It took the market a little while to get the full measure of the day’s biggest economic news. (And no, it wasn’t the shout-fest on CNBC that seemed to have resulted in the delaying of an IPO and one of the first real reckonings among many people about the ramifications of high-frequency trading.)
But it seems to have truly settled in now: Car sales were up big in March, to a seasonally adjusted annual rate of 16.3 million units. That’s better than expected, and it’s one of the first big data points that lends credence to the idea that there was a real constraint linked to winter weather that was the worst in about 13-14 years.
With all things market related, it’s the future that matters, and that’s what allowed the S&P to push past its most recent level for its first close in the ‘Grover Cleveland administration,’ as blogger Eddy Elfenbein pointed out, pushing past Chester A. Arthur for the first time (that’s 1885 – this is a bit too ridiculous to further, so I’ll stop here).
The gainers were once again, technology, with an odd mix of leadership between a few big momentum favorites turning it back around again (Priceline, TripAdvisor), and some older tech names getting a bit of a boost like Cisco Systems, helped by it being its ex-dividend day, and Hewlett-Packard, which is just sort of old.
And that kind of puts us at a crossroads. Michael O’Rourke of JonesTrading suggests we could see a breakout after a month of churning in this market, though it’s possible the day’s gains came from some beginning-of-month flows into equities as investors allocate funds in that direction. ETF flows per Credit Suisse show lots of money headed in the direction of large-cap stocks – $6.4 billion out of the $7.5 billion on the week – with the biggest outflows out of healthcare ETFs, not exactly a surprise given the selling in biotech last week.
Now then, on the high-frequency trading (HFT) issue. Felix Salmon points out that the fervor over Michael Lewis’s book comes at a time when HFT action has diminished somewhat and the money being made isn’t what it was a few years ago. But critical mass takes a while on these things, and a Lewis book seems to have turned out to be a catalyst for discussions of both the fairness question and how it relates to the underlying technology: Is this skimming or the way these firms provide liquidity (though one would argue who has asked them to act as an intermediary in some of these cases).
It seems to have thrown a monkey in the wrench of Virtu Financial’s IPO as well, at least for the time being. The times have changed – when smaller shops were doing the bulk of this activity and hitting other banks in their prop trading operations, it seemed like it was in a weird area and the nebulous definitions of what HFT did in the market didn’t move anyone to act, despite books from the likes of WSJ’s Scott Patterson or others. Things seem to be moving another direction now — and the old defense, that the HFT world provides liquidity and is totally benign (or worse, the knee-jerk “free markets gotta be free” assertion), isn’t enough. Institutions may be the ones most affected, and the concerns people have are there even if, as Salmon notes, the idea that Greenlight’s David Einhorn qualifies as the “little guy” doesn’t quite pass muster.