Thursday, November 29, 2007

Wall Street Rallies Back

In the face of a continuing credit crisis, a woeful housing market and whispers of recession in the air, US investors drove stocks forward for the second straight day.

Dow 13,289.45 +331.01; NASDAQ 2,662.91 +82.11; S&P 500 1,469.02 +40.79; NYSE Composite 9,791.05 +269.29

Early news to the markets was less-than-jovial, with the National Association of Realtors announcing the 8th consecutive month of lower existing home sales, news that the market had expected. Unexpected was the pronouncement by Fed Governor Donald Kohn, who told the Council on Foreign Relations in New York, "should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses."

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Additionally, Kohn mentioned that the Fed would remain "nimble" in the face of any setbacks. Fed watchers took this as a clear signal that the Federal Reserve would vote to reduce the federal funds rate another 1/4 point at its next meeting, December 11.

While that can hardly account for the massive run-up in stocks over the past two days - the best two day performance in five years - most of the financial press was heralding more rate cuts (and the coincident weakening of the dollar) as the savior for the sickening US economy.

The financial news is nearly as insipid and useless as what passes for mainstream media these days. They swallow even the most blatant lies from corporate types and it seems as if the scripts for the never-ending rally have been penned by out-of-work Hollywood screenwriters.

Everybody's a pitch man and the news is always upbeat and jovial. With Rupert Murdoch taking over the Wall Street Journal and launching his own Fox Financial Network, it's likely to get worse before it gets better.

There's little in the way of honest analysis, as every word is spun to the positive, led all the way by the drooling cheerleader Jim Cramer on CNBC.

So, today's rally can be seen as a victory of sorts of media over material reality. Nothing really changed in the overall economic scheme other than the minds of the investing horde.

In any case, advancing issues got the nod over decliners, 5343-1095. New lows retained their long-standing advantage over new highs, however, 325-131.

More upbeat news came the way of the oil trade, where crude slid another $3.80 on the day, closing at $90.62. Gold lost $14.00 to $807.20, and silver fell 15 cents to $14.53.

Despite the two days of gains in the markets, there are still storm clouds on the horizon, if not directly overhead. Bear in mind that Wall Street's gains were predicated on the notion that the economy would continue to lose steam, prompting Fed cuts. It's simply pretzel logic at it's very best.

Please, don't swallow the whole thing at once.

NYSE Volume 4,610,242,500
NASDAQ Volume 2,543,293,000

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