Daily Market Update – January 26, 2016 (7:30 AM)
Yesterday was just more of the same.
Oil was much lower and the stock market went much lower.
Everyone keeps waiting for something to give.
Either oil finally starts to move higher or someone comes to the realization that oil at these levels and with continuing job growth, this would be a good time to take advantage of the low input costs and build for future growth.
But yesterday wasn’t going to be that day.
This morning, oil is up slightly as are the stock futures. Never mind that Shanghai plunged overnight.
That was so much yesterday’s story and we’re on to new things now
As has been the story for 2016 and the final month of 2015, the gains that we’ve been seeing on days here and there haven’t come close to offsetting the losses of the days before or the losses to come the days after.
Since the post-August recovery high seen in the early part of December 2015, the S&P 500 is about 11% lower and there haven’t been many days like the last two of the previous week that saw two decent sized day’s gains come in succession.
Earnings keep coming in and will start building to a crescendo in the next couple of weeks, but so far, everyone’s expectation of being disappointed with those earnings reports are being met.
If earnings aren’t going to lift the market and there’s no reason to believe that economic activity will result in oil demand and price increasing any time soon, it’s hard to know what will bring good news.
The FOMC meets this week and GDP is announced on Friday, but what can either do to lead to optimism?
This morning the 10 Year Treasury Note is again below 2%.
It’s not likely that you could find anyone who would have bet on that being the case a few months ago. You definitely won’t find any people who are deeply engaged in the financial sector who would have predicted that to be the case and it’s not likely that you would have found any bond traders, either, who would have guessed this morning’s rate.
And those are reportedly the smartest guys around.
With nothing to do yesterday, I don’t see any reason to believe that this morning’s early strength has any meaning, nor that yesterday’s sell-off was happening at the bottom.
Mark Faber, a noted gloom guy, mentioned yesterday that the average stock was now trading 26% below its 2015 high.
I don’t know how he arrived at that figure and how he selected stocks to exclude from his calculation or whether the calculation was weighted by market capitalization or anything at all, but it definitely feels that way once you exclude the very few winning stocks of the past 13 months.
With the 2016 action added in, the list of winning stocks is only getting smaller, at this point.