Friday, October 28, 2011

Markets Calm After Massive Post-Eurofix Advance

For a day, at least, US equity markets responded in a fashion similar to what most wizened investors are accustomed. There were no wild swings or sudden accelerations, flash-crashes or HFT-inspired momentum runs. Volume was slight, as investors took a wait-and-see approach after Thursday's massive run-up, inspired by the market salve applied by European leaders.

One can imagine that said leaders engaged in some hearty back-slapping, after delay upon delay in dealing with the three separate issues involving the stability of the Euro as a currency and the Eurozone as a political/economic entity. Recapping, Greek bond-holders were to receive a 50% haircut, banks would get about $140 billion in recapitalizations and the size of the EFSF would be expanded to Euro 1 Trillion, or about $1.4 Trillion US. After negotiations had spilled into Thursday morning, the Europeans actually did deliver an outline that would satiate most of the news-hungry financial journalists and provided a framework for what is sure to be a fluid situation for months and years to come in one of the world's largest economic blocs.

For that, investors took a casual Friday attitude with them today, shoring up positions, taking profits and generally tape-watching to see if there would be any disruption to the relative calm. There were not, globally, as Asian markets were mostly higher, while European bourses and US equity markets were flat to split.

The Dow traded in a narrow range of less than 90 points, the NASDAQ and S&P 500 following with similar patterns. It was like a financial seventies flashback, without the disco music, flared jeans or leisure suits, thank goodness.

Only economic data releases could possibly upset the mood, but those delivered early in the day - personal income up 0.1%, personal spending rising by 0.6% and the University of Michigan's Consumer Sentiment gauge surprisingly up to a reading of 60.9 in October after a posting of 57.5 in September - were, for the most part, benign.

To say that it was a dull day was most likely an understatement and while some might decry the fact that there was no follow-through, one must consider the levels at which stocks are trading. October 2011 is on track to be not only the best October in the history of the Dow Jones Industrial Average, but the best month in terms of points gained in that index's long and storied history. There was probably as much chatter about the World Series as there was about stock moves. Investors have staked out positions and appear, for now, to be standing pat. A rest at these current levels would be neither surprising nor unusual. Even a further profit-taking decline would be an almost welcome reaction.

Macro-economic events have overshadowed what is usually a busy earnings season, though not completely. There is a sense that market turmoil has abated and global stocks are doing just fine, in deference to the protesters carousing in the Wall Street area and other cities.

Like kids after a raucous recess period, maybe all Wall Street wanted, or needed, was a time out.

There's a World Series game seven on Friday and an autumn weekend ahead. We'll worry about next week when it arrives.

Dow 12,231.11, +22.56 (0.18%)
NASDAQ 2,737.15, -1.48 (0.05%)
S&P 500 1,285.08, +0.49 (0.04%)
NYSE Compos 7,803.94, -10.05 (0.13%)
NASDAQ Volume 1,862,553,500
NYSE Volume 4,536,691,500
Combined NYSE & NASDAQ Advance - Decline: 2844-2792
Combined NYSE & NASDAQ New highs - New lows: 125-34
WTI crude oil: 93.32, -0.64
Gold: 1,747.20, -0.50
Silver: 35.29, +0.18

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