THURSDAY 1/30/14

China HSBC PMI is 49.5, the weakest number in six months, now contracting, dropping one point from last month’s 50.5. The combination of a continued Fed tapering and the weak China PMI sends Asia stocks lower. The emerging markets are left out in the cold with the Fed stimulus slowly disappearing each month forward. NIKK sells off almost 400 points, -2.5%. SSEC loses -0.8%. Dollar/yen 102.28. Asia markets are now closed until 2/7/14 to celebrate the new year. Nintendo troubles continue as investors are not impressed with the company’s business plan forward. The Wii is simply not as popular anymore.

The Turkish lira continues to weaken to 2.2931 so Turkey remains in turmoil. Turkish business owners complain about the higher rates and the currency continues to weaken anyways. Tensions are running high and Turkey’s stock market continues to drop with TUR down -10% over the last week and down -33% in the last three months.

German employment data is better than expected creating a happy tone but confidence is weaker than expected. Euro zone confidence rises overall. Worries of deflation across Europe continue with markets trading lower. Diageo drops -6% on disappointing earnings; shareholders will need a drink. Pirelli drops -6% after rumors about going private are rebuffed. Euro retailers Tod’s and H&M, that sponsors soccer star Beckham, sell off -7% and -4%, respectively. H&M will receive publicity from an upcoming Super Bowl ad featuring Beckham.

GOOG sells the Motorola Mobility unit to Lenovo for $3 billion. The unit was a money loser but Google will retain patents. Traders think Lenovo got the short end of the stick so it is beaten -8%. About three hours before the opening bell, US markets stabilize with S&P futures +7. Dow +45. Nasdaq +16. Gold, silver and copper are weak. The dollar/yen is plotting a path higher to 102.40 which elevates the US futures. The 10-year is 2.69%. The dollar continues higher towards 81.

The Turkish lira stabilizes in the 2.27-2.29 range at 2.2717. The South African rand recovers to 11.264 so the rate hikes yesterday help to steady these troubled currencies. The Russian ruble, however, becomes an increasing worry diving -10% this year to a 5-year low. The ongoing currency dilemma is far reaching across many countries. Fear increases that Hungary is going to miss a bond payment which will exacerbate the ongoing global financial stress.

Subprime auto loans are increasing substantially. Folks that cannot afford new cars are provided loans and these folks are buying more expensive vehicles. This behavior is reminiscent of the housing bubble where anyone that could fog a mirror was given a mortgage, even those without jobs and unable to verify income. The auto industry is a main driver of the economic recovery so if it stalls, or worse yet, collapses, in some form due to the obscene subprime lending ongoing, the US economy would be negatively affected.

V beats on earnings and jumps +3.4%. MMM bears and bounces +1.3%. COP beats on earnings. XOM misses by a penny reporting flat production levels and drifts lower pre-market. Global bellwether UPS beats on EPS but misses on the top line. UPS trades flat which is a shock since the company announces a $2.7 billion buyback to pump the price higher. SYMC drops -1.7% hurt by weak PC sales. S&P futures are +6. Dow +60. The dollar/yen continues higher to 102.53 so the weaker yen provides lift in the markets.

Q4 GDP is 3.2% a touch lower than the anticipated 3.3%. Q3 was 4.1%. Consumer spending is robust and business expenditures on equipment rise. The government shutdown is blamed for 0.3% of GDP so the inference is that GDP would have printed 3.5% if the shutdown did not occur. Inventories increase so folks had better show up during Q1 to buy this robust supply of goods.  Initial Jobless Claims jump 19K. The dollar/yen remains at 102.55 so the S&P continues to point to a higher open at +5. Dow +55. Nasdaq +20. Crude oil moves higher with West Texas testing 98 and Brent testing 108. FB is up +18%. UPS +1%. UA +12%.

The dollar/yen continues higher to 102.77 so the weaker yen sends US futures strongly higher. S&P +13. Dow +100. Nasdaq +32. The intraday and daily market moves are becoming more violent due to the increased volatility (higher VIX). The opening bell rings and equities explode higher. CTXS is beaten -10% after receiving multiple downgrades. WHR is up +2.4% providing encouragement to the housing sector. XOM is selling off -1.7%. The 10-year yield recovers to 2.72%. The SPX recovers the week’s losses printing 1790 and strengthening.

December Pending Home Sales plummet -9%. Weather is blamed as well as increasing house prices due to the foreign wealthy and hedge funds buying property. GME collapses -3% now down -40% in three months. ADT collapses -19.3%. Telecom company ADT is smashed -18%. WHR gives up the ghost now down -1.2%. The paint is wet as SHW loses -3%. The housing sector support stocks as appliances and paint are weakening. XOM -1.2%.  Many other stocks run higher as the dip-buyers gain confidence.

Equities continue to the upside as the morning progresses. Gold dumps 21 to 1241. Silver and gold both drop -2%. PBI jumps +14% after beating on earnings and providing higher guidance. The dollar/yen remains elevated at 102.72 with the BOJ creating the happy stock market today by bludgeoning the yen. Social and internet stocks such as FB, YELP, LNKD and TWTR catapult +3% to +9% higher as traders chase the high-flyers. GOOG gains over +3% ahead of earnings after the bell today. European markets recover into the close following along with the US optimism.

The SPX gains 20 points, +1.1%, to 1794, with the bulls receiving a snap-back rally. The Dow gains 110 points, +0.7%, to 15849. The Nasdaq gains +1.8% and RUT +1.5%. The dip-buyers rush in buying small cap biotech stocks and high-flying tech stocks. The RUT back kisses the 50-day MA at 1140 and sits here overnight. IBB +3%. Biotech pharma ALXN jumps +21% after beating on earnings and guiding higher. WLP +3%. XLF gains 1.4%. BX +4.2%. WYNN gains +4% on strong earnings but has been beaten down in recent days. The market bulls ignore copper collapsing. JCP is beaten -8% on very strong volume which may create a capitulatory bottom for this punching bag.

After the bell, Amazon beats on EPS but falls short on revenue and plans to raise the cost of the Prime service. Amazon experiences the slowest growth in five years. AMZN collapses -5% AH’s. Google misses on EPS but beats on the top line. GOOG jumps +4.3% higher despite the lackluster numbers. ZNGA runs +22% higher after announcing plans to cut 15% of its workforce. The YHOO mail server was attacked creating a security breach with email accounts. YHOO drops -1%. The higher dollar/yen (weaker yen) creates the relief rally.

Traders and analysts come out in force defending Google’s earnings miss providing excuses for this favorite child. Many pundits and talking heads defend the broader markets as well. Much of this behavior is reminiscent of market tops where excuses are provided to keep the rally party going. In the dotcom bubble, most high-flying tech stocks did not have any earnings (think TWTR now) and instead analysts defend high valuations by using arcane data such as web site clicks and page views. Analysts tout Google’s search superiority this evening citing the number of clicks and other data to defend the lackluster earnings. Sound familiar?

Put/call ratios remain low indicating that complacency and lack of fear remain in the markets despite the -4% market pull back. This behavior favors the bears moving forward. In addition, the VIX finished relatively flat on the day despite the strong rally indicating the push higher in equities may be more of a dead cat bounce. The emerging market global currency concerns continue with the South African rand and Hungarian forint a major focus. Both currencies recover today.