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.

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.

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

Why we need Rhett Butler as a hiring authority


Image by Khinson

Hiring authorities are taking longer than ever to fill vacancies, the New York Times recently reported.  Candidates interview five or six times and leave empty-handed. Sometimes the jobs never seem to get filled. I know that on LinkedIn I have seen a number of  ads for the same journalism jobs  pop up again and again — for more than year. In case you haven’t heard, there are plenty of unemployed journos dying for full-time work. What’s up with that?

Blame it on the glut of candidates. The more choices we have in life, the harder it is to choose. “We don’t know our preferences that well, says behavioral economist Dan Ariely in a TED Talk back in 2009. This is why we need Rhett Butler. He’s a guy who finally figures out what he wants and acts  on it. Ariely explains:

We have an irrational compulsion to keep doors open. It’s just the way we’re wired. But that doesn’t mean we shouldn’t try to close them. Think about a fictional episode: Rhett Butler leaving Scarlett O’Hara in Gone with the Wind, in the scene when Scarlett clings to him and begs him, “Where shall I go? What shall I do?” Rhett, after enduring too much from Scarlett, and finally having his fill of it, says, “Frankly, my dear, I don’t give a damn.” It’s not by chance that this line has been voted the most memorable in cinematographic history. It’s the emphatic closing of a door that gives it widespread appeal. And it should be a reminder to all of us that we have doors—little and big ones—which we ought to shut.

Dan Ariely, Predictably Irrational

So, dear, Hiring Authorities, choose a candidate. Close the door on the others.

Just for fun, here’s Ariel’s hilarious TED talk on how we let outside forces control our decision-making, largely because we just don’t know what we want or we get too vermischt when presented with more than two choices. Word to the wise: Before agreeing to surgery, demand your doctor present all the other choices he is rejecting!


Stocks average 24% gain for year when they finish Jan and Feb higher

2013 is shaping up to be a great year for stocks — if history is any guide. I found this in my inbox, courtesy of  David Lutz, managing director at Stifel Nicolaus.

Sam Stovall of S&P Capital IQ reports that there have been 26 times since 1945 that the S&P 500 scored gains in both January and February – In all 26 instances, Stovall says the “500” recorded a positive calendar year total return, averaging an advance—including dividends—of 24 percent and posting full-year results that were in the single digits just twice: 1987 and 2011.

The S&P 500 ended February up 1.1% — it’s fourth consecutive monthly jump.