Oil retraces after recent rally, banks, financials hit by fears of Fed interest rate retreat.
WASHINGTON, February 4, 2016 – It’s looking like another boring yet tension-filled day on Wall Street today, with the Dow attempting to stay in the green while other averages are pinned inside the negative red zone. As usual, confusing figures and stories continue to cross the tape and one senses that investors and even those allegedly emotionless machines are getting fed up with it all.
At the moment, oil has backed off a bit from its highs after Wednesday’s furious rally, likely caused by a short squeeze as many recent but short-lived general market rallies have been since early January. In general, you can feel the general sense that everyone is exiting these markets quietly but quickly, having lost faith in the wisdom of central banks. It’s a phony faith that should have been lost a long time ago, except that it’s really more the fault of phony socialist do-nothing Western governments that still feed off a failed status quo.
Productivity declined 3 percent in the fourth quarter, its biggest drop since the first quarter of 2014, the Labor Department said Thursday.
Since (right or wrong) perceptions are growing that the Fed is either done or mostly done with interest rate raises for awhile, stocks in the financials (banks, insurance companies, etc.) are mostly getting whacked today. That’s because these businesses need higher interest rates in order to achieve something like the profitability they enjoyed pre-Great Recession. Thus, the prospect of no further interest rate raises this year is seen as a potential show-stopper for the financials’ collective return to normalcy.
Joblessness has recently ticked up, which is no big surprise given it’s the end of a rather dismal Christmas selling season. But that isn’t helping things either. Neither is another downtick in worker productivity measures, although this likely reflects the lower skill levels of seasonal workers, at least in current figures. According to the Department of Labor (DOL), productivity declined 3 percent Q4 2015, the biggest drop in that measure since Q1 2014.
To sum it all up, things are just boring today, which, given current events, may actually be a good thing. Markets could take on a bullish hue if they could just calm down for a while, if oil could stabilize at least a bit higher, and if someone, somewhere could reliably signal that some government somewhere has at least a clue about what to do next.
As a result of this continued inconclusive trading, we think it’s probably best to sit on the sidelines today, exit any modestly profitable situations, and stay as much in cash as possible until we see what might happen next. It remains very dangerous out there, particularly when even experienced investing pros aren’t doing any better—and often worse—than rookie stock market dart and dice throwers.
Dull, dull, dull, but it’s what we have today.
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