Daily Market Update – November 11, 2014 (Close)
Yesterday, in what is otherwise a slow week, so much attention was placed on the Alibaba manufactured holiday called “Singles Day.”
It’s a day that single people are supposed to take the time and present a gift to themselves. Of course there are those who might believe that being single is gift enough, but nonetheless, it is a perfectly materialistic occasion that would have the leaders of the 1948 Revolution apoplectic.Having actually celebrated a 30th wedding anniversary yesterday, coinciding with Singles Day, somehow I didn’t receive anything for my troubles, so maybe I should have just following the crowd and gifted myself.
Today, in the United States, it is Veterans Day, where we honor those who gave the gift of freedom rather than honoring themselves with a gift.
I’m not quite certain why stock markets are open, as the bond markets and banks are closed.
But they are and on those few days a year that the credit markets are closed and stocks do trade, those are usually fairly slow trading days.
And so it was today.
The morning’s futures seemed to be on course to follow the same path as yesterday, as that day’s listless opening was the pattern throughout the day and served as today’s templet, as well.
The only thing of note yesterday was the marked reversal in energy prices in the late morning which eliminated the sizeable gains in the sector with moderate losses. Insofar as energy is a significant portion of the S&P 500 it again limited those gains. Since the slide in energy started sometime in July 2014, the DJIA and S&P 500 have performed identically, gaining 3.1%, with the S&P 500 being held back due to its heavier energy representation.
In the meantime, any benefit to be gained from lower energy prices won’t really become apparent until the next quarter’s earnings are reported.
For now, ever since Goldman Sachs’ call for $75 crude, the markets have been relatively stable and I think may have bottomed, although there are further calls going as low as $50.
As an unusually early start to winter begins to sweep across parts of the nation the excess supply over demand may shift a little bit, but at these prices there is also bound to be those seeking bargain pricing and speculating on an eventual rebound.
Ordinarily, the thinking would be that low energy prices would spur other businesses to ramp up their activity, seeing it as a perfect time to be able to increase their margins.
That would usually lead to increased employment, increased spending and increased earnings.
But that doesn’t appear to be happening yet.
Maybe businesses are skeptical of low energy prices remaining low and continue to be cautious, but the reality is that the markets and the economy tend to do better when oil prices are increasing, as long as that increase is demand driven.
Maybe they just don’t see consumer demand increasing for discretionary items.
Now, we’re in the unusual position of having too much energy and not enough demand. Hopefully, whatever is saved in gas prices and heating prices will become part of an increase in discretionary spending.
We’ll find out later this week whether retailers have received any benefit at all from the increasing employment statistics over the past 3 months, but despite good numbers for the past year, there has continued to be a reluctance to spend.
Something is just qualitatively different about this recovery and the typical patterns just aren’t materializing or are just taking much longer to become evident.
Hopefully retail will bring some good news this week and energy pricing will moderate as consumer demand leads to greater overall economic activity.
With Macys and JC Penney reporting after today’s close maybe we’ll get something to bring some life into the market this week. With next week being the last week of the cycle it’s never too late to sell any options if the market can find a reason to move suddenly higher.