The crashing euro, GE and Blackstone: Three things to watch today

Welcome to the new week. Here are three things to watch while trading today.

Number 1:

We have been here before.

Halfway through March, the S&P 500 is almost exactly flat year to date after a January tumble and February recovery, as investors obsess over clues that the Federal Reserve will soon become slightly less generous.

Halfway through March a year ago, that was exactly the same situation: US stocks flat for the year directly ahead of the March Fed meeting, when the Fed’s intent to slowly tighten up policy was affirmed.

So why does it seem so much noisier today? Probably because all the drama is happening away from Wall Street. The euro continues a stage-managed crash against the dollar. Oil persists in anxiously bobbing near new lows at less than half the year-ago price. German stocks are whistling higher, up more than 20% for 2015. Turkey, to pick on one unfortunate victim, is wheezing, the stronger dollar squeezing the flow of capital there.

The main puzzle as trading starts this week is whether these quantum moves in huge asset classes can continue to be absorbed by the a U.S. stock market where corporate earnings growth is ebbing toward zero. The incidence of big daily moves has increased and we’ve already had two five-day losing streaks in 2015 after a year when a three-day skid was the max. So far, markets are bending without breaking – bullish while it lasts. But a dollar rally of this magnitude isn’t easily digested everywhere.

Goldman Sachs tells clients this morning that, “Historically, S&P 500 index performance is indifferent to FX moves.” That’s been true over long market cycles. But day-to-day, it’s these stretched currency moves that seem to matter more than almost anything else.

Number 2:

General Electric Co. (GE) just sold another business no one really knew it had for a few billion bucks. This captures both the knock on GE’s stock, and the bullish case on it.

By selling its Australian and New Zealand consumer-finance unit for $6.3 billion to a private-equity group, GE CEO Jeff Immelt is plodding the promised path of trimming GE’s financial business. It also sold a chunk of its private-label credit-card unit Synchrony Financial (SYF) in an IPO last summer, and the shares have been a winner, up 38%.

And yet the stock of GE itself continue to wallow in the mid-$20s purgatory they’ve been in for nearly three years. Immelt has done his best trying to recast GE as a more focused industrial player since taking over in 2001 with a vastly overvalued stock and his predecessor Jack Welch having financially engineered the company to the max.

Most likely, GE shares won’t do much on this asset sale news, because they don’t ever do much any more. At some point, it will become too neglected and will be rediscovered by a new generation of investors willing to give it the benefit of the doubt. But when?

Number 3:

Sears Roebuck broke ground on the Sears Tower in 1970, at the height of its retail dominance and corporate hubris. The company moved out in ’88, as Wal-Mart’s ascent was well underway and Sears moving to play defense.

The building – America's tallest until New York's Freedom Tower was completed – was renamed Willis Tower in 2009 after the insurance broker that’s based there.

Not the building is being sold for $1.3 billion to Blackstone Group (BX), the private-equity giant.

While $1.3 billion seems a modest price given that $1.5 billion was bandied for it and the fact that the Waldorf-Astoria hotel – a tiny fraction of the tower’s size and rent roll – went for nearly $2 billion.

Still, look out for signs that Blackstone is showing a bit of hubris of its own these days. The company came public in June 2007, just as the credit and buyout bubble was peaking. And the firm is expected by some to pay almost $1 billion to its co-founder and CEO Stephen Schwarzman alone this year. Markets don’t always obey such anecdotal synchronicities. But sometimes they do.

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