It’s one of the biggest mysteries on Wall Street. How can stocks be in their fourth year of a bull market and trading activity be so low, CNBC questions?
During March, average daily volume in equity shares was at their lowest level since December 2007, according to new data from Credit Suisse. This is the same month that marked the three-year anniversary of the bull market that caused the Standard & Poor’s 500 to double from its March 2009 credit-crisis low.
Credit Suisse tried to solve the riddle by blaming the growing popularity of options and futures markets, a drop in high frequency trading and stock splits.
“There’s no way to sugar-coat it: Volumes are down and trending lower,” wrote Ana Avramovic of Credit Suisse, in a note to clients. “A growing preference for other asset classes may be drawing money away from equities.”
Daily equity volume in March was 6.59 billion shares a day, the lowest since a sub-6 billion volume month in December 2007, according to Credit Suisse. (The firm adjusted December 2011’s low figures to account for the holiday-skewed week.)
Inventories at U.S. wholesalers rose more than forecast in February as companies tried to keep pace with stronger demand, Bloomberg reports.
The 0.9 percent advance in stockpiles followed a 0.6 percent gain in January that was more than initially estimated, the Commerce Department reported today in Washington. Economists projected a 0.5 percent rise, according to the median estimate in a Bloomberg News survey. Sales climbed 1.2 percent in February after no change a month earlier.
At the current sales pace, wholesalers had enough goods on hand to last 1.17 months, the same as in the prior four months, the report showed. Inventory rebuilding, which helped the economy grow in the fourth quarter at the fastest pace in more than a year, may still contribute less to the expansion in early 2012.
“Inventory growth has been running a little fast and may be a bit of a headwind” in the second quarter, Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said before the report.
U.S. corporate profit growth stalled in the U.S. last quarter as companies from McDonald’s Corp. (MCD) to 3M Co. (MMM) saw gains in the world’s largest economy eroded by a slump in Europe, reports Bloomberg.
Earnings at Standard & Poor’s 500 Index companies, excluding financials, are seen gaining 0.6 percent in the first and the second quarter from a year earlier, according to analysts’ estimates compiled by Bloomberg, the slowest growth rate since 2009.
The European debt crisis and a slowdown in China are hurting S&P 500 companies, which derive about 40 percent of profits from abroad. At home, where the S&P 500 Index had its biggest first-quarter rally since 1998, consumer confidence is improving along with the job market — boosting demand for construction companies and retailers.
“While the U.S. economy is the cleanest shirt in the hamper at the moment, we’re only talking about an economy that’s motoring along at a subpar pace,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “The only way you’re going to see higher profitability is through faster growth.”
Oil prices fell in light volume on Monday as revived talks on Iran’s nuclear program eased fears of supply disruption, while slowing U.S. jobs growth sparked concern about demand for fuel, Reuters reports.
Negotiations between Iran and world powers over Tehran’s disputed nuclear program are slated on April 14 in Istanbul. The resumption of talks after more than a year tempered worries about an immediate cut in supply.
U.S. markets reacted to U.S. jobs data released on Friday when markets were shut to observe Good Friday. The employment report showed job growth slowed to 120,000 in March, well below expectations and the smallest increase since October.
Brent May crude fell 76 cents to settle at $122.67 a barrel, having dropped as low as $121.02 and tested below the 50-day moving average of $121.60.
File under “unexpected societal benefits of high frequency trading”: it’s doing wonders for building IT infrastructure. Sebastian Anthony and Jeff Hecht both have good overviews of the three — count ‘em — fiber-optic cables being laid deep below the arctic sea floor, all in a $1.5 billion attempt to shave 60 milliseconds, or less, off the amount of time it takes to get digital information from London to Tokyo, reports Felix Salmon of Bloomberg.
None of this would be possible without global warming, of course:
Each cable will be laid by a pair of ships: an ice breaker that leads the way, and a cable ship. Until now it has been impossible to lay cables in the Arctic Ocean, but the retreat of the Arctic sea ice means that the Northwest Passage is now generally ice-free from August to October; a big enough window that cable can be laid fairly safely.
But global warming alone isn’t enough to make the economics make sense: standard cable ships aren’t rated for icy waters, so polar-rated ships have to be retrofitted for the job instead, at vast expense.
The $28.4 billion Blackrock Inc (BLK).-led industry of exchange-traded funds that buy U.S. junk bonds is expanding into global speculative-grade debt as the notes outperform dollar-denominated securities by the most since 2009, Bloomberg reports.
BlackRock, the world’s biggest money manager, opened the first ETFs on April 3 that will invest in junk bonds from Europe to Asia after its iShares iBoxx High Yield Corporate Bond Fund in the U.S. grew to more than $14 billion in less than five years. Van Eck Global, the investment firm founded in 1955, opened its International High Yield Bond ETF the same day.
Fund managers are broadening their investments beyond U.S. debt with yields on junk bonds outside the country almost double the average of the past 10 years. Investors poured a record $31.1 billion into speculative-grade debt in the 14 weeks ended April 2, according to EPFR Global data, and a three-month rally in dollar-denominated junk securities is now losing steam.
“There are many fixed-income managers today who are really reaching out to international and global issuers,” Darek Wojnar, head of product development and management for BlackRock’s iShares, said in a telephone interview. “That’s one of the ways to diversify sources of yield.”