Wall Street not cutting it? Show me the gold
New York (Jan 21) The S&P 500 couldn’t manage four straight down days in 2014. But it can’t nail three positive days in 2015, either.
So goes the joke on Wall Street right now, says Jones Trading’s Michael O’Rourke. Maybe we’ll see if the S&P 500 SPX, +0.15% can bust out of that pattern today. Yesterday, the market eked out some marginal gains after flip-flopping between futures and Wall Street’s open.
Still, all this indecision may be one reason why gold has been getting so well-bid. Jump in, or sell now — that’s our call of the day.
Not to hammer on the potential for bears to come knocking, thought. The bull market is closing in on six years, and of course, that gives some of us the jitters. What does this market need to keep going up? The mantra: earnings growth. And that’s just what most companies haven’t been delivering. Banks, so far, have not been so great. Energy companies have been delivering just as we expected — again, not so good.
Deutsche Bank’s strategist Jim Reid notes that BHP ‘s BHP, -1.00% move yesterday, to cut its number of rigs in U.S. shale by 40%, shows increasing pain at the micro level for energy companies. “It’s also a risk for the economy, as investment and employment fall sharply in this sector. Can consumption gains more than offset this? This is one of the big questions at the moment, and it shows that the consequences of the sharp drop in oil are not straightforward.“
We’re not at a “Deflationary Dow”, where revenue growth turns negative, but we’re getting close, says Nicholas Colas, chief market strategist at Convergex. “We don’t need to see double-digit sales growth to spur equities higher, but 2% to 3% is a reasonable line in the sand,” he says. And no, it’s not valuations that are causing the problems, because low interest rates keep reminding investors that bonds offer little in the way of long-term potential.
If deflation takes hold, says Colas, revenue and growth goals will be that much tougher to reach. Guidance from companies this month and in February to assess the 2015 risks will be key. Our chart of the day takes a closer look at some troubling stats in the earnings department.
Plus, T-1 to ECB day. There’s entertainment from Davos in the meantime.
Key market gauges
This morning, it’s all about gold GCG5, +0.63% which has just gone back below $1,300 an ounce, after rising above that level this morning for the first time since August. Crude CLG5, -5.26% is bid up, after getting crushed on Tuesday.
For now, futures on the Dow YMH5, -0.51% and the S&P ESH5, -0.36% are on the fence, while Europe stocks SXXP, -0.40% are doing nothing — but these days, who knows how the market will behave later. The Shanghai Composite SHCOMP, +4.74% might win it for the most volatile market this week, nabbing the biggest one-day percentage gain in more than five years, after a plunge on Monday. The Nikkei 225 index NIK, -0.49% fell as that other central bank — the BOJ — did nothing. The dollar USDJPY, -1.25% is back down to ¥117 because of the BOJ. The pound GBPUSD, -0.20% is down on a Bank of England surprise — two members have dumped their rate-hike votes.
Source: MarketWatch
