The good news: The market's stumble was modest

Try as the bears might, they couldn't break US stocks. But investors still face frothy prices and considerable headwinds.

By Charley Blaine May 24, 2013 7:48PM
Stock market © Digital Vision/SuperStockThe remarkable thing about the week just ended is how little things changed, despite all the noise we all heard.

The major averages ended Friday largely unchanged. The Dow Jones industrials ($INDU) gained a whopping 9 points, after two days of losses. The Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) fell less than a point each.

For the week, the indexes fell -- but not a lot. It was just the sixth weekly loss of the year for the Dow and fifth for the S&P 500 and Nasdaq. In other words, the 2013 rally is very much alive. In spite of all the worries that streaked across the markets: Japan, Europe, rising interest rates and the like.

So here's where things stand, and what next week looks like.

How strong is the market?
With the week's pullbacks -- 0.3% for the Dow and 1.1% each for the S&P 500 and Nasdaq, the major averages are just below their highs set on Tuesday. The Dow is up 16.8% for the year. The S&P 500 is sporting a 15.7% gain and the Nasdaq is up 14.6%.

All of the worry was set off by that huge 7% loss suffered by Japan's Nikkei-225 Index ($JP:N225) on Wednesday. But the Nikkei rallied Friday, up 128 points. For the week, the index was off 3.5%. Not awful, but something you want to repeat often. European markets were off about 2%.

Is the market still vulnerable?
Yes and no. The "yes" stems from the huge gains seen so far this year. They remind many people of 1999; but I still think the year looks like 1987, where the averages surged and surged nearly to the end of August and then blew off. Much as the Japanese market did on Wednesday.

Plus, the market still looks overbought on a short-term basis. The Dow, S&P 500 and Nasdaq are still trading 10% above their 200-day moving averages, signals of some overconfidence.

The "no" comes from the fact there was some solid U.S. economic news this past week.  Existing- and new-home sales both showed gains in April, to levels last seen in 2008.

Jobless claims fell to a seasonally adjusted 340,000 in the last week; part of an admittedly slow recovery but a recovery nonetheless.

Paul Krugman noted in The New York Times on Friday that the number of long-term unemployed -- about 4.5 million -- is four times higher than before the economy began to crumble. But that number is down 36% from its peak in April 2010.

For the record, Apple (AAPL) was up 2.7% to $445.15, thanks in part to CEO Tim Cook's virtuoso defense of the company's tax maneuvering. JPMorgan Chase (JPM) was up 2.6% for the week to $53.66 after shareholders voted down a proposal to make Jamie Dimon CEO only, instead of Chairman and CEO. JPMorgan is up 22% this year. Hewlett-Packard (HPQ) cheered investors with its earnings that showed, among other things, that personal computer sales fell 20%. But the results and guidance were better than expected. The stock ended up 13.8% for the week.

Is there support still for the market?
So far, there are still buyers.

Every time this past week when the market looked like it would slump badly, buyers would step in. The Dow was down 95 points early on Friday and ended the day with a small gain. On Wednesday, the blue chips fell about 276 points during Federal Reserve Chairman Ben Bernanke's testimony, but a 122-point loss was trimmed 80 points at the close.

Unless something we don't see falls truly falls apart, there's support... until there's not support. My colleague Anthony Mirhaydari explains why he's still deeply worried.

Want some candidates? The Japanese market is still up 41% after this past week's turmoil. Manufacturing in China looks like it's contracting.

And the Fed could begin to slow its big bond-buying campaign, now at $85 billion a month, but not until fall at the earliest. The 10-year-Treasury yield ended Friday at 2.01%, down slightly from Thursday and up slightly from the previous week's 1.95%.

The week ahead
Even with just four work days next week, there are some important economic reports. The biggest will be the second estimate of first-quarter gross domestic product. The consensus estimate is it will come in at an annualized 2.5%. What everyone wants to see is a number north of 3%.

Pay attention to two reports of consumer confidence. The first comes Tuesday from the Conference Board. The second comes Friday from the University of Michigan. And the market will parse reports on personal income and spending on Friday as well as the monthly Chicago Purchasing Managers Index.

Lastly, the two big earnings reports next week are upscale jeweler Tiffany (TIF) before Tuesday's open and Costco Wholesale (COST) on Thursday. Tiffany has a big exposure to the global economy. Costco is more domestically focused. Tiffany shares are up 32.9% this year; Costco shares are up nearly 16%.

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32Comments
May 24, 2013 9:08PM
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Manipulated market controlled by the few
May 24, 2013 11:15PM
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I'm not without caution, but I remember 1987 and it seemed back then the gains had pretty much been going on for a few years before the panic blowoff of Black Monday. This uptrend has been going on for a few months. We're also in a significant economic recovery following the worst slump since the Great Depression. Hopefully there won't be another Black Monday-type event, but in a secular bull market it's clear in hindsight those that do best ride it out. And within 6 months following Black Monday, the averages were back at their previous highs.

May 24, 2013 10:21PM
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It ain't over yet. Just wait until the next budget deadlock or Israel strikes Iran Nuclear sites.
May 27, 2013 10:20AM
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This is the exact same thing I heard before the housing bubble blew sky high. "Yeah, I'm making a-lot of money so it must be right. Or yeah, you're just jealous because you weren't "smart" and missed the free money. Or you're just a pessimist. Or real estate never goes down..." Then it blew up in their faces, and they all looked like Yosemite Sam after his rifle exploded, and they shut their big braggadocios mouths for a while, and now they're at it again.
May 24, 2013 11:44PM
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NO...It's not a slanted libbie.commie article from MSN...

 

Records from Social Security Administration, where much/most of SSDI payments go to..

Working comparisons, unemployment, education levels, people,"working the system" per capita.

Everyon wants on the bandwagon of Social Security Disability.

It list the Top 5 States.....Guess what ??

May 24, 2013 8:34PM
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Wait till Ben and the boys kill the QE3 program with all the free money at 85 BILLION a month  ! The shock and awe will start then . Coming soon folks.. Ben started it and has no clue how to shut it off ! I say raise int rates 1.5% at the FED window on wall street for starters . And BTW all you investors ! There will never be another bailout like this one again .. So hold on idiots..
May 24, 2013 10:12PM
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What Market stumble ??

Our investments overall were up 0.27% for the week...

And we had a few equities that were down....Pays to diversify.

Not a bad week at all.

May 25, 2013 10:11AM
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Agree with Blaine....I expected more of a correction, maybe more coming..? 

Of all the Indices we track Globally...Two were up TSX(Toronto) and Shanghai(SSEC) slightly.

Still maybe more shake-out and possible profit taking...But trending still in place.?

Certainly not a time to run, but be skeptical and consider a little or partial profits on high flyers.

Don't think this Market will bomb anytime soon.....2-3% maybe and recovery.?

See some Sectors rocky or not as stable as others.

Gold up about $26 bucks, Silver a few cents, Oil down about $2 and Dollar settles about -.55 cents.

REITS have been head banging, maybe Bernanke?

May 27, 2013 12:42PM
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Yes it was modest, but it CAN get scary when you don't look at the graph for awhile. I'll still be in my chair on Tuesday morning to make sure it doesn't get away from me. ....just kidding, my portfolio is beta-strong! Yeah.

May 28, 2013 2:17AM
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I don't think the market stumble is finished yet.  PE's are too high for the times.  A correction is imminent.  2nd qtr earnings forecasts overstated?   It's just a question of when and how long.  I'm pulling a shitload out of bonds, waiting for the right time to plug that into equities.   Waiting for July, late July most likely.  We'll know by than if I was right.
May 24, 2013 10:15PM
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Monopoly Money can buy Boardwalk and Park Place....yahoooo!!!
May 28, 2013 12:03AM
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prgprops - "the worst economic recovery since the depression" according to CBS News.  That is significant.

We are nearly 4 years into this "recovery" and have yet to see any sustained growth north of 3%.  The recession of 1982 featured a drop in GDP nearly as steep as this recent one and included double digit unemployment, inflation, and interest rates.  And yet, it was over within a year and in 6 years the American people had created 20 million new jobs.  The government didn't do it.  Ronald Reagan didn't do it either.  He just got the government a little less involved in the lives of the people and they did it.  And that was with a prime rate more than twice what it is now.  Progressive policies have been failing America for nearly 100 years.  The last 5 years are just the most recent example of their inferiority.

And just so you know, there are good reasons for the failure of Progressivism.  Why would anyone think it is better to take money from the American people to "stimulate" an economy?  Any money the government spends comes from the people in the form of present taxes or future taxes to pay back the debt the government incurs.  It is obviously far superior to let the people keep their money and spend as they see fit.  That way the resources are allocated efficiently.

In addition, the public sector has never done anything to "help" the private sector.  Educating students with money that came from the private sector is not "helping" the private sector.  It is giving them what they've paid for.  Building roads and bridges with money that came from the private sector is not "helping" the private sector.  It is giving them what they've paid for.  Doing research with money that came from the private sector is not "helping" the private sector.  It is giving them

what they've already paid for.

May 28, 2013 8:53AM
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I might guess about 125-150 upside on DOW today, maybe even more ??

Everything is not as bad, as some would have you think...Everywhere?

The World re-adjusted, so will we..

Forget about scumbags and manipulators for awhile....Don't be scared yet.

May 25, 2013 9:53AM
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Article still there...On Home page, under Top News; About halfway down...

5 States high on the SSDI list and receiving the most Disability...

All pretty much Red States along with being Right to Work States also...Funny.

 

Mississippi, Arkansas, Alabama, Kentucky and West Virginia,...hmmm.

Article and Study done by 24/7 Wall St....Survey by Gallup-Healthways.

References and Facts provided by...SSA(SocSec Admin), BLS (Bureau of Labor&Stats)

U.S. Census Bureau and Gallup-Healthways Well Being Index.

There, have done the Homework for some non-believers.!!

 

High un-employment, Less educated workforce, Poverty ridden States are using Entitlements of SSDI (Social Security Disability) to replace U/E....Because most are too fkn lazy to find anykind of job....Even corruption with Lawyers and Judges awarding benefits, because of Greed, typical.

Some of the Major Backbone of the Conservative Republican Party...Yeah, exactly right...!!

May 25, 2013 2:04AM
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Market may go up a little more or correct a bit.

Just hope my golf game doesn't crash the next three months.

Enjoy the summer everyone (if it gets here)!

In Uncle Ben we must trust. If that quits working, winter comes early.

 

May 28, 2013 8:15AM
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"Every time this past week when the market looked like it would slump badly, buyers would step in."

 

This shouldn’t surprise anyone once they realize the buyer in chief is effectively the Fed itself, printing all the money it needs to drive the market up like it wants.

 

The Fed is playing a nasty game which depends on the selfish egos of market participants. Everyone in the stock market thinks they are getting ahead when the market rises. The truth is, when everyone’s wealth rises in price by the same percentage, no one but Wall Street brokers and traders really gets ahead.

 

When everyone in the contest gets a gold star, no one really wins anything.

 

 

May 27, 2013 2:26PM
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A different moniker....ABS, probably thinks it Latin...?

What happens if those earnings are still major losses after all that...??

Started reading some about Beta this and beta that....Just too many things to learn, for some of us old farts... 

 

I see Fatty crawled out of his box late this morning, Holiday celebrations and two bottles of Ripple will do that to ya....

Fats, If your right hand is Ms. Bambi; What do you call your left ?? Ain't that Brucey guy, is it ??

May 27, 2013 8:38PM
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Somebody tripped over the printing press's power cord but it wasn't dislodged from the electrical outlet

May 25, 2013 2:00AM
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I didn't read that article.  Someone must have removed it.   Ooo, a good conspiracy theory!
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