Is the Market Poised for a Correction – Dollar Plunges Against Yen; U.S. 10 Year Yield Keep Shooting Higher; Pension Crisis Deepens; Record Earnings Struggle To Support Record Stocks
Pandemic of pension woes is plaguing the nation
Detroit, you’re not alone.
Across the nation, cities and states are watching Detroit’s largest-ever municipal bankruptcy filing with great trepidation. Years of underfunded retirement promises to public sector workers, which helped lay Detroit low, could plunge them into a similar and terrifying financial hole.
A CNBC.com analysis of more than 120 of the nation’s largest state and local pension plans finds they face a wide range of burdens as their aging workforces near retirement.
Record earnings struggle to support record stocks
SAN FRANCISCO (MarketWatch) — As earnings and stocks prices hit records, one question keeps rising to the surface: Are corporate fundamentals growing fast enough to support higher stocks?
A disconnect between equities and the economic recovery could spell trouble for the market, and that’s been noticed as Wall Street debates whether this rally is built on shaky support. Stock indexes are telling a much brighter story than the one told by CEOs and economic reports, but that gap should narrow if stocks are to hang onto gains.
Nearly four out of five companies in the S&P 500 have reported earnings for the quarter ended in June, with earnings growth on track for a 1.7% gain. Since the third quarter started, the S&P 500 Index SPX -0.22% has risen 6%, and the index hit a record high of 1,709.67Friday.
The gains are particularly notable when the earnings season’s underpinnings are taken into account. When you take away big gains by financial firms, the second-quarter growth rate drops to a 3.4% decline from a year ago, according to John Butters, senior earnings analyst at FactSet.
Bond Market and Stock Market Disparity Warning; Trade Yen
The 10 year Treasury Note and 30 year Treasury Bond are at support while the S&P 500 is at resistance (and has been for weeks). The disparity between rates of change in the Bond and S&P 500 has reached a level that historically signals a pending stock market top, bond market bottom, or both. Higher stocks/lower bonds is deeply embedded in collective market psychology which increases the risk of reversal and a return to risk on/off conditions. Trade setups are presented to take advantage.
If you want real doom don’t watch TV, watch 10 Year Treasury Bonds…
U.S. dollar shows “fatigue” as pound, yen rise
NEW YORK (MarketWatch) — The U.S. dollar fell against some rivals Monday in the wake of Friday’s below-consensus report on job growth in the world’s largest economy.
Against the Japanese yen, the dollar USDJPY -0.42% traded at ¥98.45, down from ¥98.93.
Market Clues Are Coming From China, and Japan
This morning, the S&P 500 Index e-mini futures (ES-U3) are trading lower by 2.50 points to 1701.50 per contract. Traders and investors seem to be taking some risk off of the table before the opening bell. Last night, the important and highly followed Japanese Nikkei 225 Index finished lower by 1.44 percent. This could hurt some of the leading Japanese ADR’s such as Toyota Motors Corporation (ADR) (NYSE:TM), Canon Inc. (ADR) (NYSE:CAJ), and Sony Corporation (ADR) (NYSE:SNE). Traders should also watch the USD/JPY chart very closely. When the USD/JPY declines it will often put pressure on the U.S. stock indexes.
BOND LOSSES AT FEDERAL RESERVE TOP $192 BILLION
The yield on 10-year U.S. Treasuries (^TNX) has surged 66% over the past three months. And bond investors, especially those with jumbo-sized positions, are getting hammered. How much money has the Federal Reserve lost?
At the end of July, the Federal Reserve held $1.98 trillion in U.S. Treasuries. (See chart below) That figure represents just over half of the Fed’s $3.6 trillion balance sheet.
Ex-Soros Adviser Fujimaki Sees JGB Bust From Tax Delay, Fed
a delay in increasing the sales tax and reduction of Federal Reserve stimulus could cause the nation’s government bond “bubble” to burst.