90% of S&P 500 stocks are higher this year, closing in on the 2003 record

The number of winning stocks this year is approaching a 10-year peak, writes Howard Silverblatt, senior analyst at S&P Dow Jones Indices. You’d have to go back to 1980 for the previous record. Here’s what Howard is sending to his email subscribers:

You Take My Breadth Away

           …  Year-to-date 451 of the S&P 500 issues are up (47 down), which on an annual basis is the best since 458 issues increased in 2003.  The 2003 number is also a record high from 1980, when my data series starts.  The number is significant since it shows the depth of the recovery.  In the late 1990s, the market aggregates became dominated by technology, which grew on ‘faith’ and ‘hits’, as compared to sales and cash-flow.  In 1998, the market returned 26.67%, yet only 57.8% of the issues were up, and in 1999, the market grew 19.53%, but less than half, 48.2% of the issues, were up.  For the 2013 year-to-date, 90.2% of the issues are higher, with the market aggregate up 23.39%; 270 issues are above that aggregate, with 140 issues up at least 40%.  Surely a significant number of people are seeing large gains, and surely many are not, since they remain out of the market.

            … Chasing returns is not a good reason to invest, but when enough do it the short-term impact is more buying and higher prices. Which we may be getting close to if the market stays anywhere near its current level.

(fyi – Friday set two new official highs, intraday of 1759.82, and a close of 1759.77)

Pay to Play: Pros who pay for advanced peek on data are cheating and the sellers know it

Traders are paying up big money to get an early look at market-moving data provided by non-governmental groups. This is pay-to-play, pure and simple.

This is way different from data that the government releases. The rules are very strict; if anyone break s an embargo they get the boot. But according to the Wall Street Journal, private companies don’t have to follow that protocol. In the case of the University of Michigan Consumer Sentiment Survey, Thomson Reuters charges a premium to traders who want a two-second head start on the news. In computer-driven trading, that’s a lifetime. Thomson Reuters and its clients defend the practice, saying it’s no different from paying for a premium subscription to the Wall Street Journal or one of its feeds.

Not exactly. I am a WSJ subscriber and I am constantly bombarded with opportunities to pay up for special subscriptions. Ditto for premium subscriptions from Politico. And so forth. It’s quite public. Bloomberg news agrees, and PRIVATELY  complained to the University of Michigan about the deal it struck with Thomson Reuters.

The advance-data-peek world is submerged — a backroom club.  Even if traders believe the practice is wrong, they don’t dare buck the trend. Try and spot the irony in this explanation, by one “event-jumper” who sounds like a brainwashed  kidnapping victim:

“It’s not an exclusive club,” said Infinium’s chief operating officer, Gregory Eickbush. He said his firm needs to have an advance look at the consumer-sentiment survey to keep from getting “flattened” by other futures traders.

Mr. Eickbush said Infinium attributes around 10% of its annual revenue, or close to $18 million in recent years, to using high-speed news and economic-data feeds, in a strategy he called “event jumping.”

Trading on such reports, called the “news-feed trade,” is emblematic of an era in financial markets dominated by hair-trigger trading measured in fractions of seconds.

At its speediest, this means trading by algorithms based on what is known as “machine-readable news.” Paul Rowady of research firm Tabb Group, who studies the economics of trading, estimates the delivery of machine-readable news will generate $75 million in revenue for financial-news providers this year, up almost 50% in five years.

Sharad Kumar, a veteran of several high-speed trading firms, said the availability of early access to nongovernmental data creates an arms race in which firms pay for it to avoid being at a “huge disadvantage.” At the same time, its cost can be “a barrier to entry” for smaller traders, he said.

So Mr. and Mrs. Saver, if you want to  protect your nest egg, be sure to ask your advisor if their traders are members of the Event Jumping Club. Otherwise, they will be losing out.

ADP may foreshadow disappointing May jobs number on Friday; growth slowing

This morning, the stock market took a beating after ADP reported a weak 135,000 gain in private payrolls last month. April’s numbers were also revised lowerto a gain of 113,000 from 119,000.

That doesn’t bode well for the Labor Department report on jobs, due this Friday, writes Jack Ablin, chief investment officer, BMO Private Bank. In an email, Ablin elaborates:

Economists are forecasting an expansion of 178,000 net new private payroll positions in May.  Based on a cozy historical relationship between ADP and the Bureau of Labor Statistics’ private payrolls, a simple regression would imply a disappointing net gain of only 139,000 jobs.

Here’s a graph showing the relationship between the two numbers. Doesn’t look good:

Overall, job growth appears to be slowing (graphic via MarketWatch)

Job growth slowing in 2013.

10-year Treasury edges past S&P500 yield for first time in year

Investors, betting on a recovery, push bond yields higher, stock dividend yields lower. (Click to enlarge.)

The recovery story is gaining the upper hand in the markets today, with stocks posting rallying hard in response to strong news on housing prices and big rallies overnight in global markets. Treasurys are taking it on the chin. As a result, for the first time in a year, the yield on the S&P500 has dipped below the yield on the 10-year Treasury.

The Case-Shiller index reported today that home prices jumped 10.9% in March, the biggest gain in seven years. Double-digit gains in hard-hit areas like Phoenix, Las Vegas, San Francisco and Detroit helped to propel stock prices

Time to pop the bubbly? You’re behind the game. On the Hampton’s, Long Island’s tony seaside getaway (think Great Gatsby), the $25,000 stuff has already been drained. You’ll have to wait for the next sky diving waiter to find another magnum.

Bloomberg screenshot via David Lutz of Stifel Nicolaus

The best place to find out what is really happening in jobs

The core of the labor force is weakening; baby boomers are working longer – via Calculated Risk

Whenever I want the inside skinny on the jobs numbers, I turn to the Calculated Risk blog. No one can beat Bill McBride for his clear, steady tone (even when it felt as if the world was ending) or for his command of the numbers.  And the charts are to die for.

The labor force numbers released last Friday for March were surprisingly weak — only 88,000 new jobs were added to the nonfarm payrolls, less than half the number predicted. The unemployment number edged down to 7.6%, but only because so many people gave up looking for work.

The participation rate in the labor force has been a major topic of debate over the past few years. Baby boomers are retiring, which would naturally reduce what is known as the participation rate in the labor force. There are other factors of well — both bad and not so bad.

Let me share with you what Bill McBride sees:

• Fewer 16- to 24-year-olds are in the labor force because they are going to school more. That’ should be a plus for the economy.
• The number of 25- to 54-year-olds is declining — a negative. Those are the prime working and saving years. The downtrend is a function of the recession and structural changes in the economy. (See chart on left; click on the graphic to enlarge.)
• More oldsters are working longer (some say so they can keep their health benefits). But there aren’t enough of this cohort hanging in to boost the overall participation rate.

For more details, go read the Calculated Rate blog post here. Eye opening.