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Facebook IPO: Wall Street's Worst Kept Secret: Dave's Daily



Yes, the copy that follows has little to do with Facebook. After all what do we really know about it?

The much watched ISM Manufacturing Data (54.1 vs 54.5 consensus and previous 53.1 revised lower) stimulated bulls Wednesday. Cynics believe auto manufacturers are just stuffing inventory to dealers. We'll see if these cars get sold or not. One thing is clear; it's easier to buy a car for consumers given industry self-financing than it is to buy a home period. If you have a pulse, you can buy a car. (See U.S. Sector, Stocks & Bond ETFs for GM and linked ETF XLI) Plus owning a new can be more satisfying than most things at least until the new car smell wears off and payments accumulate.

Bulls did rally stocks from the opening bell on global manufacturing data including the U.S. ISM report. News that China's PMI was slightly higher than expected (50.5 versus 50.4 previous) as was Europe's (48.8 versus 46.9) was part of the stimulant. It may mean no manufacturing slowdown in those regions. Further the eurozone news that Greek debt negotiations with its bond holders would be resolved soon was also bullish. But, later it was announced a settlement may not occur until next week. Where have we heard this stuff before? (See Overseas Sectors & ETFs below for FXI, EZU and EFA).

U.S. ADP Employment Data was rather confusing showing a jobs gain of 170K versus the previously revised data (325K to 292K). So jobs gained were weaker but bulls didn't seem to mind. Construction Spending increased 1.5% but here too, previous data was revised sharply lower to .4% from 1.2% making Wednesday's data seem better than it really was. (See, Homebuilders, ITB in U.S. Sector, Stocks & Bond ETFs). Lastly, the EIA Petroleum Report showed a large build in crude oil (4.2M BBL), gasoline inventories (3.0M BBL) but little with distillates (-.01M BBL). (These are featured with USO and UGA in Currency & Commodity Market ETFs.) 

The poor result from Amazon (AMZN) didn't negatively affect bulls thinking even as it fell. The tech sector continues to lead markets overall with shares of Broadcom (BRCM) and Seagate (STX) for example sharply higher on earnings. After the close heavyweight Qualcomm (QCOM) beat estimates and the shares soared nearly 6%. (All four are featured in U.S. Sector, Stocks & Bond ETFs ).

Bill Gross put out a rather philosophical muse (not outdoing Zuckerberg) in his monthly report which investors should read. After all PIMCO is the largest fixed income fund manager on the planet so his thoughts bear attention. During an interview with CNBC he even suggested Ron Paul would make a better president than the two likely choices. (He gets it!)

The dollar was weak as the euro rose (UUP and FXE) because another fix for Greece was at hand (maybe) and the better PMI report eased eurozone concerns. Gold also rose as the dollar fell and Bill Gross in his report also stated that gold now was the only real store of value period. Base metals were somewhat higher (See Currency & Commodity Market ETFs) and bonds were weaker.

Thursday brings more earnings and economic data the latter featuring Jobless Claims and Productivity & Costs. This week is jammed with economic data, earnings and now Facebook's IPO.

Volume was a little higher Wednesday but still low by recent averages while breadth per the WSJ was quite positive. Markets even on an intermediate basis seem quite overbought per the McClellan Summation Index (See closing charts).

 

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SPY - The SPDR® S&P 500® ETF is a fund that, before expenses, generally corresponds to the price and yield performance of the S&P 500 Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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IWM - The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.
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QQQ - PowerShares Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded fund.PowerShares QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.
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