Day trading activities constitutes a large portion of daily trading volume. Investors are reluctant to buy for long term investment as market approaches peak since the financial crisis.
Investors are concerned about economic uncertainties and a weak recovery, especially when the rich are benefited most due to concentration of wealth. Although day traders and market makers are buying up the market in the week, profit can also be made by manipulation in a volatile market with thin trading volume.
If Debt Ceiling Talks Fail, Treasury Has Options
It is unfortunate the president and Treasury secretary are spreading around calamity scenarios, because the Treasury really does have options after Aug. 2 if it doesn't scare the markets into panic before then.
The Treasury will still be receiving 55% of its tax revenue and can easily pay the interest on the debt, and should then be able to roll over bonds coming due. For the balance of federal expenses, the Treasury will have to prioritize, but it will have enough money for Social Security, Medicare and Medicare. Some checks may have to be spread out to accommodate discrepancies between payment dates and cash flows, but interest payments are modest enough, relative to the total cash coming in, that those can be met on time.
A downgrade is likely no matter what comes out of current negotiations. Specifically, Standard and Poor's has indicated a $4 trillion deficit reduction package is necessary by Aug. 2 to avoid a downgrade. That simply is not possible given the president's aversion to genuine spending cuts -- evidenced by his failure to table concrete spending cut proposals -- and the insistence on no new taxes by many members of the Republican House caucus.
Bond Funds Cut the Cord
The bond market's getting even more popular. Despite a gut-wrenching sell-off from late 2010 through January of this year, flows into bond funds have been massive.
In short, investors are pouring into bonds on an unprecedented scale. With more than $685 billion of inflows to bond funds since December 2008, we have not been able to find another period that comes close, even when adjusted for inflation.
A combination of rock-bottom U.S. interest rates and worry about the nation's fiscal health is driving managers to higher-yielding assets.
Buy the Big Banks Despite Weak Q2 Earnings: Pavlik
Right now, to most investors it feels like little more than headline risk, settlements, and set-asides from the beleaguered banks and it is reflected in the market with the Banks and Diversified Financial industry groups tied for last place so far this year with double-digit declines. "The news has been already priced into these things. The catalyst is going to be when we really start to see some improvement in the mortgage-related area, the housing stuff. Once we start to see the beginning of the end of this, then the stocks are going to start rising," says Pavlik.
Ultimately, he says there is "a lot of money sitting on the sidelines" and an investment banking franchise that practically mints money to carry them through until things pick up. And remember, that day is not a question of if, but when.
Why Most Market Forecasters Get it Wrong
We want to know the future, and we actively seek out experts who can predict it. But facts show that in most pursuits where dynamic and multiple variables determine what will happen, experts are not good at predicting the future. And to make matters worse, those who predict are rarely held accountable for their prognostications.
Fang concludes that rather than being an indication of good judgment, accurately forecasting a rare event, such as business success, may in fact be an indication of poor judgment.
As avid index investors, we make only one prediction: In a global, capitalistic economy, investors are rewarded for the risk they take in deploying their capital. If in bonds, investors will be rewarded as a lender. If in small-cap stocks, investors will be rewarded for increased equity risks.
A boom in corporate profits, a bust in jobs, wages
Strong second-quarter earnings from McDonald's, General Electric and Caterpillar on Friday are just the latest proof that booming profits have allowed Corporate America to leave the Great Recession far behind.
What's behind the disconnect between strong corporate profits and a weak labor market? Several factors:
-- U.S. corporations are expanding overseas, not so much at home.
-- Back in the U.S., companies are squeezing more productivity out of staffs thinned by layoffs during the Great Recession.
-- Companies remain reluctant to spend the $1.9 trillion in cash they've accumulated, especially in the United States, which would create jobs.
Where's the volume? Stock trading quiet in July
Trading volume, or the number of shares bought and sold, is down because there are fewer big investors buying stocks. And those who want to buy are worried about the job market and the European debt crisis -- and the budget impasse in Washington.
Low volume is worrisome because it suggests that few investors are driving the stock market's gains or losses. That creates the risk for bigger price swings.
Where's the volume? Stock trading quiet in July
What happened to the volume? July set to be slowest month for stocks in more than 3 years
This month may be the slowest in the stock market in more than three years.
Trading volume, or the number of shares bought and sold, is down because there are fewer big investors buying stocks. And those who want to buy are worried about the job market and the European debt crisis -- and the budget impasse in Washington. If Congress and the White House don't agree on budget cuts and raising the government's borrowing limit, the U.S. is at risk of defaulting on its debt after Aug. 2.
Daily volume on the New York Stock Exchange is down 22 percent so far in July compared with the same period in 2010, according to data provider FactSet. About 3.7 billion shares have traded hands every day on average, down from 4.7 billion in July last year.
If that continues, July will have the lowest average daily trading volume since December 2007, says Patrick O'Shaughnessy, a research analyst at Raymond James.
Low volume is worrisome because it suggests that few investors are driving the stock market's gains or losses. That creates the risk for bigger price swings. When, for example, there are few buyers, someone trying to sell a stock may be forced to keep lowering the price in hopes that someone will want it -- the same as a homeowner who can't find a buyer for a house.
A lack of volume also indicates that some investors don't believe that stocks are worth buying right now.
Traders have reason to be wary:
-- Job growth is weak.
-- The manufacturing industry is in a slump, too.
-- Debt problems remain in the U.S. and Europe.
All this has led investors to avoid stocks. And that has hurt volume.
In June, investors withdrew $14.5 billion more than they deposited into U.S. stock mutual funds, according to consulting firm Strategic Insight. That was the largest withdrawal from stock funds since August 2010. "Investors are running scared," said Frank Barbera, portfolio manager of the Sierra Core Retirement Fund.
No comments:
Post a Comment