Traders Lament: ‘My Desk Is Dead’
“My desk is dead.”
Over dinner last night with several managing directors for a large equity desk, the first topic of conversation was not, “What's going to happen after the NYSE Euronext-Deutsche Boerse merger gets turned down?” It was, “What the hell is going on with this lousy volume? My desk is dead.”
Indeed. The slow decline of volume (even options volume is weaker) is the main topic on Wall Street and was a major reason why there is less lamenting over the loss of the Deutsche Boerse deal than you might expect at the NYSE. The logic of the deal is not as compelling as a year ago.
Lest you missed my commentary yesterday, here are the facts: January consolidated volume at the New York Stock Exchange was 17 percent below the January 2011 volume, and the second-lowest since July. Consolidated volume is all trading in all NYSE-listed stocks on any exchange.
January is normally a strong month for volume, since we usually see considerable flows for the start of the year.
What happened? There's a dulling regularity to the three most common reasons listed:
1) Too much euro zone uncertainty;
2) Less prop trading;
3) Lower volatility begets lower volume, because the high-frequency trading firms trade less.
Here's one other observation: Several traders said that all the headlines on insider trading was also having a chilling effect. Nobody's buying stocks on rumors from dot.com sites, or from anywhere else, it was observed. They're buying exchange-traded funds instead. Hmm.
1) Where's the panic? Everyone's pessimistic on Europe and the global economy, but European stocks are up this morning, and Germany is at the highest level since August.
Sure, there's the usual vague rumors about how close a deal on Greece is (stop me if you've heard this), today's twist is about a “sweetener” being added that would give private creditors a larger coupon than the 3.5 percent being offered if economic conditions improve.
Global manufacturing: Asia holding on, but Europe still a drag. The official China Purchasing Managers Index (PMI) expanded to 50.5 in January from 50.3, better than expected. But the new export orders fell.
The Eurozone PMI expanded to 48.8 last month from 46.9, an improvement but its sixth month below 50 (readings below 50 suggest a contraction in the sector). The one ray of brightness in Europe was from Britain, where PMI rose to 52.1 from 49.6, beating expectations of 50.
Hong Kong unveiled more than $10 billion worth of economic stimulus and warned that the outlook for exports is grim. Financial Secretary John Tsang took a page from the Christine Lagarde playbook and warned of a double-dip recession in the global economy.
The U.S. ISM data for January is out at 10 a.m. ET; looking for expansion of 54.5.
2) Earnings update: About half of the S&P 500 has reported by this morning. About 57 percent have beat expectations; that is the lowest level since 2011. Bottom line: We have gone through a two-year beat of strong earnings growth, and now appear to be reverting to the mean.
This tells me analyst estimates are too high.
3) Whirlpoolshares surge pre-market, up 8.7 percent, after the appliance maker provided aggressive 2012 guidance of $6.50 to $7 per share, well above $5.85 consensus. The company reported fourth quarter earnings per share of $1.73 ex-items, missing analysts’ $1.96 expectation, as a stronger dollar and weak global demand hurt sales. Whirlpool's miss is the third in a row; the company witnessed a selloff in October after its third-quarter miss. The company expects price increases, tighter cost controls, and a thinner inventory will help it offset weak global demand in 2012.
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