Thursday, May 23, 2013
Saturday, March 2, 2013
NEW YORK (Reuters) - If Wall Street needs to climb a wall of worry, it will have plenty of opportunity next week.
Major U.S. stock indexes will make another attempt at reaching all-time records, but the fitful pace that has dominated trading is likely to continue. Next Friday's unemployment report and the hefty spending cuts that look like they about to take effect will be at the forefront.
The importance of whether equities can reach and sustain those highs is more than Wall Street's usual fixation on numbers with psychological significance. Breaking through to uncharted territory is seen as a test of investors' faith in the rally.
"It's very significant," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
"The thinking is, there's just not enough there for an extended bull run," he said. "If we do break through (record highs), then maybe the charts and price action are telling us there's something better ahead."
Flare-ups in the euro zone's sovereign debt crisis and next Friday's report on the U.S. labor market could jostle the market, though U.S. job indicators have generally been trending in a positive direction.
Small- and mid-cap stocks hit lifetime highs in February. Now the Dow Jones industrial average <.dji> and the S&P 500 <.spx> are racing each other to the top. The Dow, made up of 30 stocks, is about 75 points - less than 1 percent - away from its record close of 14,164.53, which it hit on October 9, 2007. The broader S&P is still 3 percent away from its closing high of 1,565.15, also reached on October 9, 2007.
The advantage may be in the Dow's court. So far in 2013, it has gained 7.5 percent, beating the S&P 500 by about 1 percent.
THE RALLY AND THE REALITY CHECK
The Dow's relative strength owes much to its unique make-up and calculation, as well as to investors' recent preference for buying value stocks likely to generate steady reliable gains, rather than growth stocks.
But the more defensive stance illustrates how stock buyers are getting concerned about this year's rally. While investors don't want to miss out on gains, they're picking up companies that are less likely to decline as much as high-flying names - if a market correction comes.
The Russell Value Index <.rav> is up 7.6 percent for the year so far, outpacing the Russell Growth Index's <.rag> 5.7 percent rise. Within the realm of the S&P 500, the consumer staples sector led the market in February, gaining 3.1 percent.
There is some concern that growth-oriented names are being eclipsed by defensive bets, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.
"This isn't a be-all and end-all sell signal by any means, but we would feel much more comfortable if some of the more aggressive areas, like technology and small caps, would start to gain some leadership here," Detrick said.
Signs that investors are becoming concerned about the rally's pace is evident in the options market, where the ratio of put activity to call activity has recently shifted in favor of puts, which represent expectations for a stock to fall.
"We are seeing some put hedging in the financials, building up for the past month," said Henry Schwartz, president of options analytics firm Trade Alert in New York.
The put-to-call ratio representing an aggregate of about 562 financial stocks is 1:1, when normally, calls should be outnumbering puts.
Investors have no shortage of reasons to crave the relative safety of blue chips and defensive stocks. Although markets have mostly looked past uncertainty over Washington's plans to cut the deficit, fiscal policy negotiations still pose a risk to equities.
The $85 billion in spending cuts set to begin on Friday is expected to slow economic growth this year if policymakers do not reach a new deal. Markets so far have held firm despite the wrangling in Washington, but tangible economic effects could pinch stock prices going forward.
The International Monetary Fund warned that full implementation of the cuts would probably take at least 0.5 percentage point off U.S. growth this year.
EASY MONEY AND TEPID HIRING
Investors will also take in a round of economic data at a time when concerns are percolating that the market is being pushed up less by fundamentals and more by loose monetary policy around the world.
The main economic event will be Friday's non-farm payrolls report for February. The U.S. economy is expected to have added 160,000 jobs last month, only a tad higher than in January, in a sign the labor market is healing at a slow pace. The U.S. unemployment rate is forecast to hold steady at 7.9 percent.
While lackluster data has been a catalyst in the past for stock market gains as investors bet it would ensure continued stimulus from the Federal Reserve, that sentiment may be wearing thin.
Markets stumbled last week following worries that the Fed might wind down its quantitative easing program sooner than expected.
"It shows the underpinning of the market is being driven at this point by monetary policy," Hellwig said.
With investors questioning what is behind the rally, it will make a run to record highs even more significant, Hellwig added.
"There's smart people that are in the bull camp and the bear camp and the muddle-through camp," Hellwig said. "The fact that you can statistically, using historical evidence, make a case for going higher, lower, or staying the same makes this number very important this time around."
(Wall St Week Ahead runs every Friday. Comments or questions on this column can be emailed to: leah.schnurr(at)thomsonreuters.com)
(Reporting by Leah Schnurr; Additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)
SYRACUSE, N.Y. (AP) — When Louisville coach Rick Pitino threw off his coat, it was game-on.
Miffed by two straight fouls against Luke Hancock when the 10th-ranked Cardinals trailed No. 12 Syracuse by a point with time running out, Pitino stomped on the sidelines as he altered his courtside wardrobe and his team responded with a late spurt for a 58-53 victory Saturday, silencing another huge Carrier Dome crowd.
"We had a couple of real tough calls go against us and veteran teams don't let it bother you," Pitino said. "They dig in. It bothered me, but it didn't bother the players."
Cool under fire despite the two quick fouls, Hancock hit a 3-pointer from the left corner to break a 48-all tie with 50 seconds left as the Cardinals exacted a measure of revenge for a loss to the Orange earlier this season.
"It's big," said Hancock, who hit 4 of 5 from behind the arc for all of his points in the game. "This was like a tournament game. It was that kind of atmosphere. This prepares us well. It definitely gives us confidence going into the end of the season. We want to win out the rest of our games and this was another step."
It was the third straight loss for Syracuse (22-7, 10-6 Big East), which was humbled 57-46 in a loss to No. 7 Georgetown a week ago before a record Carrier Dome crowd of 35,012. That snapped the Orange's 38-game home winning streak, and they were beaten again, 74-71, at No. 22 Marquette on Monday night to drop into a tie in the Big East with Notre Dame behind the league-leading Hoyas, Louisville and Marquette.
Louisville (24-5, 12-4) snapped a three-game losing streak against Syracuse, and the Cardinals did it before a stunned crowd of 31,173. The victory moved Louisville into a tie with Marquette (21-7, 12-4), which beat Notre Dame, one-half game behind the Hoyas (22-4, 12-3), who played later Saturday.
Russ Smith led Louisville with 18 points and Gorgui Dieng finished with 11 points and 14 rebounds as the Cardinals overcame a poor offensive performance by point guard Peyton Siva. Siva failed to score, missing eight 3-pointers, but had four assists and no turnovers.
C.J. Fair had 19 points to lead the Orange, James Southerland added 13 and point guard Michael Carter-Williams 11.
Syracuse, which trailed 23-19 at halftime, its fewest points in a first half this season, outrebounded Louisville 41-36 but was victimized by eight 3s and shot poorly again (20 of 56 for 35.7 percent). Senior guard Brandon Triche, one of the heroes in the win over Louisville in mid-January with 23 points, had just eight on this day, going 2 for 11 from the field and missing all three of his tries from long range. Syracuse's starting guards finished 5 of 21 overall and 1 of 7 on 3-pointers, while Triche had a game-high seven turnovers.
"We can't have him (Triche) play this way," Syracuse coach Jim Boeheim said. "He works his tail off. He's a good teammate. He wants to win, but I don't like the way he's playing right now. I don't like the way we're playing. We need to get something offensively."
After Hancock swished a straight-on 3 for Louisville, Fair hit a spinning layup as Dieng fouled him but missed the free throw and Syracuse trailed 41-40 with 7:34 to go.
Louisville began to press and the strategy paid off with two straight turnovers. Southerland lost the ball off the dribble and Triche mishandled an inbounds pass. The Cardinals took advantage as Dieng sank two free throws and Hancock hit a 3 from the wing for a 47-40 lead at 5:35, the biggest edge by either team in the game.
Carter-Williams scored six straight points in a span of just over a minute to rally the Orange, hitting four free throws and a shot off the glass as Syracuse trailed 47-46 with 4:27 left. Fair's baseline jumper gave Syracuse the lead and Smith's free throw tied it at 48-all with 1:39 to go.
After Triche missed a baseline layup against Dieng, Hancock stole Triche's ensuing inbounds pass and Hancock drained his fourth 3 off a slick pass to the corner from Smith to break the tie. Smith then hit two free throws and Triche's turnover sealed the Orange's fate as the Cardinals hit 7 of 8 free throws in the final seconds.
"We had the lead. We just lost it at the end," Southerland said. "We just have to have the mentality that when we have the ball, we're not going to lose it. Unfortunately, we had some tough turnovers at the end of the game that definitely changed the outcome.
"We just have to forget about this game and move forward. This is stuff teams go through. The best thing about it is it's better to go through it now than in the tournament because you only have one chance then."
Syracuse beat Louisville 70-68 in mid-January in the final seconds when Carter-Williams stole a pass at the top of the key and raced the length of the court, slamming home a two-hander that Dieng couldn't contest and landing hard on his back underneath the backboard. A record crowd of 22,814 at the KFC Yum! Center saw Syracuse beat a No. 1 team for fourth time, and the Cardinals are still the only top-ranked team to lose at home this season.
The Louisville players said they weren't thinking revenge. They're just happy to be playing at a high level after their fifth straight win.
"It wasn't a revenge game. We did what we were supposed to do," Dieng said. "Anyone can beat anybody in the Big East. We need to win all the games (left) and do what we're supposed to do, and the rest is going to take care of itself."
Syracuse, which trailed 23-19 after a poor first half, briefly found a way to foil Dieng, Louisville's shot-blocking defensive ace, early in the second half. Carter-Williams fed Rakeem Christmas for a slam dunk and less than a minute later Southerland slammed another home to complete a three-way passing play in the lane with Christmas and Triche to move Syracuse within 28-27.
With Dieng on the bench, Southerland, who had just one basket in the first half, then drained a 3 from the top of the arc to give Syracuse just its second lead of the game. It was short-lived as Kevin Ware hit a 3 from the top of the key 24 seconds later.
"It's March," Ware said. "Tournament time is right around the corner. We told ourselves yesterday every game is like an NCAA game. We don't want to lose. We want to keep this win streak going."