Thursday, July 12, 2007

Wall Street Surprise

Just a few days ago, earnings season looked like it was going to be an enormous flop, but after the best session on the Dow since October 2002, all is well again in the financial world.

The Dow Jones Industrials rocketed skyward by 283.86, shattering the old record of 13,676.32, set just over a month ago on June 4, by a mile and then some, more than 185 points better, in fact. The S&P also rose to a new all-time high while the NASDAQ closed at its best level since February 2001.

Dow 13,861.73 +283.86; NASDAQ 2,701.73 +49.94; S&P 500 1,547.70 +28.94; NYSE Composite 10,197.69

A single catalyst for the big move has yet to be unearthed, though the mainstream financial press is giving retailers - especially Wal-Mart which showed same-store sales up more than 2% in June - most of the credit. More to the point would be the considerably low interest rates which continue to persist at around 5% - an historically low level - feeding more money into stocks, mutual funds, hedge funds and ETFs.

US equities are currently awash in capital, with literally no end in sight. The credit expansion of the past 6 years has created an unimaginably robust bull market which has run longer than any in recent memory. Off the lows of October 2002, we are now well into this bull run's 58th month, and that's a long, long run.

The other major catalyst is the maturation of globalization. Companies are just now beginning to see the world as a whole, complete with outstanding opportunities in emerging markets and leveraging of entire economies. The world hasn't seen this kind of explosive growth - amid a somewhat stable environment - ever, and most of the global giant companies are listed on US indices.

On the day, advancing issued hammered decliners by nearly a 3-1 margin, while 577 new highs dwarfed 162 new lows.

Normally, any good market reporter would through a word of caution in on a day as spectacular as today, but the best this one can provide is a reminder that tomorrow is Friday the 13th. The boom continues, and there seems to be nothing in the way to slow it down.

The only price lower on the day was that of oil futures, which fell a paltry 6 cents to a still-ridiculous $72.50. Americans, hardy lot that we are, have adjusted to $3.00 per gallon gasoline, so even the mad oil barons are plotting new ways to make more money. Gold was up $6.20 to $668.30, while silver advanced 21 cents to $13.18, proving that even bad dogs have good days.

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