Monday, August 30, 2010

Awful August Continues; September Worst Month for Stocks

Since topping out at 10,698.75 on August 9, stocks have been in a pretty steady decline, losing almost 700 points on the Dow over the past 15 sessions. And what used to be known as "mutual fund Monday" - because so many fund investors would pony up with fresh cash - have been losers the past three weeks.

According to Reuters, today was the lowest combined volume for the three major exchanges: AMEX, NYSE and NASDAQ. In the absence of any kind of market-moving news, investors took the path of least resistance and shed shares in favor or more likely candidates. Bonds, gold and cash were where money was being parked until some certainty over the future of the US economy is ascertained.

The general mood being dour and weary, traders have found nothing upon which to hang a trade and that's a serious problem, not only for investors, but for the companies whose stocks trade on the public dollar. Without ample support, a slew of companies will simply cease to exist, especially when borrowing has become somewhat of a nuisance.

Sure, corporate debt is at high levels, but companies are finding it more palatable to borrow at low rates than touch the bales of cash they are hoarding, symptomatic of a deflationary depression, upon which the nation has embarked, without doubt.

Stocks never made it into positive territory, and declines worsened throughout the session. The usual thought of month-ending "window dressing" has been replaced by a flight to safety and out of risky assets.

Dow 10,009.73, -140.92 (1.39%)
NASDAQ 2,119.97, -33.66 (1.56%)
S&P 500 1,048.92, -15.67 (1.47%)
NYSE Composite 6,695.28, -99.63 (1.47%)

Declining issues buried advancers, 4931-1489, though new highs managed to beat out new lows, 240-125, only because so many stocks have been delisted of late.

NASDAQ Volume 1,614,811,125
NYSE Volume 3,411,060,000

Commodities were also weak. oil lost 47 cents, falling to $74.70. Gold managed a tiny gain of $1.50, to $1,237.10. Silver was unchanged at $19.04.

As bad as August has been, September is historically the worst month to own stocks.

Bank of America (BAC) fell 2.5 percent to $12.32, as fears that the Fed may begin dumping all of its toxic paper (originally owned by BofA and others) back upon the beleaguered institution. Somebody has to take the fall and there probably is no better candidate than BofA.

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