It Don't Mean a Thing if the Market Don't Swing
JUST BECAUSE YOU DON'T FLINCH, it doesn't mean the punch won't sting when it comes.
Stock traders exhibited little anxiety over most of last week about either the persistent ascent in oil prices or the impending Friday employment report. The things that seem as if they should be important to stocks don't ever matter unless and until the market decides they do. And they only matter then until some other distraction or preoccupation comes along.
Thursday and Friday, it seems, a fresh record high in oil above $53 a barrel and another slightly disappointing monthly payroll gain came to matter. The widely followed stock indexes, which reached three-month highs Wednesday, gave way and lost almost 2% over the next two sessions.
For the week, the Dow Jones Industrial Average sank 137, or 1.3%, to 10,055. The Standard & Poor's 500 slid 9, or 0.8%, to 1122. The Nasdaq lost 22, or 1.1%, to 1919.
The constant alternation of what variables appear to move the markets in the short term is never an easy process to game profitably. Not that this prevents many market handicappers from trying.
Just when Wall Street had concluded that President Bush's re-election prospects were the closest correlate to stock action -- and created the charts to prove it -- the relationship broke down. Stocks continued their recovery as John Kerry pulled even in the polls.
Oil has gone from being the sole fixation of traders to an afterthought, and now may be inching back again. The one broad and brisk rally in stocks last week lasted from exactly 3 p.m. to 4 p.m. Eastern time Wednesday, beginning just as trading in the oil pits closed for the day.
The selling squall that hit the market later in the week caught plenty of folks on their heels. Due to technical and seasonal factors, bullish sentiment had been spreading among tactical investors.
The strategic advice flowing into professional investors' e-mail boxes as the week began focused closely on the S&P 500's ability to rise and hold above its 200-day average in recent weeks. Then, on Wednesday, when the S&P closed at 1142, it reached a higher peak than the previous short-term high, thus breaking a bearish pattern featuring lower highs and lower lows.
For those who aren't susceptible to visual cues, the market's almanac readers were pushing the calendar as reason enough to bid for stocks. In an annual ritual, analysts emphasized the tendency of the fourth quarter to be friendly toward stocks.
For example: Since 1945, the S&P 500 has returned on average 4.2% in the fourth quarter, compared to just a 1.5% average for each of the first three quarters. In the last five years, the final quarter has featured even better results, an average of 7.2% versus small losses for the other quarters.
Peeling the onion further, the numbers on fourth-quarter performance following a negative third quarter were proffered as additional encouragement. In the last 20 years, goes the story, when the third quarter was negative (as was this year's), the average upside in the fourth was 8%.
All this is indisputable as history, of course, even if it's hard to see how it gives any investor an edge or how it might comfort those who might get caught suffering any exceptions to the rules. But such seasonal patterns offer some comfort this time of year, when the memories of scary Octobers past sometimes encroach.
Investors are also deriving comfort from the sense that the earnings season about to begin will be good enough to accommodate a strong finish to the year, even though the trends in earnings-forecast revisions have turned negative.
General Electric initiated the blue-chip corporate reporting season Friday, delivering third-quarter results in line with forecasts, at 38 cents per share. GE also modestly boosted its fourth-quarter guidance and expressed confidence in 10% to 15% gains in 2005. GE shares initially edged higher, but were caught in the broader selling and settled at 33.74, off 23 cents on the week.
On the general earnings outlook, belief in the short-lived "soft patch" is everywhere. That is, even though slower summer economic growth and higher energy costs are now pressuring profit expectations for the third and fourth quarters, forecasts of double-digit '05 increases haven't budged.
The S&P retailers' index, for example, remains just 2% below its recently set 52-week high, despite disappointing chain-store sales results released Thursday.
For now, the view that the soft patch is ending -- or has ended -- has placed an underlying bid in stocks. The bulls, too, are deriving encouragement from the recent steadiness in the crucial financial sector.
And, for now, there's not much concern that the low 4.13% 10-year Treasury note that helps those very financial stocks doesn't seem to be foretelling an imminent re-acceleration in the economy.
HERE'S SOME MATERIAL for the file headed: "Interesting facts, but hard to know what they mean."
While the broad indexes remain firmly bound within the range that's prevailed for nearly a year, several noteworthy gauges have been hitting new highs.
The S&P 600 Small Cap index, for instance, clicked to an all-time high last week. This beneficiary of liquidity, risk appetites and low rates has defied many calls for the end of little stocks' outperformance.
The Dow Transportation average, likewise, has reached new highs, mocking anyone who made a facile negative bet on supposed energy-cost victims. Proponents of the Dow Theory, which looks to the transports as economic and market bellwethers, are eagerly awaiting "confirmation" via a new high in the Dow Industrials.
Yet perhaps a transportation sector that seemingly has an ability to pass along high energy costs to the rest of the economy isn't necessarily to be celebrated. The same goes for the new high in the Morgan Stanley Cyclicals index.
Finally, an item that might indicate the most profound move of them all: The Reuters CRB commodity-futures index Friday reached a 23-year high. Clearly, the stuff that travels on barges is in a bull market, quite in contrast with things that move in bytes over fiber-optic lines.
Happy Anniversary, Sort Of
Exactly two years ago, the post-bubble bear market reached its low point. (Some would quibble that it was an interim low in a broader bear phase, but that's a fight for another night.)
Bad Side Effects: Concerns over prescription pain relievers continued to weigh on Merck and Pfizer, helping to drive the Dow to a 137-point weekly loss.
On Oct. 9, 2002, the S&P 500 sank to 776, almost exactly a 50% collapse from its 2000 high of 1527. A subsequent rally and swoon into early 2003 brought the index nearly as low as the October bottom, but not quite.
The market two years ago, one could say, had become "sold out," after 30 months of relentless dumping of stocks, a recession, a collapse in corporate profits and a plague of business scandals. Stocks responded to a policy of free money, and the market began to look ahead to a rebound in economic and corporate activity.
Buying hungrily in that dark moment has paid off rather well, although the gains were registered almost entirely between March 2003 and January 2004.
The total return to an investor who plucked the October 2002 bottom has been just about 50%, including accumulated dividends of 3.9%, according to Goldman Sachs. The S&P is up 45%, outpacing the 33% jump in company earnings by adding some P/E-multiple expansion.
A comparison of then and now shows plenty more optimism embedded into the market, and perhaps a thinner cushion of safety. The price-earnings ratio at the bottom, based on then-expected 12-month future earnings, was 15.4. Today, it's 16.9.
Then, the 10-year Treasury-note yield bottomed, along with stocks, at 3.58%. It has risen to 4.13%, up from those panic levels but far below where most commentators would've pegged it a year ago.
Back then, short interest on the NYSE was 6% higher than it was at last report. And the options market's gauge of expected volatility -- a measure of investor anxiety -- has deflated from 42 to 14. Crude oil, let's not forget, was around $30 then.
All in all, today's setup hardly has "historic buying opportunity" written on it. But the numbers are middling enough to suggest that the market today expects more and is vulnerable to any disappointment.
A look at the sector performance in the past two years shows an intriguing mix of old- and new-economy groups leading the way. In terms of total returns, utilities have been tops, delivering 81% through Oct. 4, says Goldman. Technology was next, at 76%. The next three top performers were basic materials, energy and industrials.
Goldman sector strategist David Kostin sliced the numbers in an attempt to flag opportunities and risks in sectors and stocks based on multiple expansion and earnings growth since the bottom.
Energy stands out as an area where the stocks are cheaper today than they were in late 2002, a sign that the market remains skeptical that the runs in oil and gas can continue powering profit growth there. This would seem to contradict the view aired frequently that energy stocks have gotten "too popular."
Industrials, meanwhile, have become one-third more expensive on a forward P/E basis, even as their earnings have badly lagged the index. Here we can see the abiding hope for a sharp pickup in this deeply cyclical sector, even as the cycle ages.
Scanning for buy candidates among stocks whose above-average profit results have been met with lower valuations, Kostin cites Exxon Mobil, Allstate, Dell, UPS, Microsoft and Medtronic. Note that this list includes only stocks being recommended by Goldman analysts.
On the flip side, names that have enjoyed P/E expansion despite sub-par earnings trends include Boeing, MGIC Investment, RadioShack and Sabre Holdings.
影响大不大？事实说话
即使你面临打击毫不畏惧，也不代表重击到来时你不会感到疼痛。
上周大多数时间，股票交易员无论是对油价的持续攀升，还是周五即将到来的非农就业报告，都显得有些坦然自若。这些看来应该对股市很重要的事件，事实上通常并没有多大份量，除非市场觉得他们很重要。而且只有在其他因素的合力下，他们才会真正具有影响。
上周四和周五，油价突破每桶53美元创下新高和月度非农就业报告再度令人稍感失望这两则负面消息波及股市。曾在周三达到3个月高点的股指于接下来两天录得近2%的跌幅。
上周，道琼斯工业股票平均价格指数跌137点，跌幅1.3%，收于10,055点。标准普尔500指数跌9点，跌幅0.8%，收于1122点。那斯达克综合指数跌22点，跌幅1.1%，收于1919点。
近期什么因素将使股市发生变动？由于市场风云变换迅速，对此要作出判断并基于此盈利并不容易。
就在华尔街得出结论说，布什(Bush)成功连任总统的前景与股市表现最具相关性，他们甚至划出了图表来证明这一点时，这种相关性被打破了。克里(John Kerry)在民意调查中领先布什后，美国股市仍在继续上涨。
在交易员眼中，油价经历了从唯一的关注点到（忽视后的）追悔莫及这样的变迁，现在正再次逐步受到重视。上周，股市呈现的大范围、大踏步反弹从美东时间周三下午3点持续到了4点，开始的时间恰恰是当日石油场内交易结束的时间。
上周晚些时候股市出现的抛盘风潮让很多人措手不及，因为之前由于技术和季节性因素，看涨在战术投资者中曾得到广泛响应。
上周初，专业投资者的电子邮箱收到的战略性建议均密切关注标准普尔500指数近几周上涨突破并保持在200日均线上方的可能。之后于周三，标准普尔500指数收于1142点，创下短线新高，并突破了由较低的高点和较低的低点组成的看跌图形。
在那些不太关注图形的人中间，市场年鉴的信奉者们将日历因素举为购买股票的充足理由。每年，分析师们都强调第四季度有对股市友好的倾向。
例如，自1945年以来，标准普尔500指数第四季度平均有4.2%的反弹，而前三个季度的平均增幅仅有1.5%。过去5年，最后一个季度的表现甚至更好，平均增幅为7.2%，而其他三个季度为小幅下跌。
在不佳的第三季度后，第四季度走势良好的预期总是给人更多的鼓舞。过去20年就是这样，第三季度普遍下跌（今年亦如此），而第四季度的平均增幅是8%。
当然，所有这些作为历史是毫无争议的，虽然仍很难说这能给投资者在投资决策中怎样的优势，或这如何能给那些仍可能因违背常规的现实而受损的人们以任何宽慰。但这样的季节性图形今年这个时候的确给人带来了些许宽慰，因为以前的恐怖10月记忆有时仍会让人心惊。
投资者也在从下述预期中获得一些安慰：即将开始的收益季节将有足够的好信息为今年划上一个完美的句号，即使收益预期修正的大趋势已变得负面。
通用电气(General Electric)上周五是第一家公布业绩的蓝筹股公司，第三财季业绩与预期一致，每股收益38美分。通用电气还温和上调了第四财季的业绩指导值，表示2005年有信心实现10%至15%的增长。通用电气的股价最初小幅上涨，但后受普遍抛售的影响下挫，收于33.74美元，当周跌23美分。
整体来说，人们普遍相信暂时的不景气不会持续。也就是说，虽然夏季经历了经济增长放缓，虽然能源价格上涨给第三、第三季度的利润前景带来压力，05年两位数增长的预期仍未动摇。
比如，标准普尔零售分类指数仍位于比52周高点低2%的水平，虽然周四公布的连锁店销售额令人失望。
目前而言，暂时的不景气行将结束或已经结束的观点已给股市提供了潜在的买盘支撑。多头也在从近来金融类股的稳步走势中获得了鼓舞。
