Friday, October 10, 2008

US Markets Seen Stabilizing As Wild Week Ends

Global financial markets have taken steep discounts over the past week, in addition to falling values over the past year due to the unwinding of credit markets.

After weeks of hand-wringing and record declines on stock exchanges around the world, the US markets had the final say of the week and indications are encouraging that most of the selling may be over.

US markets were down sharply in the opening minutes of trading on Friday, with the Dow briefly falling below 8,000. But they quickly recovered and there was some stabilization, though the major US indices spent the majority of the day in negative territory. In fact, the Dow again touched the 8000 mark just before 2:00 pm.

In start contrast to recent days, however, the late-day trading was mostly buying rather than selling and the US averages finished with relatively minor losses. The NASDAQ, was, in fact, higher for the session.

Dow 8,451.19 -128.00; NASDAQ 1,649.51 +4.39; S&P 500 899.22 -10.70; NYSE Composite 5,704.00 -105.98

Asian and European markets finished with steeper losses, in the range of 5-9%. Traders are now routinely calling the selling "overdone" and "panicked" and some are actually advising clients to buy selected shares, though cautiously.

The Dow's final hour move was dramatic, gaining nearly 900 points by 3.40 pm before settling nearly 450 points below the day's high. Investors now seemed resigned to massive intra-day swings until there is some resolution to the crisis that has credit markets frozen, though there's somewhat of a consensus that the worst of the selling is behind.

On the day, internals were all over the map. Declining issues carried the day again, though by a much smaller margin over advancers, 3921-2659. The number of new lows was a shocker: 4341, roughly 2/3rds of all listed securities. Only 21 stocks attained new 52-week highs. Volume was extraordinarily strong, at the highest level of the past three weeks. We may have witnessed the final flushing out of weak hands and the initiation of some serious buying. There are bargains galore if one has the stomach for the extreme volatility.

NYSE Volume 2,929,366,000
NASDAQ Volume 4,203,839,000

Oil for December delivery took a massive hit, losing nearly 10%, down $8.63, to $77.99. That can only be seen as a huge positive for beleaguered motorists and homeowners who use oil for heat. Gold lost $27.50, settling at $859.00, while silver lost more than 10% in value, dropping $1.28, to $10.60. The losses in commodities are at one time reassuring, but also signaling deflation, which they have been doing since August.

With a meeting of G7 finance ministers over the weekend in Washington, any positive talk from that group could usher in a big Monday rally. Then again, market participants are still somewhat shaken and may not be ready to jump right back in straight away.

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