By Anora Mahmudova and Barbara Kollmeyer, MarketWatch Grantham:
Another 10% run and then S&P will crash
NEW YORK (MarketWatch) -- U.S. stock futures traded in a narrow
range, switching between small gains and losses on Tuesday, as
market reaction to inflation data, as well as news of a snap
election in Japan and better-than-expected data from Germany, has
been largely muted.
U.S. producer prices rose unexpectedly, in October, largely
because of a spike in an erratic category that measures profit
margins for wholesalers and retailers.
As expected, Japanese Prime Minister Shinzo Abe announced plans
to call a snap election and to delay a planned sales-tax hike by 18
months, after data showed Monday the country fell into a
recession.
A survey from ZEW showed improved German sentiment on the
economy -- a sign the country's fortunes may be turning around, the
ZEW institute said.
Futures for the S&P 500 index (SPZ4)(SPZ4) were flat at
2,039, while the Dow industrials (DJZ4) ticked up 3 points to
17,620. Futures for the Nasdaq-100 index (NDZ4) added 1.5 points to
4,213.75.
Next on the economic calendar is a release of home builders'
index for November due at 10 a.m. Eastern.
Running out of steam: The S&P 500 (SPX) nabbed a record
close on Monday, but closed up just 0.07%, dented by soft U.S. data
and the downbeat news on Japan's economy. The S&P 500 has now
logged five-straight sessions without a daily price change of more
than 0.1%, which has some suggesting the rally may be slowly losing
steam.
The U.S. stock market remains on course to "run deep into bubble
territory" before crashing, wrote Jeremy Grantham, co-founder and
chief investment strategist of Grantham Mayo van Otterloo, in a
quarterly newsletter released Monday. He said bubble territory
starts at 2,250 on the S&P 500, roughly another 10% gain from
here. (Also see: A turning point for the S&P?
http://www.marketwatch.com/story/decision-making-time-for-the-sp-2014-11-17.)
Billionaire investor Carl Icahn told a Reuters conference on
Monday that he's also worried about a market selloff, though not
for the next three to five years. (Read more in Need to Know
http://www.marketwatch.com/story/bone-chilling-temps-put-the-us-and-the-stock-market-in-a-deep-freeze-2014-11-18.)
Mislav Matejka, strategist at J.P. Morgan Cazenove, said in a
note dated Monday it has switched to overweight on the eurozone and
cut U.S. equity exposure to underweight. Among the reasons: The
eurozone has underperformed sharply, and valuations are improving
versus the U.S.
Among Fed speakers, Minneapolis Federal Reserve Bank President
Narayana Kocherlakota is schedule to give a speech on clarifying
monetary policy objectives, in St. Paul, Minn at 1:30 pm Eastern
Time.
Stocks to watch: Home Depot Inc. (HD)(HD)(HD) reaffirmed
fiscal-year 2014 guidance and announced earnings per share of $1.15
in the third quarter. Manchester United Ltd. (MANU) posted lower
revenue across all segments for its September quarter as the team
failed to qualify for the Champions League during one of its worst
seasons in more than two decades.
Dick's Sporting Goods Inc. (DKS) profit dipped due to weakness
in its gold and hunting segments.
Urban Outfitters Inc. (URBN) reported a drop in third-quarter
earnings on Monday, which weighed on shares in late trading.
Gold jumps as dollar falls: The news from Japan's Abe weighed on
the dollar (USDJPY) versus the yen, which sent gold (GCZ4) prices
higher by about 1.3%.The Nikkei 225 index rebounded 2.2% ahead of
the announcements from Japan's Prime Minister.
European stocks and the euro (EURUSD) rose after ZEW report. Oil
prices (CLZ4) were little changed.
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