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Another day, another new high. Ebola, Ukraine, ISIS—nothing has killed this rally. It's the 39th time this year the S&P 500 has closed at a new high.
We also have record earnings, near-record profit margins—9.7 percent for the S&P 500, well above the 10-year average of 8.5 percent—and declining unemployment.
Several beaten-up sectors have rebounded nicely. Housing stocks in particular have been on a tear recently The SPDR Homebuilders ETF is above its highs in the late summer and not far from an historic high.
China stocks rallied, with the Hang Seng up 0.8 percent and the Shanghai Composite up 2.3 percent overnight. After years of discussion, the Hong Kong Stock Exchange and Shanghai will finally open a formal stock trading link on Nov. 17.
Many mainland China firms already dual list in Hong Kong, mainly large state-owned enterprises, but this trading link will open up many more smaller companies.
Hong Kong investors will be able to buy and sell an additional 568 Shanghai-listed equities. Mainland investors will be able to buy and sell 268 Hong Kong-listed stocks. This opens up many domestic Chinese stocks for the first time.
Some fund managers were already allowed to invest in Chinese stocks through a quota system that was capped at $105 billion. But the new system will allow most investors to buy shares on the Shanghai Stock Exchange, opening up the $2 trillion market fully to foreign investment, though there will be some quotas on inflows into China that will still be applied.
Too many people think the stock market moves only on the Fed, but we have:
And this with a government that can't get anything done!
As for the markets at new highs, that's good news, but there are signs that we have moved from bargains to "Not much is cheap" really fast. Like, in less than a month.
What's cheap? Not much. Gold miners are absurdly oversold. They bounced yesterday, and that's a good sign.
But much of the rest of the market has bounced back, in some cases dramatically.
It's downright pathetic. IBM has gone from a monster after the Financial Crisis (it doubled in a couple years) to a loser, down 14 percent this year. True, it hasn't done much in the last two years, but it has simply collapsed since it's disappointing earnings report a few weeks ago.
It dropped from $180 to $169.10 the day of its earnings (October 20th), but then continued to drop for the next two days.
It rose modestly over the following days, but this morning, it drifted lower again, to an intraday low of $160.05, a three year low.
I don't like spending a lot of time on technicals, but more than one trader has noted that when a stock drops big on bad earnings--and then follows that up by making ANOTHER "lower-low" after a "dead-cat bounce"—that is a sign that investors are throwing in the towel.
It's often said that IBM's problem is that it is so big it is difficult to grow. But that's only part of the problem.
Dow Industrials and Transports and the S&P 500 reached new highs Thursday. U.S. stock futures popped ahead of the bell as weekly jobless claims came in lower than expected, suggesting we could have upside to Friday's non-farm payroll report.
Dovish comments from European Central Bank head Mario Draghi also helped.
The euro dropped like a rock and European equities moved up, as Draghi said ECB officials were unanimous in their position that they would use more stimulus if conditions on the continent call for it. Draghi said the ECB is committed to expanding its balance sheet and to continuing to use unconventional methods.
The question is how "unconventional" Draghi is willing to be. What's in his bag of tricks that will not cause blow back from the Germans?
How much are the election results impacting the stock market? Not much.
The big move has been in the Energy sector in general, but most of the move up occurred midday, when both Brent and West Texas Intermediate crude moved up on reports of a disruption in a Saudi Arabian pipeline.
The Saudis have still not provided details on what--if anything--happened, but it clearly moved oil and oil stocks. One source said it was a fire that had been extinguished.
There are modest moves up in some medical device makers (hopes the medical device tax might be repealed), though separately Covidien (COV) reported strong earnings.
There has also been some hope that the election results would be a positive for drug companies (less chance of government interfering in drug pricing). But these ideas have been well vetted, and the results have been almost exactly as Wall Street expected.
Elsewhere, NASDAQ and Russell 2000 have drifted in and out of negative territory all day. Some crowded long names missed earnings overnight: TripAdvisor (TRIP) is down almost 15 percent, for example, as is FireEye (FEYE).
Then there seems to be a bit of de-risking going into earnings: look at Tesla (TSLA) and SolarCity (SCTY), both reporting after the bell, both associated with Elon Musk, SCTY down 9 percent, Tesla down 3 percent, as is FEYE.
With the midterm elections over, much discussion is now moving toward what 2015 stocks may look like. That's right, we are already moving beyond the seasonally strong November and December issues.
Seasonal trends have become a favorite of traders, even though many of them are not working.
For this, let me turn to an old friend: the Stock Trader's Almanac, 2015 edition, the venerable yearly production of Jeff and Yale Hirsch. It's chock full of the usual market stats, but since 2015 is a presidential pre-election year here's one stat that jumped out at me: the Dow has not had a loss in a pre-election year since 1939.
Think about that. Since 1939, no losses in a pre-election year, which is exactly where we are heading in 2015. That's a lot of history.
We got a reminder that it's not just oil that could move our markets this morning--Europe can also have an influence.
Shortly after 10 AM ET, Reuters published a story indicating there may be more opposition to ECB head Mario Draghi's easing program--and to his management style--than was previously thought.
There are 24 members on the Governing Council, six on the Executive Board (who essentially run the bank) plus governors of central banks from 18 countries. Those central governors are the ones who seem most irritated.
It's well-known that the Germans--led by Bundesbank President Jens Weidmann--were pushing back on Draghi's plans. But opposition from other members--on style or substance--could be a major headache for Draghi and shake confidence in the market as to Draghi's ability to get his program through the ECB.
What the article highlighted was that Draghi is being too autocratic, and that he has been revealing too much of the ECB's internal discussions. They seem particularly unhappy that he revealed he was going to increase the balance sheet by a trillion euros in order to buy asset-backed securities and covered bonds, when everyone seemed to believe that Draghi would not talk specific numbers.
That's a style issue, but there is a bigger substance issue: perhaps 10 of the 24 members may be against Draghi's plan for U.S.-style quantitative easing. Partly this is philosophical, but there is also a difficult execution issue. It is difficult for the ECB to replicate the central banks that exist in the U.S. and Japan. Simply put, they don't have a single, fluid bond market like the U.S. and Japan. If the ECB starts buying sovereign debt, whose will they buy? Will the French say, why are you buying so much Italian paper?
Bottom line: these battles shake the confidence of the market as to whether Draghi will be able to get anything done. If they clip his wings as to what he is able to say, or what he will be able to do, that will reduce the ability to divine what Draghi's intentions are.
Europe weakened when this article came out, and even our markets started drifting south.
Two of the great darlings of momentum traders are reporting good earnings, but with sales growth slowing, they are getting hurt.
Momentum trading is a fiscal business. Traders want revenue growth, preferably growth of at least 20 percent, but 30 percent or 40 percent is better. When earnings growth decelerates, it can be difficult.
Michael Kors reported an earnings beat for the second quarter. Retailers would kill for these kinds of comps: North American same-store sales, which account for more than 80 percent of revenue, were up 10.8 percent. European same-store sales increased 41.1 percent, as well.
But the North American numbers represent a deceleration. The company saw 18 percent growth in the prior quarter.
The decline in oil, with West Texas Intermediate closing below $80, has caused a blip down in stocks midday.
Odd, because oil initially rallied on a pair of confusing headlines:
Brent crude initially rose on the first headline, which would appear to make some sense, since the Saudis are major exporters to the Far East.
But it collapsed going into the close. Even Brent crude dropped. Huh?
The scandal-plagued head of health-care investment banking has resigned to focus on family.
2015 is shaping up as the year the U.S. consumer will have to shine the light for the rest of the world—or else.
Softer talk on Ukraine from Russian President Vladimir Putin may be an early sign of recovery, said Christopher Granville.