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Markets Barely Shake in Light Trade - Money Matters for 12/28/05
Without a sense of purpose or direction, the US indices traded in extremely narrow ranges today before ending modestly higher on slim volume.
The compelling news was that of consumer confidence, which returned to levels of last August, before the devastating hurricane season blew away economic hopes. While that was an upbeat bit of information, it did little to establish any kind of clear cut direction. Investors still seem more concerned about the interest rate condition - with a temporary inversion of the 2, 3 and 5-year yields, which spilled over into the 10-years yesterday - and the lack of any measurable price action during the month of December, which saw the indices reach for new highs but repeatedly fail to break through.
What may be occupying more investment minds at the moment are the prospects for the upcoming year and the upcoming 4th quarter earnings reports, which are feared to be slightly less encouraging than what analysts are seeking.
All of this weighs on a market beset upon by pundits and prognosticators with varying views of the current condition and what lies ahead. Lately, forecasts have turned slightly more bearish, as the December non-event in stocks has seemingly taken its toll on even the most permanent of the perma-bulls.
It's not as though a downturn in the stock market is either unexpected or alarming. The Nasdaq recently reached a 4 1/2 year high, the NYSE posted new highs regularly in November and the Dow was within sniffing distance of the 11,000 level recently. A temporary pullback will likely engender new buying opportunities.
Maybe more than anything else, as we head toward the closing sessions of 2005, investors are taking a long look at valuation, which are still hovering in the sky-high area. The average P/E on the S&P 500 is right around 19, well above the average of 12-15 and far ahead of what's considered the prime buying range, below 12.
Certainly spooking the investment community is the continued advances in the price of gold and silver, which have reached multi-decade highs and show no signs of slowing down. Also worrying in the commodities area are crude oil and natural gas, which also are near all-time highs. The difference is that while the metals are time-honored hedge instruments, the energy components carry an opposite appeal, that of depressing consumer spending and business profits.
All of this makes for a challenging climate for the weeks and months ahead in US equity markets and much head-scratching and wondering as a turbulent year draws quickly to a close.
Dow Jones: +18.49; 10,796.26 close
NYSE Advancers: 2136
Nasdaq Advancers: 1640
NYSE New Highs: 64
Nasdaq New Highs: 72
Gold: +6.20; 516.30 close
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