Stocks Slammed As Interest Rates Climb; Fed Officials Not Concerned

While the losses on Thursday weren't quite at the disaster level, the declines were significant enough to get people's attention. The Dow lost 200 points, the first time that has occurred since July 11 (-219.21), though it could have been much worse. The 30 blue chips were down more than 350 points early in the afternoon, but some "buy the dip" specialists stepped in to rally stocks into the close.

The NASDAQ fared much worse than its peers, as investors scrambled out of speculative tech stocks, some of which carry significant debt loads. With interest rates rising, debt servicing costs are going to be scrutinized as they can materially contribute to deterioration of bottom lines.

With a decline of 1.81%, the NASDAQ losses were nearly one percent worse than the S&P (-0.82%) and easily outdid the Dow Industrials (-0.75%).

Blaming rising interest rates for all equity woes might be a bit of a stretch, but it is becoming more of a concern as the 10-year note yield kicked higher, reaching 3.20%, an attractive number for those who wish to reduced risk, and apparently, many do.

Other indices slid lower as well, with the Russell 2000 and Dow Transports also in the red. This indicates that investor sentiment may have soured, and this could be serious, coming so close to reporting of third quarter earnings.

An interesting development is the Federal Reserve's ebullient attitude toward the US economy. Chairman Jerome Powell seems to be in the camp that the economy will continue to expand, and he is echoed by other Fed officials, though their giddy projections are in stark contrast to some of the biggest players on Wall Street, including Ray Dalio, Peter Boockvar, and Stanley Druckenmiller, to name just a few. The insightful article is posted at investopedia.com by Matthew Johnston, and can be found here.

That Fed officials are touting the economy is more than a little disconcerting, being that they're cold-hearted bankers and have held interest rates down near zero for a long time. Additionally, they're in the process of unloading trillions in excess securities and they'd like nothing more than to see that proceed smoothly. Surely, they'd like to collect more interest from everybody, so their comments about the strength of the economy are extremely self-serving.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17

At the Close, Thursday, October 4, 2018:
Dow Jones Industrial Average: 26,627.48, -200.91 (-0.75%)
NASDAQ: 7,879.51, -145.57 (-1.81%)
S&P 500: 2,901.61, -23.90 (-0.82%)
NYSE Composite: 13,042.29, -76.25 (-0.58%)

Numbers Racket: Greece, Euro, Apple, Transports and 100 Dow Points

Let's get real here.

Raise your hand if you think Greece is NOT going to default.

Very well. Maybe the rest of you with hands on hips or in pockets will appreciate the news out of Europe this morning, which somehow managed to pump futures toward a strong positive opening.

What's that? Even though Dow futures were up more than 80 points before former Treasury Secretary Hank (martial law) Paulson appeared on CNBC for the usual softball interview and were up 47 points just seconds before the open, the Dow only managed an initial gain of... hmmmm, less than 20 points.

Eurozone's 17 nations' (non) growth rate for the 4th quarter of 2011 was -0.3, the only countries showing gains in GDP growth being France and Slovakia.

Five countries in europe are already in recession. No surprise here, as Greece, Belgium, the Netherlands, Portugal and Italy have experienced two consecutive quarters of GDP decline. The one country everyone has an eye on is Germany, where output for the quarter fell by 0.2%, because the Germans have been the only country in the region showing any sign of elasticity and ability to weather the financial storms.

However, the rest of the Eurozone is dragging Germany's usually strong industrial sector down with the rest of the continent, a development that could prove disastrous as the EU plods through a troubling 2012.

Stocks took a spanking today in the US after the aforementioned recession news and then the communique out of Brussels from the esteemed EU finance ministers (a Baptist minister, a Catholic priest and an EU finance minister walk into a bar... oh, never mind) reminded the assembled money watchers worldwide that they are experts at procrastination and posturing.

While yesterday's commitment letter from Greek conservative leader Antonis Samaras stated that he would go along with the proposed - and passed by the Greek parliament - austerity measures, the potential future leader of Greece (give him about 6 months before he is bought off and retires, if he even wins the April race for Premier) contained a small caveat, saying he might reconsider, once, of course, the authorities deliver the 130 billion (or maybe it's more like 202 billion) Euros promised by the supra-government of the EU.

What happened today could best be described as controlled demolition. While the Dow was subsumed, hovering from 15 to 35 points in the red, the NASDAQ was wildly positive, though 90% of the gain was due to just one stock, Apple (APPL), which exploded in a number of ways on the day.

First, Apple rocketed to an all-time high of 526.29, but closed the day at the somewhat pedestrian level of 497.67. That's a pretty big round-turn, even for a stock with such a heady valuation. The decline was magnificent, falling 20 points in just the noon hour, and stumbling to a nearly 12-point loss in the remainder of the day. Volume was more than four times the average daily volume (12 million shares) at 53,457,212.

But Apple was just the NASDAQ story. The Dow charted its own path, guided by the Euro-dollar trade. The Euro slumped and finished below the psychotic 131 level, a number which is absolutely meaningless unless you're swapping currencies or considering travel to the doomed continent. But, stocks have followed the Euro-Dollar relationship like clockwork this year. Euro up, US stocks up, with the converse also true. The real value of the ephemeral Euro is all in the mind and to which equally worthless paper currency to which you compare it. If one would be so bold to compare it to some commodity - say, gold - well, a Euro won't buy you a single grain and it's gotten worse throughout its 11+ year life with each turning of the calendar.

So, the Dow set down at the close with its worse loss of 2012, which is not so much a surprise, being that the index (and all the other majors) has overheated in what has been an unusually-warm winter. But the Dow could just not surrender 100 points on the day, despite it being down 125 points at its worst level and down 108 points only one minute prior to the close. Perhaps that number (-100) has meaning to some people, but for the rest of us, -97.33 will just have to do.

What is alarming and scary (like Europe isn't enough of a fear factor) is the action in the Dow Transports, which suffered a two percent decline on the day, easily outstripping the widely-followed indices.(please have a gander at the 1 year chart with the 80% down-spike in November)

Another unpleasant thought concerns the timing of this week's reversal of fortune, just two days prior to options expiry, normally the strongest and upward-tilted week of any month in this Ponzi-like market scheme. Today's volume was also quite strong across all indices.

If stocks aren't making gains just prior to options expiry, then something very wrong is happening behind the scenes. It could be as simple as the market being overbought, or waking up to the awful European reality or the threat of war with Iran which looms larger each passing day.

Then again, it could just be that the low level of market participation has the major traders now drooling over each other's lunches. US stocks have been on a tear since October and the time and sentiment are ripe for a nasty correction.

A clue could come the day the Dow closes with a loss of more than 100 points, though that might prove to be a day too late and many billions of dollars short. Today's near-100-point loss should provide more than enough caution to everyone.

Keep a close eye on gold, and especially, silver, which has underperformed for the past two weeks. Any sustained gains in the precious metals should serve notice that there's something big brewing.

Dow 12,780.95, -97.33 (0.76%)
NASDAQ 2,915.83, -16.00 (0.55%)
S&P 500 1,343.23, -7.27 (0.54%)
NYSE Composite 7,998.65, -30.97 (0.39%)
NASDAQ Volume 2,036,710,750
NYSE Volume 4,045,495,750
Combined NYSE & NASDAQ Advance - Decline: 2267-
Combined NYSE & NASDAQ New highs - New lows: 264-23
WTI crude oil: 101.80, +1.06
Gold: 1,728.10, +10.40
Silver: 33.41, +0.06

NASDAQ Trading at 18-Month highs; S&P Streak Ends at Six

A year ago tomorrow, the NASDAQ bottomed out at a closing price of 1268.64. With today's finish, it has gained a whopping 84% from the low, so, one must ask just how much more upside is there left?

Investors seem to be pondering that on a daily basis, picking stocks with much more care than in the pre-Lehman days, another level the NASDAQ has surpassed. The last time the index was at this level was September 3, 2008 (2333.73), but it is only 18.5% below the high of October 31, 2007 - the last market top - of 2859.12. It's difficult to imagine that the investments underlying the NASDAQ would be worth 81% of what they were before the market collapsed and the world realized that asset values were over-inflated, but, apparently, the mindset of the typical trader in tech believes in the marvels of technology and the value of equity in these companies.

Being realistic, any group of stocks which gains 84% in a year is probably overvalued, but the inverse is also probably true: that the same group of stocks should probably not have lost 55% in value over an 18-month span. Since neither of these scenarios are normal, the idea that the stock market is in the middle of an extraordinarily perverse period would be an astute observation. When normalcy returns (whenever that may be, possibly never), a reversion to the mean would be the order of the day, putting the entire NASDAQ market at a level approaching the midpoint of the extremes, or, right around 2063.88.

The timing of such an event would again be conditioned on the time-lines of both the fall and subsequent rise: 18 months to the downside and 12 months of gains, making the midpoint to attain equilibrium at half of the derivative times of those, or 7 1/2 months from tomorrow (the midpoint between 6 and 9 months). Checking the calendar, we should expect the NASDAQ to close around 2063 on or about November 10, 2010. (Make sure to mark that date and this post and check back)

The preceding was issued to show just how absurd and arcane any and all quantitative or qualitative analysis of the markets can be. You can go ahead and believe the concoction that spewed out of the top of my little pinhead or just chalk it up to more internet nonsense. The upshot is that I'll probably end up being as correct with my prediction than 50% of the other analysts, name-droppers and outright frauds who populate the stock media today. It gets worse with forex and options trading, so, consider yourself lucky that you are only invested in equities and thus, only mildly confused.

Dow 10,551.91, -14.29 (0.14%)
NASDAQ 2,332.21, +5.86 (0.25%)
S&P 500 1,138.31, -0.38 (0.03%)
NYSE Composite 7,291.58, -0.27 (0.00%)

Advancing issues outdid decliners by a margin of 3676-2857. New highs hit an expected extreme of 806, compared to just 70 new lows. The number of new highs should peak tomorrow or within the next few days at somewhere North of 850, but probably no higher than that. Once we cross the Rubicon that is the one-year anniversary of the market bottom tomorrow, all comparisons become more difficult. Gains will surely be difficult to attain and the chances for a major correction - or a mean revision, as outlined above - increase every day these lofty equity levels are maintained.

One should bear in mind that 2009 was witness to the most powerful stock market rally most of us will ever see in our lifetimes. Comparisons to earnings during that period when companies had cut staffs and expenses to the barest of bones will be particularly challenging. The time to exit the market is, if not now, shortly, unless you are fully recovered from the shocks of 2008 and early 2009 and still liquid. Then, shoot the works. Hang on until the end. Hey, it's only money. Your money.

Volume today was reportedly the lowest of the year on the consolidated markets. That should raise at least one eyebrow toward thinking that this latest rally off the small January-February correction are close to making a double-top. The NASDAQ is already in the process of making a double-top breakout, though the S&P and Dow are lagging, still below the early January highs. Likewise, the Dow Jones Transportation average has yet to confirm, though with Warren Buffet heavily invested in that sector, it's probably only a matter of time before it launches to new highs.

On the other hand, seasoned pros will take one look at the charts and tell you that you missed the move. They'd probably be right.

NYSE Volume 4,092,305,250
NASDAQ Volume 2,096,990,000

Oil continued its dazzling run to higher prices, up another 26 cents, to $81.76. Gold, however, slipped back $10.70, to $1,124.50. Silver also fell by 11 cents, finishing at $17.27.

Economic data is very light this week, and since we're close to the end of the quarter, earnings releases are practically nil. There isn't much to trade on these days except sentiment, which has grown to about as positive a level as we've seen in three years - perfect timing for a sell-off.

Buy tools, plant seeds, grow your own investments.

Dow, S-P, NYSE All Hit New 2009 Highs

On the day Americans celebrate the man who discovered our continent - Christopher Columbus - investors were discovering new 2009 highs on three of the four major indices. The Dow Jones Industrials, S&P 500 and NYSE Composite all closed at highs of the year, with the Dow eclipsing an intra-day high with the new mark now 9931.82, just 69 points shy of the enormously psychological 10,000 mark.

Stocks were up sharply in the opening hour, but weakened into the afternoon, and sold off sharply between 2:00 and 2:30 pm, sending the Dow and NASDAQ into negative territory. The Dow recovered to close modestly positive, but the NASDAQ, surprisingly weak on the session, finished fractionally lower. It was the only major index to close in the red. The sudden drop on the indices, though very sharp, was probably due to options expiration this week, as a major trader likely closed a large number of positions. The general market didn't seem to make much of it, as all of the indices recovered nicely with strong buying into the close.

Interestingly, the Dow Jones Transports sported solid gains on the day. The transports have been something of a laggard in recent sessions, but showed remarkable strength into the close, led by Ryder Systems (R) nearly 10% one-day move.

The act that the Transportation Index also closed at a new 2009 high is a bullish signal, inferring that rail and truck transport - the things that move goods across the nation and to the ports - are showing signs of recovery. Those issues are at the bottom of the economy, with shipping of energy - coal, natural gas, oil - and goods of all manner on the rise.

Dow 9,885.80, +20.86 (0.21%)
NASDAQ 2,139.14, -0.14 (0.01%)
S&P 500 1,076.18, +4.69 (0.44%)
NYSE Composite 7,051.16, +35.62 (0.51%)

Market internals were positive, in line with the headline numbers. Advancing issues beat decliners, 3386-3002, though there were quite a few more losers than gainers on the NASDAQ. There were 731 new highs to 67 new lows, a bullish sign. The new high-new low indicator has been the most reliable metric for market movement, though there is some fear that stocks may be getting to an overbought condition as earnings begin rolling out. Companies will have to show top-line growth this quarter in order to keep pace with their high valuations.

Volume was low due to the observance of Columbus Day.

NYSE Volume 4,169,401,250
NASDAQ Volume 1,758,818,250

Commodities were a big story on the day. Oil sipped past the $73.00 mark, gaining $1.50, to close at $73.27. Gold caught a bid higher, by $8.90, to finish at $1,057.50. Silver also gained 13 cents, to $17.82. The resumption of the rally in the precious metals seems to have been re-ignited by oil's gains.

The only notable earnings-related news was from Black & Decker, which pre-announced better-than-expected results. Market direction for Tuesday may be guided by Johnson & Johnson (JNJ), which is supposed to released 3rd quarter earnings prior to the bell. There will be some anticipation concerning Intel (INTC), which reports after the close.