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Daily Market Update – February 5, 2015 (8:00 AM) With only a single trade in the books through the first three days of this week, this is looking like it will be the slowest week in about 5 years. So far, based on the comparative results, I don’t mind the inaction and hope to see the broader advance continue to close out the week as I would really like to see some assignments and some more cash becoming available for next week and beyond. The pre-open futures are already pointing to another gain after yesterday’s very quixotic trading. This morning there’s a chance to ponder what the meaning of positive forward guidance from a handful of national retailers may mean. When Macys, Kohls and L Brands think that this quarter will be better than expected, there’s reason to believe that the good news that has been accumulating will finally result in something tangible. Increased job growth over a sustained period, wages finally increasing and much lower energy prices should reasonably be expected to translate into a growing consumer economy, but for the past month, as we’ve been waiting for some evidence of that to happen, we’ve been getting just the opposite. Looking at it from the perspective of our expectations versus what is being reported as reality may explained the behavior of the markets over the past 6 weeks, as we have repeatedly bounced between DJIA 17000 and 18000. In fact, since mid-October we’ve had 5 or 6 very noticeable declines when in a 2 1/2 year period before that they were coming only every 2 months. But you really can’t blame traders for that kind of indecision given what logic dictates should have been happening in the economy and then what was being reported.by companies and by official government statistics. Although there isn’t necessarily a direct correlation between the economy and the stock market, at least you would have expected that companies would have been reporting good news or predicting some better news down the road, regardless of how traders and investors may react to that news. With stock buybacks slowing down and so many having been executed at such high prices, you do have to wonder a little where the next impetus for increasing stock prices may come from. While positive or revised forward guidance is always helpful and while the top and bottom lines may improve, the impact of continuing decreasing share floats will likely be reduced and that artificially induced elevation in EPS will be less of a factor going forward. But that’s an issue that may not begin to unfold until the next earnings season is set to begin. For now, we can hope that what Macys, Kohls and maybe others are seeing in their top and bottom lines will translate into reasons to be optimistic over where the stock markets will be heading in the near future, even as energy prices may be looking for a higher level.
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