I know everyone would like to make sense of global stock markets today—but the upcoming three-day weekend in the United States makes that really, really difficult. I’m not sure that any news or any news interpretation carries much weight today against the desire of Wall Street professionals to reduce the chance of anything blowing upon them while the markets are closed.
From this perspective, the big drop in Tokyo on Thursday was especially unnerving. It was a reminder of how volatile this market can be just before a long period when the U.S. markets will be closed.
Last night the Tokyo market began strong but faded as traders who had profits early in the session took those profits and closed out positions.
Can you read anything meaningful into this about the market’s worry about the weak yen policy of the Bank of Japan and the Abe government? I doubt it. Banks such as Sumitomo Mitsui Financial Group (8316.JP), down 2.09% when the Nikkei 225 closed up 0.89%, took it on the chin again today, just as they did yesterday. The big loser in Tokyo, however, was Toyota Motor (7203.JP in Tokyo), which fell 6.03%. The stock had been the only member of the Nikkei 225 in the green yesterday. (In New York trading Toyota closed down 3.1%.) My guess is that we’re looking at delayed profit taking—Toyota’s Tokyo shares are up almost 117% from November 14 through the close on May 23. The stock is so liquid that traders can’t have any worries about being able to easily rebuild a position after the weekend.
You’d figure that the U.S. market would be up today on the news. Orders for durable goods climbed 3.3% in April, the Commerce Department said today. That’s a healthy rebound from the 5.9% drop in March and ahead of the 1.5% growth projected by economists surveyed by Bloomberg.
The consensus explanation for a decline today—the Standard & Poor’s 500 index closed down 0.06%—is that investors are worried that strong growth will lead to the Federal reserve tapering off its program of buying $85 billion in Treasuries and mortgage-backed debt sooner rather than later.
Sorry, I don’t buy that explanation for today’s market direction. Yes, I do agree that investors are worried about an early end to Fed stimulus, but the durables orders are hardly so strong that we’re about to see a big increase in hiring that will take unemployment down from its current 7.5% rate to the 6.5% neighborhood that the Fed has indicated would lead to an end to QE3.
I think this is just traders taking risk off the table before the weekend. Nothing more or less.
If I’m right, we’ll have to wait for Tuesday—at least—to get a sense of the current direction in the markets.
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