March Madness continues for US markets … By Ken Mahoney
The markets bounced back on Monday as investors embraced ‘Monday Merger Mania’. AT&T announced a 39 Billion Dollar deal to buy competitor T-Mobile. Investors are also hoping that the crisis in Japan is stabilizing ‘a bit’, while the Libya conflict will be measured in ‘days’.
Between situations in Japan and Libya, stocks faced some serious headwinds last week. The Dow declined 1.5%, the S&P 500 fell 1.9% and the Nasdaq dropped 2.7%. The Libyan cease-fire announcement temporarily calmed concerns about developments in the Middle East on Thursday and Friday, but ongoing uncertainty eventually caused the rally to slow and it wasn’t enough to recover from Wednesday’s thrashing.
Recent events, including the nuclear disaster in Japan, international forces b
ombing in Libya, and the possibility of more currency market intervention will likely keep investors reacting to headlines in the weeks ahead. We are currently facing an extremely media-driven market that responds quickly to what is visible in the news. At times like this, it is more important than ever to avoid trading based on emotion rather than facts or fundamentals. Even when things are uncertain, there are often many promising opportunities to be found.
Consider one example:
Some people see huge opportunities in Japan. Since experts are optimistic that the earthquake's impact will have a relatively mild long-term effect on Japan’s economy, a cross-section of investors are watching the Japanese market with the intent to invest – viewing the Nikkei’s sharp drop as the best time to get in. In fact, a whopping $956 million flowed into Japanese equities in the week ending March 16 alone, according to data from Thomson Reuters Lipper service. While we are not necessarily advocating this strategy for you, it does highlight the importance of seeking out opportunities even when things look grim.
Despite the complicated and unpredictable elements at play, these events remind us of the nature of the markets: ups and downs are to be expected. Although we've quoted him before, now is a good time to recall the words of billionaire investor Warren Buffet who said, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”. And always remember, we’re monitoring the situation closely.
ECONOMIC CALENDAR: Monday – Existing Home Sales Tuesday – Redbook Wednesday – New Home Sales, EIA Petroleum Status Report
Thursday – Durable Goods Orders, Jobless Claims Friday – GDP, Consumer Sentiment
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HEADLINES:
America’s top military commander says a United Nations-authorized no-fly zone over Libya has effectively been achieved. The Chairman of the U.S. Joint Chiefs of Staff, Admiral Mike Mullen, is calling the initial phase of a multi-national effort to take control of Libyan airspace a success. Mullen says Libyan command-and-control centers and air defense installations have been struck, and that leader Moammar Gadhafi’s forces effectively are grounded.
The U.S. cost of living hit a record high (127.4) in February, according to the Chained Consumer Price Index. The previous high of 126.9 was reached in July 2008, before economic markers like unemployment and stock prices were affected. Simultaneously, states will be cutting back services this year at the same time they increase taxes in order to close enormous budget deficits.
Japanese government officials say food and milk contaminated with radiation is being detected in a wider than expected area. Some shipments are now being stopped, although authorities stress that ingesting the items will not immediately harm people.
Nissan Motor Co. said Sunday that it will start parts production and vehicle assembly operations this week in Japan, becoming the first car maker to restart its entire auto production process after a devastating quake brought the country's auto industry to a standstill.
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