New Year, Old News

Story Highlights:

• Today US stocks had their sixth worst opening trading session for a New Year on record.
• Many blamed high oil prices and recession fears, but those worries have been priced in to stocks for some time.
• It's possible increased uncertainty tied to upcoming presidential primaries is contributing to the jitters.

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The new trading year opened with oil prices back near record highs, a substantial drop in long-term treasury bonds, and renewed jitters about the US economy on worse than expected manufacturing data.

Today's -1.4% opening for the S&P 500 was the sixth worst on record. The fifth worst harkens all the way back to the days Michael Jackson was still the King of Pop with 1983's -1.6% walloping.*

The first day of ‘08 felt like a rehashing of 2007's ghosts. Which is fine—the difference between today and last Monday isn't very much. A new year doesn't mean markets hit the reset button.

Oil worries and recession fears aren't anything new. These two issues in particular have been repeated ad nauseam. Since stock markets are discounters of widely known information, we find it difficult to believe such old worries are telling us anything new.

Maybe one could argue today's ISM manufacturing data was worse than expected and that's why markets tanked. But then again manufacturing isn't as big a piece of the US economy as it used to be, and anyway, it was only a mild disappointment in a monthly report that often swings wildly.

Besides, November US construction spending posted a much stronger gain than expected today. Commercial building was so strong it offset weakness in residential construction. Why pundits ignored that data and stuck with the manufacturing story, we don't know.

It's possible markets are a bit uncertain right now heading into the US presidential primary elections. This is shaping up to be one of the strangest US presidential races on record: There's an unusual amount of national attention on the opening primaries…a full ten months before the election!

With Iowa's primary tomorrow and others to follow shortly, we're going to get a very good picture of who the nominees will be by mid-February (not-withstanding a potential independent entry from Bloomberg later in the year).

Given the media circus and intense focus on these initial races, things are a touch uncertain right now. A lot could happen. Neither of the national frontrunners (Clinton and Giuliani) are a slam dunk to win Iowa. In fact, Giuliani is barely in the running. Should the leaders lose the opening round, there could be a lot of short-term doubt as to who will ultimately emerge the candidate.

So stay tuned. Short term uncertainty tied to politics can evaporate very quickly. Either way, presidential primaries have a negligible fundamental impact on stock markets. This is most likely short-term noise.

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* Source: Standard and Poor's