Monday, September 10, 2012

Monday Morning Musings

The markets are slightly lower in early trading after a lackluster overnight session abroad.

Asian markets were mixed after a bevy of economic data was released in China.  Imports and exports both came in below expectations.  Industrial production was also lower than expected coming in at 8.9% yr/yr.  CPI was in line at 2.0% vs. a year ago.  The light data point to a continued slowdown  in economic growth, and lend themselves to the notion that the PBOC will keep its foot on the stimulus pedal.

Material stocks continue to lead after China's stimulus plans announced last week.  Tech stocks are lagging so far today after leading the action last week. 

European markets are fairly quiet, with financials continuining to rally after the ECB's announcement last week for Outright Monetary Transactions (OMT).  Italian Q2 GDP was revised lower to show a contraction of -2.6%.  France also lowered its forecast for GDP to 0.8% from prior expectations for 1.2%.  Spain's 10-year yield is hitting its lowest levels since April, near 5.64%.

There isn't a lot in the way of economic data or corporate news this morning in the U.S.  Investors are eagerly awaiting this Thursday's FOMC meeting, but I still think that the Fed will merely reiterate its recent statements and not announce any new QE initiatives at this point.  Oil and gas prices are up lately, and more QE at this point would likely just drive commodity prices higher.

The dollar is higher today, and commodities are flattish.  Oil prices are steady near $96.33 while gold prices are down a little to $1734.

The 10-year yield is up a little to 1.67%.  And the VIX is down -1.5% all the way down to 14.15 and getting close to its yearly lows seen in August.

Trading comments: The markets put in a very nice week last week.  Breadth in the market improved with over 300 new highs seen on the NYSE.  Moreover, more growth stocks are starting to lead the market vs. the defensive type of stocks we had seen leading previously.  It looks like dips will continue to be bought by portfolio managers until something comes along and really rattles the market and shakes the newly minted bulls' confidence.  We have seen bullish sentiment indicators rising lately.  If more of the indicators begin to hit extreme bullish levels, that could leave the market more vulnerable to a pullback.  But right now it still feels like folks are looking for spots to put money to work in stocks.


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