Wednesday, July 18, 2012

The No-Reason Rally; Debt Ceiling Fight Again?

Cause and effect doesn't always work for markets, at least not in any recognizable fashion when it comes to the intricacies of the US stock exchanges.

There was little news to move markets on Wednesday, but, after a slow start, the speculators moved stocks up substantially on little else but positive momentum, caused by an absence of any overtly bad news, especially from Europe.

It's a little bit like whistling past the grave, these bouncy, out-of-the-blue rallies, because the US economy is pretty much stalled out, and corporate profits are slowing, as evidenced by lowered expectations this quarter.

Even though most companies are still beating their estimates, many have experienced quarter-to-quarter or year-over-year weakness and a slowing of their growth, which is not any good way to be investing for the long-term, but, most of the money being circulated through the markets is very, very short term.

Since money has to go somewhere and there's still plenty of it sloshing around, stocks still are the preferred vehicle of choice for the control crowd that moves markets and individual stocks. Bond yields are abysmally low, precious metals have stalled and commodities aren't for everyone, thus, stocks get bid up, especially two days before monthly options expiration.

Once this earnings season winds down - in another two weeks or so - the markets will be looking for a catalyst for their next move, though it's hard to see from where any positive one might emerge. Conditions in Europe are dire, China is slowing, and the US is pretty much running in place.

August could be pretty scary, though probably not as bad as last year, when the US bumped up against the debt ceiling and had its credit rating lowered. On the other hand, the rhetoric is already heating up in congress over raising the debt ceiling again. The IMF suggested the US raise the debt limit "soon" and House Minority Whip Steny Hoyer told Republicans he would like a vote in the House in the "very near term" on the debt ceiling, though Majority Leader John Boehner has suggested that the limit not be raised without offsetting budget cuts.

So, perhaps the coming months may be deja vu all over again.

Dow 12,908.70, +103.16 (0.81%)
NASDAQ 2,942.60, +32.56 (1.12%)
S&P 500 1,372.78, +9.11 (0.67%)
NYSE Composite 7,831.09, +36.32 (0.47%)
NASDAQ Volume 1,793,354,500.00
NYSE Volume 3,613,047,500
Combined NYSE & NASDAQ Advance - Decline: 3393-2128
Combined NYSE & NASDAQ New highs - New lows: 346-62
WTI crude oil: 89.87, +0.65
Gold: 1,570.80, -18.70
Silver: 27.10, -0.22

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