The market is busy this week. As one month closes and a new month opens, the market has a lot on its mind. Fundamental factors and technical data are rife and are competing for attention from traders and investors. We have lots of economic news—two of the month’s biggest reports—coming this week. We also have companies that refuse to be ignored. And how can anyone ignore the price of oil? The US indexes are not the only attention-seeking markets this week. Wild swings and big moves can grab as much attention as markets that are eerily quiet. These big market swings, company news, technical moves, and economic changes add up to a market that is nervous. Investors are nervous. Traders are nervous. But the market is in a state of high anxiety and this feeling is sweeping across the market world. Let’s take a look at the global markets.
The Asian indexes closed higher on Tuesday, April 29, 2008. The Shanghai index rebounded after two consecutive days of losses to gain 1.4 percent higher. However, anyone who knows this not-to-be-ignored market realizes that the Shanghai index has the potential to make much larger gains. It can (and has) made larger losses as well. Elsewhere in the region, the Hang Seng also closed higher, gaining a full percentage point. India’s BSE index was the big winner in the region, gaining more than two percent on Tuesday, April 29, 2008. India’s tech sector fueled the index’s big gains. Satyam Computer Services Ltd. (SAY) and Infosys Technologies (INFY), which are listed on the BSE Sensex, made strong gains. Satyam Computer gained as much as 8 percent before closing with a 5 percent gain. Infosys gained nearly 4 percent. The Nikkei was closed on Tuesday, April 29th for a holiday.
Europe experienced mostly losses on Tuesday, April 29, 2008. The European Big Four group traded in the negative to various degrees. France’s CAC was the big loser in the region, trading down 0.83 percent. This loss was closely followed by Germany’s DAX, which lost 0.79 percent. Switzerland and London experienced modest losses. Despite the negative trading day in Europe, the oil companies showed very strong gains in the region. Oil giant, BP, plc (BP) was a big winner, trading up more than 4 percent during the US session. Royal Dutch Shell also made an impressive gain on the same day. Yet the European markets are showing anxiety in anticipation of the Fed’s rate decision coming later this week.
In the US, the markets are indeed nervous. And they have plenty of reason for its case of the nerves. Economic data is coming this week that could move the market in big ways. In fact, this data usually makes the markets either jump higher or fall lower. The manufacturing data will be on the loose later this week. With recession on everyone’s lips, this data could make the market scream and shout. If that wasn’t enough, the payrolls data is coming at the end of the week. It is sure to move the stock, bond, and currencies markets. Well, two is company and three really is a crowd this week because the third mover in this party is the Fed. They are probably the biggest cause of anxiety that is shaking the global markets this week. Even if we decide to ignore this fundamental data, the company news is pouring in this week showing big moves by huge companies.
The moves are both to the upside and downside. And this has everyone nervous inside. Let’s examine the economic data coming this week.
Economic Reports
The economic data has already made the market move this week. A surprising report has given a boost to this nervous market. The Consumer Confidence report came out with a much higher-than-expected figure. With all the recession talk, foreclosures, credit problems, and taxes who would have thought that consumer confidence would have risen for April? This report surprised the market in a bullish way. The market seems ready to take advantage of any bullish news and squeezing every bit of price movement it can from the report. The Consumer Confidence report examines how consumers feel about jobs, the economy, and spending. Given this information, the higher figure is an even greater surprise. But why fight it? The market is happy with this news and we never second-guess the market’s response, do we? I doubt that this figure signals a turning point for the economy, but it is definitely a reason to pause.
The Consumer Confidence report is not the big market mover on the agenda this week. The manufacturing and employment reports—marking the beginning of a new month—are the biggest. But these reports can be challenged by the FOMC meeting.
Let’s start with the manufacturing report. The manufacturing figure is released on the first business day of every month by the Institute for Supply Management. In fact, it is the first report of the month that measures growth in this large sector of the economy. The figure is expected to decline from 48.6 in March to 4 by the Institute for Supply Management. In fact, it is the first report of the month that measures growth in this large sector of the economy. The figure is expected to decline from 48.6 in March to 48.0 in April. Any figure below 50 means manufacturing activity is contracting, but the economy might be continuing to grow. A figure below 43 could mean that the economy is contracting and is in full recession. This declining figure for April could put downward pressure on the stock market and dollar. However, the bond market could have a bullish response to this low manufacturing figure. The ISM manufacturing figure will be released on Thursday, May 1st at 10:00am.
The next big report of the month (and every month) is the nonfarm payrolls report. This is the report that moves the stock, bond, and currencies markets around the world. The nonfarm payrolls report measures the number of new jobs created during a particular month. This figure serves as a measure of the economy’s health. The payrolls figure has steadily declined over the past few months and it is putting strong downward pressure on the stock market and the US dollar. Conversely, this lower figure has boosted the bond market and rival foreign currencies like the Euro, British Pound, and the Yen.
So, the market is, of course, right to be nervous with the release of two such heavy hitters that are expected to show declines. Next week, the Institute for Supply Management will release the Non-manufacturing (Services) Survey. This often-overlooked report is rising in prominence and strength. It has the ability to move markets in big ways. The Productivity report for the first quarter will also be released next week. While it is a medium market-mover, this important report can give us a strong indication as to what is really happening in the economy. I’ll be waiting on the edge of my seat!
Company Reports
The Dow ($INDU) is in a state of push-me-pull-you at this time. There is a lot of activity, but the index is staying within a tight range. This can trick many traders and investors into thinking that the market is quiet. But it is anything but quiet right now. The tug-of-war is going strong. And both sides are nervous. What a mix!
Looking more closely, we see that some companies are making big moves. Okay, the oil companies like BP and Shell are moving strong as we have already reported. But there are other companies that are moving right now.
Merck & Co, Inc. (MRK) was hit by a negative decision from the FDA about its cholesterol drug. The drug giant is trading down more than 9 percent from the opening of the market. It has not recovered during the trading day. Eli Lilly & Company (LLY) was also affected by this decision—many pharmaceuticals could be affected by the decision—and it is trading down 2.3 percent.
To the upside and without returning to the oil giants, Mastercard, Inc. (MA) has made a huge move on Tuesday, April 29, 2008. Reporting profits that have more than doubled, the company is trading up 11 percent. Its rival, Visa, Inc. (V) did not fare so well with lower profits. Nevertheless, Visa shares are trading up nearly 3 percent.
As the trading day approaches the after-lunch hour, the Dow is trading down 43 points. It has hovered around that point for most of the trading day. The S & P 500 ($SPX) and Nasdaq ($COMPQ) are also trading slightly lower. This merely shows the market’s caution and anxiety as it awaits the Fed’s rate decision and the two blockbuster reports at the end of the week.
Market Moves Wisdom of the Week
Control anxiety! Yes, the market might be experiencing a high degree of anxiety at this time. There are lots of factors contributing to the nervous feeling in the market. However, traders do not need to experience this level of anxiety. It is not good for your trades or for your health. A trader can watch and realize that the market is nervous yet remain disaffected by the feeling. Using a good trading system, entering sound trades, and controlling risk are good methods of controlling trader anxiety even during a high level of market anxiety. So the Market Moves Wisdom of the Week is to learn how to recognize and control anxiety. This simple but not-always-easy move step can help to keep your trading profits and quality of life at a high level.
Robin Lofton
Staff Writer and Trading Strategist
Profit Strategies.com
