The market has been full of sound and fury, but there are many questions as to what it’s signifying. The last few sessions I’ve felt like I’ve been living inside a Maurits Cornelis Escher masterpiece. My son was telling me the other day about a super rollercoaster that sounds unbelievable, but I could have it beat in a minute if I could create a ride that mimics the gyrations of the stock market of late. Of course, many investors in the market now would happily pay just to get off this crazy ride.
It feels like classic manipulation, but what is the goal?
Right now, it feels like high frequency trading has completely taken over, and I wouldn’t be surprised if we find out it’s responsible for 80% to 90% of trading this week rather than 60%. I don’t want to be one of those whining about high frequency trading, but I fondly remember when the market moved mostly from fundamental developments and the occasional bubbles. Of course, there is amazing pressure from euro weakness that continues to send big money to the sidelines or the comforting, though unHot, arms of U.S. Treasuries. I’m not sure how they’re going to pull it off, and I suspect it’s going to cost U.S. taxpayers even more money, but the European crisis will be packaged and sent forward like those old time capsules. However, this one will have a nuclear detonator attached to the lock! It’s a dizzying story to follow day by day. And then there’s the BP story.
The so-called Top Kill approach sounded as hokey as that container that was going to redirect oil to a tanker on the surface of the Gulf. Maybe it was just a coincidence but as images of the procedure began hitting the airwaves the market began to slip. Like I wrote yesterday afternoon, there has to be an impact on the American psyche, we can point to BP but it feels like the nation is hopeless with respect to this situation. There have been so many failures; the phantom stock market swoon (somewhat of a moot point now that the Dow is much lower than it was the day something went wrong) and Times Square bomber are just additional issues that makes one wonder why the government would want more power and jurisdiction over our lives. When we really need the might of the government, it just doesn’t seem like it can get its act together.
On that note, this Top Kill can take 48-hours to work, which just coincidentally is perfectly timed for the arrival of the President of the United States. It would make for great public relations if he is standing on the beach with the spill capped off. I would make one suggestion, don’t wear a Mission Accomplished jacket, just in case.
Economic Data
GDP
The market expected GDP to cool from the 4Q rate in 1Q, but to actually see the moderation is something else entirely. This morning, GDP for 1Q was revised down to 3.0% from the 3.2% previously reported, and below the consensus forecast of 3.4%. With everything that has been occurring in the world since the end of the first quarter, and considering growth was cooling anyway, the market reaction this morning (slight pullback in the futures) may say it all.
Conclusion
The market also slipped on scuttlebutt China is reevaluating its euro investments/holdings, but China’s state agency that governs foreign exchange debunked that rumor. The euro is higher today, lending to strength in U.S. equity futures. There also seems to be some kind of epiphany the selling is overdone. It’s not conventional wisdom, which seems to be indifferent with respect to the stock market, but for those that watch the action for a living, selling has gone from overdue to overdone. Of course, one thing everyone cares about is employment and the overall economy, and the jury is still out on those issues. Things are getting better but that’s not good enough, not by a long shot.
* Initial jobless claims: 460,000, down 16,000 and missing consensus.
* 1Q GDP: 3.0% from 3.2% previous release; consensus was 3.4%.
These numbers have taken some of the wind out of the initial enthusiasm we woke up to this morning. The meandering should continue. In a strange way, these numbers bode well for next week because the expectations need to drift lower. It has been rare when economic data has been able to exceed hopeful estimates.
Charles Payne is the CEO and Principal Analyst of Wall Street Strategies . This post was republished, with permission, from his company’s column, WStreet Market Commentary.
