Yahoo Finance Stock pickers struggle to tune out global market noise
Maybe U.S. stock traders wanted to spend the morning picking through the so-so earnings report from Costco Wholesale Corp. (COST) from last night.
Or figure out whether today’s pending home sales numbers fit with an emerging picture of an accelerating housing market.
Presumably there are also those working to decipher the acquisition of chipmaker Broadcom Corp. (BRCM) by Avago Corp. (AVGO) for $37 billion, and what it means for the steadily consolidating semiconductor business.
All worthy pursuits for the engaged investor.
But as has been the case for most of the past several years, when push comes to shove it’s the macro that pushes and the micro that gets shoved aside.
So the morning financial headlines and immediate trading catalysts all concern broad, global macro and policy concerns.
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The wild ascent of mainland Chinese stocks hit a nasty air pocket over night, the key index there dropping more than 6% on huge trading volume. If a market that was up more than 50% in less than three months on rampant government-abetted retail speculation needs an excuse to give back a chunk of those gains in one stroke, this time it was news of sovereign wealth funds selling bank stocks.
Across a different ocean, the roulette wheel of Greek bailout rumors landed on red again overnight. As concerns build over deposit flight from Greek banks, encouraging reports of a bailout-extension deal have now flipped toward pessimism. It’s hard-to-impossible to handicap this situation with any confidence. But it refuses to recede entirely from investors’ screens.
And what to make of the pullback in 10-year Treasury (^TNX) yields this week, to below 2.14% from 2.21%? Are stock investors still supposed to worry that this is a negative signal for economic growth - or is it a good thing because bonds fear a Fed hike less? It's so hard to remember what all the macro constellations in the dark sky are supposed to mean.
The upbeat takeaway to all this, of course, is that investors are free to opt out of the game of trying to interpret and integrate all these powerful macro forces and see the broad market action for what it is.
On Dec. 29 – five months ago tomorrow – the S&P 500 closed at 2090. It closed Wednesday at 2123, a percent-and-a-half higher. To those looking at the U.S. market complaining that “too much” is going on to figure it all out, I could easily counter that hardly anything at all has happened so far in 2015 for the longer-term investor.
U.S. stocks have been like the static barge floating perpendicular to the tidal current, pushed one way by a rising dollar and ebbing economic growth, and another by sturdy corporate finances and value-minded deal making.
The U.S. market’s trading range has been one of its tightest in history. Suspense builds as patience wanes. That’s OK unless you make your living on trading commissions.
If forced to choose one item to focus on among the news array of the day, it should probably be the Broadcom merger and the response by the broader semiconductor sector.
For all the concern expressed lately over the severe lagging action in transport stocks compared to the overall market, the semis are really today’s industrials. The industry is rationalizing and getting an adrenaline shot at once.
Watch the Market Vectors Semiconductor ETF (SMH), which busted out to new highs on the Broadcom rumors Wednesday. It’s more interesting than trying to decide how the Greek political and fiscal situation will - or won't - get sorted out.
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