INTC) -1 (6.6%) to $14.26 on volume of 72.65m shares;
- Alcoa (AA) -0.58 (5.6%) to $9.77 on volume of 22.87m shares; and
- Caterpillar (CAT) -2.49 (5.6%) to $42.16 on volume of 12.44m shares.
The S&P500 index (SPX) slid 19.14 points (2.12%) to 885.28 points. Total volume traded in the 500 components of the index was 4.25bn shares. Decliners beat the gainers by 2.7 to one, with 352 decliners to 130 advancers. Declining volume was greater than advancing volume by 3.33bn to 834.17m shares. The main decliners (in percentage terms) were -
- General Motors (GM) -0.71 (16.2%) to $3.66 on volume of 41.57m shares;
- Federated Investors Inc. (FII) -3.17 (16%) to $16.59 on volume of 5.95m shares;
- Nabors Industries Ltd. (NBR) -2.07 (15.9%) to $10.92 on volume of 9.82m shares;
- ENSCO Int'l (ESV) -4.41 (13.8%) to $27.62 on volume of 4.03m shares; and
- MEMC Electronic Materials (WFR) -2.14 (12.8%) to $14.52 on volume of 10.79m shares.
The Nasdaq Composite dipped 26.94 points (1.71%) to 1552.37 points and the Nasdaq100 dipped 21.17 points (1.73%) to 1204.69 points..
The Nasdaq100 index (NDX) lost -21.17 points (1.73%) to 1204.69 points. Total volume traded in the 100 components of the Nasdaq100 was 862.53m shares. Decliners exceeded gainers by 3.4 to one, with 75 decliners to 22 advancers. Declining volume was greater than advancing volume by 708.26m to 152.62m shares. The main decliners (in percentage terms) were -
- Joy Global (JOYG) -2.4 (9.4%) to $23.11 on volume of 5.92m shares;
- NVIDIA (NVDA) -0.86 (9.2%) to $8.46 on volume of 13.44m shares;
- Foster Wheeler (FWLT) -2.46 (8.9%) to $25.06 on volume of 4.21m shares;
- Broadcom (BRCM) -1.62 (8.6%) to $17.28 on volume of 14.02m shares; and
- Flextronics International (FLEX) -0.17 (7%) to $2.25 on volume of 8.25m shares.
Volatility
The CBOE Volatility Index slid 2.5 points (5.02%) to 47.34 points and the CBOE Nasdaq100 Volatility Index fell 2.01 points (4.18%) to 46.03 points. Interesting to note that volatililty has been contracting even on down days - it is well off the readings of 80-odd that were seen less than a month ago.
Breadth and Internals
[Note - NYSE total and A/D volume figures are again stuffed up. I think it's time to change data providers]
A total of 3920 issues traded today on the NYSE; today's total volume was 1.93bn shares. A total of 1573 stocks posted gains for the day, and volume in advancing issues totalled 1.48bn shares. Exerting downwards pressure on the index were 2268 losers, which accounted for a total declining volume of 0.41bn shares. 24 stocks made new 1-year highs on the NYSE, while 85 shares plumbed new 52-week depths.
On the Nasdaq 3006 tickers traded today; total Nasdaq volume was 2.02bn shares. A total of 1097 stocks posted gains for the day, with aggregate volume of 470m shares changing hands in the day's winners. The red zone of the Nasdaq exchange comprised 1777 losers, and total declining volume was 1.54bn shares. 10 Nasdaq-listed stocks hit new 52-week highs, while 78 shares dipped to new 1-year lows.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 8604.99 | -219.35 | -2.49% |
| S&P500 Index | 885.28 | -19.14 | -2.12% |
| Nasdaq Composite | 1552.37 | -26.94 | -1.71% |
| Nasdaq100 | 1204.69 | -21.17 | -1.73% |
| CBOE Volatility Index | 47.34 | -2.50 | -5.02% |
| CBOE Nasdaq100 Volatility Index | 46.03 | -2.01 | -4.18% |
Dow Darlings
- Merck (MRK) +0.62 (2.3%) to $27.74 on volume of 18.2m units
- United Technologies (UTX) +0.21 (0.4%) to $50.81 on volume of 7.6m units
- Wal-Mart (WMT) +0.22 (0.4%) to $55.41 on volume of 26.1m units
- Johnson & Johnson (JNJ) +0.21 (0.4%) to $58.99 on volume of 18.2m units
- Boeing (BA) +0.05 (0.1%) to $41.07 on volume of 8.4m units
Dow Duds:
- General Motors (GM) -0.71 (16.2%) to $3.66 on volume of 41.6m units
- General Electric (GE) -1.43 (8.2%) to $15.96 on volume of 151.6m units
- Intel (INTC) -1 (6.6%) to $14.26 on volume of 72.7m units
- Alcoa (AA) -0.58 (5.6%) to $9.77 on volume of 22.9m units
- Caterpillar (CAT) -2.49 (5.6%) to $42.16 on volume of 12.4m units
Most Traded Dow stocks:
- General Electric (GE) --1.43 (8.2%) to $15.96 on volume of 151.6m units
- Citigroup (C) --0.40 (5.1%) to $7.43 on volume of 107.6m units
- Bank Of America (BAC) --0.66 (4.5%) to $13.96 on volume of 99.6m units
- Microsoft (MSFT) --0.36 (1.8%) to $19.3 on volume of 78.8m units
- Intel (INTC) --1 (6.6%) to $14.26 on volume of 72.7m units
Precious Metals
Precious metals futures advanced as follows -
| Precious Metals Futures | |||
| Index | Close | Gain(Loss) | % |
| Gold | 853.6 | -14.9 | -1.72 |
| Silver | 10.96 | -0.46 | -4.03 |
| Palladium | 176.9 | -0.7 | -0.39 |
| Platinum | 856.8 | -8.4 | -0.97 |
The Gold Bugs index (XAU) declined -8.81 points (7.36%) to 110.86 points. Total volume traded in the 16 components of the index was 171.04m shares. Decliners outpaced gainers by 15 to one, with 15 decliners to 1 advancers. Declining volume was greater than advancing volume by 154.55m to 16.49m shares. The main decliners (in percentage terms) were -
- Silver Wheaton (SLW) -0.74 (12.1%) to $5.4 on volume of 17.55m shares;
- Harmony Gold (HMY) -1.16 (11.3%) to $9.14 on volume of 5.17m shares;
- Freeport McMoran (FCX) -2.69 (10.3%) to $23.32 on volume of 24.1m shares;
- Pan-American Silver (PAAS) -1.67 (10%) to $15.01 on volume of 2.55m shares; and
- Gold Fields Ltd (GFI) -0.89 (9.4%) to $8.56 on volume of 9.48m shares.
Energy Complex
Energy futures are weaker than a baby - so which market is 'forward looking'? Stocks or Energy? Energy is saying "Depression", stocks are saying "I will rally on the slightest news".
| Energy Futures | |||
| Commodity | Close | Gain(Loss) | % |
| Crude Oil | 36.85 | -3.21 | -8.01 |
| Heating Oil | 1.3999 | -0.0426 | -2.95 |
| Natural Gas | 5.554 | -0.065 | -1.16 |
| Gasoline RBOB | 0.9868 | -0.0187 | -1.86 |
| Ethanol | 1.573 | -0.019 | -1.19 |
The Oil Services index (OSX) dipped -12.57 points (9.86%) to 114.88 points. Total volume traded in the 15 components of the index was 148.08m shares. Decliners outpaced gainers by 0 to one, with 15 decliners to 0 advancers. Declining volume was greater than advancing volume by 148.08m to 0m shares. The main decliners (in percentage terms) were -
- Nabors Industries (NBR) -2.07 (15.9%) to $10.92 on volume of 9.82m shares;
- Smith International (SII) -3.25 (12.8%) to $22.16 on volume of 4.88m shares;
- Weatherford International (WFT) -1.39 (12.7%) to $9.54 on volume of 15.43m shares;
- National Oilwell Varco (NOV) -3.23 (12.4%) to $22.86 on volume of 7.73m shares; and
- Noble Corp (NE) -2.89 (11.5%) to $22.35 on volume of 10.08m shares.
Currency Futures
YEn was overdue for a correction, having plunged yesterday to below 88. The USDX was a;sp below 80 yesterday. As I wrote last night (to a group of select punters known as 'FaceBook'):
Feeling brave? I reckon that today (US time) is the day to sell Yen. Weekly oversold AND a CCI divergence. Daily oversold too.
The decline in USDJPY can't get any steeper, after all - it's already nearly vertical.
Not sure what it means for Euro/USD at present... ordinarily would think any USD bounce versus Yen would also drag Euro down, but maybe not this time (Euro was weak while Yen was rising).
| Currency Futures | |||
| Index | Close | Gain(Loss) | % |
| U.S. Dollar Index | 81.08 | 1.005 | 1.26 |
| Euro FX | 1.4283 | -0.003 | -0.21 |
| Swiss Franc | 0.9327 | 0.0023 | 0.25 |
| Australian Dollar | 0.6889 | -0.0066 | -0.95 |
| Canadian Dollar | 0.8335 | -0.0005 | -0.06 |
| Japanese Yen | 1.1197 | -0.0182 | -1.6 |
| New Zealand Dollar | 0.5838 | -0.0022 | -0.38 |
Bellwethers
The nine-stock group that makes up the Rant bellwethers declined on average by 3%. The fallout occurred as follows:
- General Electric (GE) -1.43 (8.22%) to $15.96 on volume of 151.62m units.
- Citigroup (C) -0.4 (5.11%) to $7.43 on volume of 107.63m units.
- Wal-Mart (WMT) +0.22 (0.4%) to $55.41 on volume of 26.11m units.
- IBM (IBM) -1.84 (2.14%) to $84.00 on volume of 7.65m units.
- Intel (INTC) -1 (6.55%) to $14.26 on volume of 72.68m units.
- Cisco Systems (CSCO) -0.18 (1.07%) to $16.66 on volume of 51.17m units.
- Google (GOOG) -4.96 (1.57%) to $310.28 on volume of 4.7m units.
- Fannie Mae (FNM) -0 (0%) to $0.69 on volume of 18.41m units.
- Freddie Mac (FRE) -0.02 (2.82%) to $0.69 on volume of 10.39m units.
Other Indices of Interest...
The Banks index (BKX) declined -1.26 points (2.8%) to 43.72 points. Total volume traded in the 24 components of the index was 499.09m shares. Decliners outpaced gainers by 4.8 to one, with 19 decliners to 4 advancers. Declining volume was greater than advancing volume by 472.21m to 26.89m shares. The main decliners (in percentage terms) were -
- BB&T Corp (BBT) -1.92 (6.3%) to $28.32 on volume of 6.27m shares;
- National City (NCC) -0.11 (6.2%) to $1.67 on volume of 29.19m shares;
- Bank Of NY Mellon (BK) -1.64 (5.9%) to $26.36 on volume of 9.4m shares;
- JPMorganChase (JPM) -1.65 (5.2%) to $30.21 on volume of 55.49m shares; and
- Citigroup Inc (C) -0.4 (5.1%) to $7.43 on volume of 107.61m shares.
The Semiconductor index (SOX) dropped -12.21 points (5.52%) to 208.95 points. Total volume traded in the 18 components of the index was 254.67m shares. Decliners outpaced gainers by 17 to one, with 17 decliners to 1 advancers. Declining volume was greater than advancing volume by 209.61m to 45.06m shares. The main decliners (in percentage terms) were -
- National Semiconductor (NSM) -1.25 (11%) to $10.09 on volume of 5.97m shares;
- Broadcom (BRCM) -1.62 (8.6%) to $17.28 on volume of 14.02m shares;
- Texas Instruments (TXN) -1.19 (7.3%) to $15.06 on volume of 16.34m shares;
- Intel (INTC) -1 (6.6%) to $14.26 on volume of 72.65m shares; and
- Linear Technology (LLTC) -1.55 (6.6%) to $22.11 on volume of 6.21m shares.
The ChildKiller ("Defence") index (DFX) lost -2.12 points (0.83%) to 253.53 points. Total volume traded in the 17 components of the index was 186.62m shares. Decliners outpaced gainers by 1.3 to one, with 9 decliners to 7 advancers. Declining volume was greater than advancing volume by 163.93m to 22.69m shares. The main decliners (in percentage terms) were -
- General Electric (GE) -1.43 (8.2%) to $15.96 on volume of 151.59m shares;
- Esterline Tech (ESL) -1.03 (2.7%) to $36.88 on volume of 0.24m shares;
- ITT Corporation (ITT) -1.19 (2.6%) to $43.92 on volume of 1.63m shares;
- Northrop Grummanl (NOC) -0.88 (2.1%) to $40.75 on volume of 2.72m shares; and
- Rockwell Collins (COL) -0.61 (1.6%) to $36.96 on volume of 1.26m shares.
