Stocks Take a Breath

After the battering stocks took on Thursday, Wall Street braced for the worst Friday, and early on, it looked as though the bears were going to have another fun day, and, to a large extent, they did.

Just after 10:00 am, the Dow slumped to its low of the day, 13,446, a 121-point decline. Twice, the index struggled into positive territory, for a brief period after 1:00 pm, and for the final twenty minutes of trading, which is where it closed.

Naturally, a see-saw ride such as Friday's is suspicious, and no doubt the President's Working Group, the Plunge Protection Team, was hard at the wheel, boosting all the averages, and the Dow by 120 points in the final 45 minutes.

Dow 13,595.10 +27.23; NASDAQ 2,810.38 +15.55; S&P 500 1,509.65 +1.21; NYSE Composite 10,052.26 +30.18

The internals tell the real story. Losing issues led advancers by a slim margin, 11-10, while new lows swamped new highs, 552-190. That's the largest number of new lows in at least three weeks and augers ill for the rest of the quarter. Even with the Labor Dept. reporting new job creation at the rate of 166,000 for October, nobody was impressed, and skepticism regarding the veracity of the numbers is abundant.

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Meanwhile, the destruction of the dollar continued apace, highlighted by action in the commodities pits. Oil ballooned another $2.44 a barrel, closing at $95.93. Gold broke through the $800 barrier, gaining $14.80 to $808.50. Silver caught a bid as well, adding 27 cents to close at $14.60.

It was somewhat of a disjointed week in equities and finance. Nobody quite understood why the Fed was cutting rates again if the economy was so good. The two main reports of the week, the aforementioned October labor report and the preliminary 3rd quarter GDP data (+3.9%), were both very positive.

The fallout from the sub-prime mortgage debacle continues to cast a long shadow over everything, however, and credit markets worldwide continue in near-panic mode. There's scant M&A activity, another sign that something's just not right, and some of the heavy bets made over the past three years by private equity firms may be on the verge of blowing up. There are literally billions of dollars to be lost should some of the high-profile leveraged buyouts not work out as expected, and a slowing economy is seen as harmful to breakups, IPOs and turnarounds.

It's going to be an interesting November and December, with, no doubt, more shocks from the housing, banking and finance centers.

NYSE Volume 4,338,039,000
NASDAQ Volume 2,485,408,500