"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
They can blabber all they want, but the current rally in the stock market is nothing more than a bear market rally.
There are only two events that can turn the markets from bear to bull;
1) The government allows FHA to take millions of sub-prime mortgages off the hands of lenders, and/or they allow the rebirth of the "Resolution Trust Corporation" that bailed out the real estate crisis in the 1980's.
2) Oil prices must come down dramatically.
If one or both of these events do not occur, the markets will not only re-test the recent lows, but we are doing nothing more than "Delaying the Inevitable".
Not that I don't trust them, but the current rally may be due to the fact that Wall Street knows one of the two events above is are about to happen, or they are setting investors up for a huge sucker rally. Guess who the suckers will be?
The Markets
The EIA released its oil inventory numbers for the week, and Crude and Gasoline had larger than expected builds while Distillates (Diesel) had a surprise draw.
Crude Oil: Up 5.654 million barrels
Gasoline: Up 794 thousand barrels
Distillate: Down 107 thousand barrels
Since truckers use Diesel fuel, higher prices have, and will continue to be passed on to the consumer.
Today, Iranian oil minister Gholamhossein Nozari said that "oil has not become expensive," explaining instead that the main currency for trading oil, the US dollar, has declined significantly making oil more expensive here at home.
Before we begin pointing our finger toward the Middle East oil producers, we should start with pointing toward Pennsylvania Avenue (Washington, D.C.) first.
Like I have said many times, a stupid US energy policy combined with a stupid US fiscal policy is eating away at the pocketbooks of consumers.
Wal-Mart (WMT) boost sales last month by 3.2 percent helped by increased sales of groceries, flat-screen TVs and medications.
If Wal-Mart's same store sales are rising, it means consumers have retrenched.
Oh, remember when Merril Lynch said sell WMT when the stock was at $43, and I said they were wrong? The stock is now trading at $57.30. Do you have an account with these guys?
Toyota Motor (TM) said profits in the January-to-March time period fell 28 percent due to the rising yen and weak North American sales.
If Toyota's fuel efficient vehicles such as the Prius and Camry aren't selling, the spend thrift consumer is completely tapped out.
The European Central Bank left its interest rates unchanged today saying that they are more concerned with inflation than appeasing their banking buddies.
Q1 2008: Sector Snapshot
Consumer Staples:Q1: -2.2/ 1-year +9.3
Materials: Q1: -3.0/ 1-year +9.1
Industrials: Q1: -3.9/ 1-year +6.4
Consumer Discretionary: Q1: -5.9/ 1-year -17.7
Energy:Q1: -7.2/ 1-year +22.5
S&P 500: Q1:-9.5/ 1-year -5.0%
Consumer Staples -2.2%
The most defensive sector of the economy suffered from the rising cost of commodity prices.
Materials -3.0%
Two of the sector’s largest components—chemicals and metals & mining—held up relatively well. The top contributors were fertilizers, pesticides and genetically modified seeds into the agricultural market.
Metals & mining, and steel performed well due to a favorable supply/demand situation.
Industrials -3.9%
Industries, such as air freight and railroads had positive returns while Aerospace & Defense, Building products, and Construction & Engineering saw slower global demand.
Consumer Discretionary -5.9%
Suffered from weak consumer spending. The welfare checks being mailed out will help some but any increase in spending will likely be temporary.
Energy -7.2%
Energy stocks outperformed the overall market but the U.S. economic slowdown may lead to slowing demand. This was likely the cause for the recent bout of profit-taking.
