Equity Markets – Ok, today is the anniversary of the infamous “flash crash”…one year ago the S&P 500 opened for trading at 1164.38 and in one abbreviated intraday span of time dropped to 1065.79 before recovering to close at 1128.15. The occurrence of the flash crash is considered to be one of the major factors that has kept the individual investor away from the equity market…one example of the crash is Proctor & Gamble (PG) which opened that day at $62, traded intraday at $39.37 and closed at $60.75. Another example is one of my personal favorites FFC which opened the day at $15, traded as low as $2.42 only to close at $13.72. Do I expect history to repeat itself? No, but it remains clear that there are still competing views of what brought about the crash and it remains difficult to know for certain if the new safeguards put in place will prevent its ever happening again. So from that note…trading in Asia overnight was mostly lower but having said that, each market collapsed to begin with then rallied into the close to finish lower but significantly higher than the low price on the day…equities are mixed the morning session in Europe but domestic futures indicate that the markets here look set to rally after yesterday’s thrashing…
Oil – the commodity slide continues as fears of a global slowdown and realization of the fact that there is clearly no oil shortage has commodity prices in full retreat at this point…the natural gas futures “strip” is higher in ¾ of the months but otherwise my screen is completely red…obviously, prices at the pump do not adjust as quickly on the way down as they do on the way up but my estimate of the average price of a gallon of petrol at the retail pump is down about 10% (roughly 40 cents) in a week…that’s a big move.
Commodities – other commodity prices have gotten hammered this week as well…SLV the silver ETF is down 21.3% this week, this ETF had gone completely parabolic in recent weeks with the total return for April of +27.2%...IAU(gold ETF I prefer) is down 4.5% this week after a +9.5% return in April…the resource stock to watch down here is Freeport-McMoran (FCX)…it closed yesterday at $49.85 which pretty much matches it’s last pull back low in mid April. If it breaks through this level then there should be great support around $47 ½ which would carry us all the way back to October of ’10 which was the pause in the summer rally that extended through year end.
Economic Announcements – all eyes will be on the screens at 8:30 this morning as we get the “jobs report” with non-farm (+185,000) and private payroll (+200,000) data (the difference being the public sector) as well as the overall unemployment rate (expected to hold steady at 8.8%)…we’ll also get hours worked (looking for 34.3) and sequential and year over year hourly earnings (expected to be up 0.2% and 1.8% respectively).
Other News –
• Industrial production in Germany was up 0.7% in March from +1.7% in February…economists had forecast a gain of 0.5%...construction led the way +6.2% while manufacturing was +0.5%..this has breathed a sigh of relief back into the German market after yesterday’s poor orders numbers and has the DAX up ½%.
• The Canadian jobs report showed Canada gaining 58,000 jobs vs. expectations of +20,000…the gains appear driven by service company hiring and increased part time work…the unemployment rate declined to 7.6%.
• Fannie Mae will likely post earnings today…can they follow Freddie Mac with a profit? If so, it could incentivize Congress to try and save the GSEs rather than dismantle them completely…we’ll see.
Phillip Pennell, CFA
Turnberry Capital Management
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The contents of this posting do not constitute recommendations to buy or sell specific securities. Any individual wishing to buy or sell securities for their investment account or that of others should consult with their investment advisor prior to entering into any securities related transaction