Earnings on Deck

Investors took a respite on Monday. They really did. For perspective, the Dow traded in a range of only 40 points, so there really wasn't anything to get excited about. It's part inertia and part waiting game - waiting for 3rd quarter earnings reports to begin flowing later this week.

The markets have been in such convulsion, first from the sub-rime mortgage malaise and the related tight credit conditions, then, the August jobs report that showed a loss of 4,000 jobs prompting the Fed into a 1/2-point cut in the Federal funds rate.

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And now, with the release of the September jobs data and upward revision of August to a gain of 89,000 jobs, there's a sense of apprehension and wonder as to whether the Fed moves were actually necessary.

Personally, I think the question to be asked is, "how reliable are government statistics?"

Frankly, I don't believe the August job revisions and I think there are others out there - though it's difficult to locate anyone of that opinion - who are in the same mindset.

Regardless, the markets are in horrible condition. Today's trading was simply another manifestation in a loss of confidence. Investors feel cheated, that the markets are rigged to benefit only the major players. And even some of the major players are unhappy. It's really depressing. Maybe a spate of honest earnings reports will put more perspective on where we stand.

Dow 14,043.73 -22.28; NASDAQ 2,787.37 +7.05; S&P 500 1,552.58 -5.01; NYSE Composite 10,186.43 -61.50

Declining issues held a somewhat surprising 5-3 edge over advancers. On the other side of the equation, new highs stood at 329 to a mere 99 new lows.

Perhaps the most surprising action of this Columbus Day - a curious half-holiday - was in commodities. Oil fell $2.20, to $79.02. Hallelujah! Gold fell $8.50 to $738.70. Silver dropped 13 cents to $13.36. Strange, indeed.

Market Powers Ahead on Jobs Data

It was a win-win situation for stocks on Friday. A solid jobs report would show a strong economy. A weak report would prompt the Fed to cut rates again at their next meeting. At 8:30 am, traders got more than they bargained for when the Bureau of Labor standards announced 110,000 new jobs created in September, plus revisions to both August and July reports.

Most outstanding was the August revision, up to a gain of 85,000 jobs from a previously-reported loss of 4,000. The Bureau said, "Nearly half of the over-the-month increase in the labor force occurred among teenagers; this offset a labor force decline among that group in August."

In other words, kids went away to college and took up new jobs. It's barely believable and in no way responds to questions about the mysterious August revision. Generally, it is probably pure bunk.

Nonetheless, stocks went on a tear.

Dow 14,066.01 +91.70; NASDAQ 2,780.32 +46.75; S&P 500 1,557.59 +14.75; NYSE Composite 10,247.93 +105.00

Volume was solid and advancing issues outnumbered decliners by a whopping 3-1 margin. New highs raced ahead, beating new lows, 442-118.

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Oil dipped slightly to close at $81.22. Gold was up $3.40 to $747.20 and silver lost a penny to $13.49.

Investors had their day - or two weeks - in the sun. On Monday, earnings will begin pouring in, and we'll see firsthand how solid these investment gains are. I would not dismiss this quarter as being one in which stocks sell off, even on good earnings. The market is in a completely overbought condition, priced to perfection, and if earnings are even a bit on the sluggish side, individual issues will be unloaded.

Have a great weekend!

Markets Await Jobs Data

Stocks spent most of Thursday trading in a narrow range on moderate volume as investors nervously awaited Friday's Non-Farms Payroll data for September.

The report is expected to reveal growth in the labor pool of 100,000 jobs, though arguments are being made on both sides of the equation. Judging from recent commentary, the idea that the US economy is stumbling toward recession has gained traction, especially since new claims for unemployment insurance ticked higher Thursday.

Dow 13,974.31 +6.26; NASDAQ 2,733.57 +4.14; S&P 500 1,542.84 +3.25; NYSE Composite 10,142.93 +41.90

However, Wall Street diehards are hoping for a reversal of the trend which resulted in a net loss of jobs for August and a rebound, though there's no talk of where these new jobs may have been created. The housing and construction industries, mortgage and banking-related employment have all felt the sting from the sub-prime mortgage meltdown.

Nevertheless, investors were generally on the positive side Thursday. Advancing issues were ahead of decliners by a 3-2 margin. New highs retained their edge on new lows, 217-130. That margin continues to narrow, albeit by small increments, daily.

In an ominous portent, commodities advanced across the board. Oil futures gained $1.40, nearly erasing a week's worth of declines, to $81.44 at the close. Gold added $8.10 to $743.80, while silver popped 3 cents to $13.50.

The Non-Farms Payroll data is due out at 8:30 am ET, an hour prior to the opening of the equity markets. Stay tuned.

More Money Down the Drain

Investors who pumped the Dow to new record highs on Monday are scratching their heads after two consecutive days of losses. What could have happened, buying so close to the high, with the overhang of the still-unwinding credit crisis, a slumping housing market, oil near all-time highs and the US dollar in the tank?

Talk of a looming recession still trickles from the lips of brokers who dare speak truth to power; the massive losses by major banks in the coming quarterly reports are mentioned in hushed whispers, in private meetings, but sometimes the fears are manifested in the trades, like today.

Dow 13,968.05 -79.26; NASDAQ 2,729.43 -17.68; S&P 500 1,539.59 -7.08; NYSE Composite 10,101.03 -74.81

All of the major indices took a hit on Wednesday, and the losses were double or more than Tuesday's. Declining stocks laid over advancers by a 5-2 margin while new lows gained ground on new highs for the second consecutive day, with the highs holding a 232-127.

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That gap has closed considerably and is signaling continued weakness.

Economic numbers have been benign for the most part. Investors may be looking for positive news from the September Non-Farms Payroll report, due Friday prior to the market open. Estimates call for 100,000 new jobs created, though last month's estimate was equally rosy when the report for August showed a net loss of 4000 jobs.

Oil slipped 11 cents to close at $79.94; gold and silver were marginally changed. Gold lost 60 cents. Silver was up 2 pennies.

What the payroll report holds in store for the markets is yet indeterminate. Stocks have been rising on bad economic news, in a convoluted logic that a weak economy will spur the Fed to lower interest rates even more. The thinking is that looser money will be invested and cause stocks to gain. The trouble with that is eventually, as economic conditions worsen, consumers will close their wallets and stop spending. That's the downside of the equation. Lower interest rates can only free up so much capital. Sooner or later, consumers, who make up 70% of GDP, must get some relief.

Lowering interest rates is inherently inflationary and weakens the dollar against foreign currencies. While that may be good for exports, again, consumers are stuck with higher bills for just about everything, being that the US has become an import-driven economy.

If there are less than 100,000 new jobs created, investors may get just what they're asking for, but the fruit of their desires may come with a bitter aftertaste.

No Follow-Through off Big Rally

Stock indices spent the better parts of Tuesday wallowing in the red, and with the exception of the NASDAQ, all closed lower.

Dow 14,047.31 -40.24; NASDAQ 2,747.11 +6.12; S&P 500 1,546.63 -0.41; NYSE Composite 10,175.66 -8.84

Essentially, since the declines were so marginal, little can be gleaned from Tuesday's session, except that investors are not exactly solid in their positions. Some wizened veterans of Wall Street say the 4th quarter kick-off rally was funded mostly through fresh 401k money, put to use by various fund managers who have nothing better to do than add to already overbought positions in an attempt to goose prices higher.

If anything, this market is short-term, with a very limited view of market history. If the credit market unraveling of August is prelude and already forgotten, the "irrational exuberance" of 1999-2000 is prehistoric. One can almost sense the desperation in the headlines, suggesting that traders will swap a weak economy for more fed funds rate cuts. That kind of thinking is a sure symptom of short-sighted trading, as is buying near or at tops.

By now, you've probably discerned that I am not particularly encouraged by any Wall Street euphoria since it is being built on the backs of a weakened economy and tumbling US dollar.

Internals were once again bullish, however, with advancers beating decliners by a 3-2 margin. New highs beat new lows, 366-120. Both margins were significantly slimmer than yesterday, though that is expected.

Oil continued it's week-long decline, falling well below the absurd $80 threshold before rallying back to close down just 19 cents at $80.05. Gold and silver profits were trimmed, if not slashed and burned, with gold losing $17.80 to $736.30 and silver declining 41 cents to $13.45.

The moves in the metals are of particular interest. The last time they fell in tandem by such a large amount was last month, at the height of the mad cash scramble prompted by the ongoing credit squeeze.

There's a safe bet that some of the selling in the metals was credit-related, as that nasty little problem may have been swept under the rug for now, but is beginning to smell.

What will be interesting is how the major banks handle the massive writedowns for the mortgage mess in their third quarter reports. The largest banks, including Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Wachovia (WB), Washington Mutual (WM) and Wells Fargo (WFC) all report between October 15 and 19. That's just two weeks away and investors should expect some serious fallout. Citigroup already warned that profits would be cut by more than 60%. None of the others have yet to show such bravery, though some word is sure to slip out sooner rather than later.

When one or two of these drop a bomb on the market, expect some serious reconsideration in trading strategy for the remainder of the quarter. Most mainstream stocks won't be adversely affected, though some strain will surely be showing as we wend our way toward the holidays.

October can be a vicious month for stocks. Ask anybody who was around in 1929.