The inevitable finally occurred on Wednesday as fearful investors pulled more money out of US stocks and dropped major indices to new lows.
Damage was widespread, with all sectors showing losses and the blue chip Dow Industrials recording one of its worst sessions on record, a blistering 427-point, panic-induced drubbing.
Dow 7,997.28 -427.47; NASDAQ 1,386.42 -96.85; S&P 500 806.58 -52.54; NYSE Composite 5,011.99 -353.67
While the CEOs of Detroit's Big Three automakers (Ford, GM and Chrysler) flew in private jets to Washington, where they begged for government assistance, the unheard small investor prayed silently for relief.
Huge companies may fall in this most wicked of all financial storms, but the real tragedies are being felt hardest by honest working men and women who are seeing years of painstaking investing and planning spill down a drain of deceit and despair as the value of stocks continues descending to points unknown.
The massive $6 trillion hole drilled into the world financial system by the subprime mortgage thievery - and then exacerbated by the same parties taking out insurance against the very loans they knew would fail - will not be repaired soon, if ever.
The day began with CPI figures for October showing a 1% decline in October and ended with more fear and doubt than ever in recent days. By shattering the lows set just weeks ago, on October 27, investors are awe struck by the sheer size of the continuing declines. Comparisons to the crash of 1929 are not exaggerated. Stocks have lost nearly half of their value in just one year's time. Nobody has been able to divine a way to stem the worsening economic conditions.
But it's not all bad news. Many people still have jobs, many of them well-paying ones. Unemployment has not yet reached 10%, though that is according to government figures. What the feds fail to take into account are the large sums of monies earned by labor which go routinely unaccounted for and the determination of the American people as a force for right and reason.
Out in the vast access of America are god people who will make the best of the situation. As all asset classes come tumbling down, some people, particularly those at the traditional bottom, will actually find themselves comparatively better off than before. Those who did not own stock and who have no savings will feel the least pain of all.
It's a new world, just 50-70% poorer and cheaper.
Market internals on the day were along the lines most often seen in major bear market corrections. Declining issues beat down advancers, 5958-639. New lows expanded to 1871 - nearly one out of every three stocks on the major exchanges. There were 22 stocks making new 52-week highs. Volume was high, yet another indication that the markets are again in the midst of a major sell-off.
NYSE Volume 1,546,734,000
NASDAQ Volume 2,424,409,750
The worst fears will be realized some time between now and late January. Two major events will collide on and around January 20. A newly-elected government will take the reigns of the nation and 4th quarter earnings reports will roll out from corporate offices to shareholders, investors, traders, brokers and analysts. The earnings reports are almost certain to be horrific. There's some hope that the newly-minted government will bring improvements. Nothing, however, is certain, as always.
Commodities mostly continued their downward trek. Oil dipped another 66 cents, to $54.10. Gold gained marginally, up $3.30, to $736.00. Silver fell 24 cents, to $9.31.
Wednesday, November 19, 2008
Tuesday, November 18, 2008
Wall Street Narrowly Avoids Flushing
At 3:30 pm, with just 30 minutes remaining in the regular session, the Dow Jones Industrial Average and the NYSE were the remaining two indices that had not succumbed to the deadly gravity gripping investors. They remained above their October 27 closing lows, while the NASDAQ and S&P 500 had already shown their cards and were trading at fresh, multi-year lows.
Moments earlier, the Dow had traded as low as 8105, well below the bottom of 8175, but in the final fifteen minutes, a spirited rally lifted all indices close to the highs of the day, delaying the inevitable flushing for at least twenty-four more hours.
Dow 8,424.75 +151.17; NASDAQ 1,483.27 +1.22; S&P 500 859.12 +8.37; NYSE Composite 5,365.66 Up 42.30
That stocks will break below the October 27 lows is not a certainty, though today's retesting was probably the most serious of recent attempts. Traders must be encouraged by the idea that the indices continue to test and rebound, even though the NASDAQ has already dipped to new downside levels.
It does seem, however, that stocks have not found their bottoms yet, considering the recent volatility and various gyrations of recent days and weeks. There has yet to be a final, crushing capitulation, nor has there been any imminent signal that investing was once again a worthwhile endeavor. Bottoms are funny things. There is nobody who can call them with any certitude, and this bottom seems to be wearing thin.
Stocks are relatively cheap, but are they cheap enough? It would seem that speculators are not quite ready to take the leap without a bungee cord of some sort (like options) to pull them out of the fire should their forays prove a bit premature.
There's also the political side of the issue to consider. While President-elect Barack Obama inspires confidence and a degree of trust that the worst is behind us, he has not spelled out specific policies, nor does anyone know how the upcoming congress is going to either comply and/or oppose any initiatives.
So, for now, we'll assume that this is not the bottom, that life will go on, and that the US will sink further into a recession through the 4th quarter and probably well into 2009.
Bottom? What bottom? Patience may be the virtue most rewarding except that of abstinence for now and possibly for months to come.
On the day, the headline numbers stood in stark contrast to the internal indicators. Declining issues far outweighed advances, 4074-2469, indicating that the late rally was nothing more than good, old-fashioned tape-painting designed to keep the wolves from the door. Significantly, new lows expanded once more, to 1248, against only 14 new highs. This market is once again approaching a capitulative stage. Investors should be ready for another hefty downdraft which could occur at any time.
Volume was about as normal as it has been in a number of weeks.
NYSE Volume 1,571,633,000
NASDAQ Volume 2,379,432,000
The most intriguing aspect of this entire financial episode continues to spring forth from the font of commodities trading, where the full impact of global slack demand can be experienced in all its splendor.
Crude oil continued to drive lower, falling another 73 cents, to $54.76. Gold lost $9.30, to $732.70, while silver bucked the trend, rising by 22 cents, to $9.55 the ounce.
With producer prices falling by their largest margin in the history of that gauge, a whipping 2.8%, according to October's Producer Price Index (PPI), released this morning.
It was the third consecutive month of decline in the PPI, a sure sign not only of recession, but a deadly draft of deflation, with no support for pricing at the producer level. The corresponding Consumer Price Index (CPI) for October is due out tomorrow at 8:30 am, and should show a similar decline. If there's any silver lining in the dark clouds overhanging Wall Street, it is that the cost of everything continues to go down, a boon to consuers, though a bane to business. Some deflation was almost certain at the end of the long credit boom, but just how much, and how far down prices will have to go before stabilizing is another unanswered question. The assumption is that there's still some room below for stocks, goods, services and all asset classes.
Moments earlier, the Dow had traded as low as 8105, well below the bottom of 8175, but in the final fifteen minutes, a spirited rally lifted all indices close to the highs of the day, delaying the inevitable flushing for at least twenty-four more hours.
Dow 8,424.75 +151.17; NASDAQ 1,483.27 +1.22; S&P 500 859.12 +8.37; NYSE Composite 5,365.66 Up 42.30
That stocks will break below the October 27 lows is not a certainty, though today's retesting was probably the most serious of recent attempts. Traders must be encouraged by the idea that the indices continue to test and rebound, even though the NASDAQ has already dipped to new downside levels.
It does seem, however, that stocks have not found their bottoms yet, considering the recent volatility and various gyrations of recent days and weeks. There has yet to be a final, crushing capitulation, nor has there been any imminent signal that investing was once again a worthwhile endeavor. Bottoms are funny things. There is nobody who can call them with any certitude, and this bottom seems to be wearing thin.
Stocks are relatively cheap, but are they cheap enough? It would seem that speculators are not quite ready to take the leap without a bungee cord of some sort (like options) to pull them out of the fire should their forays prove a bit premature.
There's also the political side of the issue to consider. While President-elect Barack Obama inspires confidence and a degree of trust that the worst is behind us, he has not spelled out specific policies, nor does anyone know how the upcoming congress is going to either comply and/or oppose any initiatives.
So, for now, we'll assume that this is not the bottom, that life will go on, and that the US will sink further into a recession through the 4th quarter and probably well into 2009.
Bottom? What bottom? Patience may be the virtue most rewarding except that of abstinence for now and possibly for months to come.
On the day, the headline numbers stood in stark contrast to the internal indicators. Declining issues far outweighed advances, 4074-2469, indicating that the late rally was nothing more than good, old-fashioned tape-painting designed to keep the wolves from the door. Significantly, new lows expanded once more, to 1248, against only 14 new highs. This market is once again approaching a capitulative stage. Investors should be ready for another hefty downdraft which could occur at any time.
Volume was about as normal as it has been in a number of weeks.
NYSE Volume 1,571,633,000
NASDAQ Volume 2,379,432,000
The most intriguing aspect of this entire financial episode continues to spring forth from the font of commodities trading, where the full impact of global slack demand can be experienced in all its splendor.
Crude oil continued to drive lower, falling another 73 cents, to $54.76. Gold lost $9.30, to $732.70, while silver bucked the trend, rising by 22 cents, to $9.55 the ounce.
With producer prices falling by their largest margin in the history of that gauge, a whipping 2.8%, according to October's Producer Price Index (PPI), released this morning.
It was the third consecutive month of decline in the PPI, a sure sign not only of recession, but a deadly draft of deflation, with no support for pricing at the producer level. The corresponding Consumer Price Index (CPI) for October is due out tomorrow at 8:30 am, and should show a similar decline. If there's any silver lining in the dark clouds overhanging Wall Street, it is that the cost of everything continues to go down, a boon to consuers, though a bane to business. Some deflation was almost certain at the end of the long credit boom, but just how much, and how far down prices will have to go before stabilizing is another unanswered question. The assumption is that there's still some room below for stocks, goods, services and all asset classes.
Monday, November 17, 2008
Stocks Continue Relentless Slide
This week begins on the same note as the previous one ended: with stocks taking big losses late in the day. All major indices are once again approaching their October 27 lows with the Dow Jones Industrials just 100 points away, the NASDAQ finishing at a new low (previously 1505.90), the S&P 500 a mere 2 points above and the broadest measure, the NYSE Composite, finishing the day just 127 points above the most-recent low.
Dow 8,273.58 -223.73; NASDAQ 1,482.05 -34.80; S&P 500 850.75 -22.54; NYSE Volume 5,507,580,000 NASDAQ Volume 1,885,847,500 NYSE Composite 5,323.36 Down 129.27
Investors were initially cheered about industrial production figures provided by the Federal Reserve, showing an increase of 1.3% in October. However, closer examination of the methodology revealed that September figures were revised lower, thus affecting the October numbers positively. The net result, according to the Fed, was a reduction of roughly 0.67% for the two months combined.
Also, the seldom-quoted Capacity Utilization figures continued to stagnate at the 76.4% level, suggesting that - for the time being - overall industry will continue to reman flat or decline.
Both the Industrial Production and Capacity Utilization data can be found here.
Those numbers caused a little bit of relief midway through the session, but Citigroup announced 53,000 layoffs, and that bit of news sent shivers through the investing community throughout the day.
Investors now find themselves in a conflicted, malignant state of waiting until a new president and congress takes over the reigns of federal governing on January 20. The current congress and lame duck president don't seem capable of making any kind of useful decisions, and the ones they have made haven't alleviated any of the stresses in the market or credit system. Even the much-ballyhooed G-20 economic summit which took place in Washington Friday and Saturday ended with only a statement of desired objectives and no immediate action.
So, stocks languish, day after dreary day. News continues to erode confidence as everything seems to be spiraling downhill without respite. The list of store closings by retailers (everybody from J.C. Penny to Pep Boys to the Gap to Lowe's) continues to expand. Some malls are concerned that following the holidays there will be an absolute glut of retail space available with nobody to fill it.
Not surprisingly, decliners beat back advancing issues by a wide margin, 4804-1832. Likewise, there were far more new lows than highs: 780-9. Volume was light.
NYSE Volume 1,311,161,000
NASDAQ Volume 1,856,252,000
Oil resumed being a bad bet, losing $2.11, to $55.49. Gold was virtually unchanged, losing 50 cents to close at $742.00. Silver dropped 16 cents to finish the day at $9.33 per ounce.
As far as the eye can see upon this somewhat murky financial horizon is nothing but trouble. Holiday sales are not expected to be merry for most retailers and job losses continue to mount in all sectors of the economy. The key questions being asked are, first, where's the bottom? and secondly, how is the economy supposed to be revived?
Obviously, nobody knows the answers, but here's a couple of guesses: The bottom will be in the 6500-7200 range, occurring either in December or early January. The revival of the economy will begin the moment George W. Bush is shown the White House exit for the final time and President Obama with a new congress can get down to work on fixing the mess with green initiatives, public works programs and sensible government solutions - something this administration seemed not only incapable of formulating, but actually went out of their ways to avoid doing.
Dow 8,273.58 -223.73; NASDAQ 1,482.05 -34.80; S&P 500 850.75 -22.54; NYSE Volume 5,507,580,000 NASDAQ Volume 1,885,847,500 NYSE Composite 5,323.36 Down 129.27
Investors were initially cheered about industrial production figures provided by the Federal Reserve, showing an increase of 1.3% in October. However, closer examination of the methodology revealed that September figures were revised lower, thus affecting the October numbers positively. The net result, according to the Fed, was a reduction of roughly 0.67% for the two months combined.
Also, the seldom-quoted Capacity Utilization figures continued to stagnate at the 76.4% level, suggesting that - for the time being - overall industry will continue to reman flat or decline.
Both the Industrial Production and Capacity Utilization data can be found here.
Those numbers caused a little bit of relief midway through the session, but Citigroup announced 53,000 layoffs, and that bit of news sent shivers through the investing community throughout the day.
Investors now find themselves in a conflicted, malignant state of waiting until a new president and congress takes over the reigns of federal governing on January 20. The current congress and lame duck president don't seem capable of making any kind of useful decisions, and the ones they have made haven't alleviated any of the stresses in the market or credit system. Even the much-ballyhooed G-20 economic summit which took place in Washington Friday and Saturday ended with only a statement of desired objectives and no immediate action.
So, stocks languish, day after dreary day. News continues to erode confidence as everything seems to be spiraling downhill without respite. The list of store closings by retailers (everybody from J.C. Penny to Pep Boys to the Gap to Lowe's) continues to expand. Some malls are concerned that following the holidays there will be an absolute glut of retail space available with nobody to fill it.
Not surprisingly, decliners beat back advancing issues by a wide margin, 4804-1832. Likewise, there were far more new lows than highs: 780-9. Volume was light.
NYSE Volume 1,311,161,000
NASDAQ Volume 1,856,252,000
Oil resumed being a bad bet, losing $2.11, to $55.49. Gold was virtually unchanged, losing 50 cents to close at $742.00. Silver dropped 16 cents to finish the day at $9.33 per ounce.
As far as the eye can see upon this somewhat murky financial horizon is nothing but trouble. Holiday sales are not expected to be merry for most retailers and job losses continue to mount in all sectors of the economy. The key questions being asked are, first, where's the bottom? and secondly, how is the economy supposed to be revived?
Obviously, nobody knows the answers, but here's a couple of guesses: The bottom will be in the 6500-7200 range, occurring either in December or early January. The revival of the economy will begin the moment George W. Bush is shown the White House exit for the final time and President Obama with a new congress can get down to work on fixing the mess with green initiatives, public works programs and sensible government solutions - something this administration seemed not only incapable of formulating, but actually went out of their ways to avoid doing.
Friday, November 14, 2008
Clearly, More Trouble Ahead for Economy
After a short-covering spree boosted stocks on Thursday, it was back to selling on Friday as news and economic reports clearly demonstrated the the US and world economy was headed for even more trouble.
Prior to the opening bell on wall Street, the Commerce Department offered a glimpse of the pain, releasing October retail sales data that showed the worst one-month decline in history, a drop of 2.8%.
On the macro-economic front, both import and export prices fell as the full wrath of deflation began to manifest themselves.
Dow 8,497.31 -337.94; NASDAQ 1,516.85 -79.85; S&P 500 873.29 -38.00; NYSE Composite 5,452.63 -263.16
As expected, there was no follow-through on yesterday's rally. Instead, investors are scrambling to get their money out of stocks as quickly as possible, even though some companies seem to be in relatively good health. Nonetheless, share prices continue to decline with no end in sight.
Internals were decidedly negative. declining issues overwhelmed advancers, 5041-1378. There were 503 new lows, but only 10 new highs. Volume was on the low side.
NYSE Volume 1,449,427,000
NASDAQ Volume 2,273,926,000
On Capitol Hill, Rep. Dennis Kucinich called the Treasury Secretary's change in the TARP bailout plan - from buying up bad mortgage debt to taking equity stakes in troubled banks - a "classic bait-and-switch." Other members of the House finance committee (of which Kucinich is the Chairman) echoed his comments and plan on further hearings on the scope and nature of the $750 billion bailout.
Fed Chairman (and full time moron) Ben Bernanke hinted that the Fed could cut interest rates once again, at the next meeting of the FOMC in December, from their current 1%. Of course, talk is now cheaper than ever in Washington, as one administration (the one which caused the problems) is on the way out the door and the Obama people are lining up for high government positions.
Bernanke's absurd concept of lowering key federal funds rates below 1% is a desperate idea designed to inject liquidity into still frozen capital markets.
That same term, "liquidity," has already been bantered about at the economic summit which kicked off today in Washington. Here we have the economic and political leaders of major nations all in one place trying to figure out how to further cripple free market economics. No doubt they will encourage more government spending and various high-sounding concepts which will do nothing except extend the now-global contraction.
Here's where we are in a nutshell: 1930. It was at this point, at the very early stages of the global Great Depression, that the government intervened in all kinds of ways. Of course, their plans did nothing. It wasn't until the mid-30s, when FDR's jobs and public works programs began to take effect, that the economy began to improve.
There's some hope that President-elect Obama and his advisors will begin to implement middle class tax cuts and public works programs that will ameliorate the condition to a degree. But, there's no question that the US and other nations are in for a long - another two to three years at least - period of economic instability in which - get this - the rich get poorer and the poor get better.
So, the dark clouds you witness hovering over the stock markets and on the news do actually have significant silver linings, if you are already poor or middle class and can manage your assets and income reasonably well. Forget stocks, forget retirement. Keep yourself liquid and on the lookout for the varied economic windfalls which will present themselves in months and years to come.
Commodities, by the way, were mixed again. Oil dipped another $1.46, to $57.60, but gold gained $37.50, to $742.50 and silver powered higher by 69 cents, to $9.49. While those gains look good today, they will likely not be sustained. All asset classes continue to decline, and the precious metals are not immune. In fact, due to various cash-for-gold schemes, there is a growing amount of gold coming into the market, and that will only serve to depress gold prices.
Just remember: everything is getting cheaper. If something you want is not selling for an acceptably low price, ask for a discount. Sellers of goods of all kinds will take less today and even less tomorrow.
Prior to the opening bell on wall Street, the Commerce Department offered a glimpse of the pain, releasing October retail sales data that showed the worst one-month decline in history, a drop of 2.8%.
On the macro-economic front, both import and export prices fell as the full wrath of deflation began to manifest themselves.
Dow 8,497.31 -337.94; NASDAQ 1,516.85 -79.85; S&P 500 873.29 -38.00; NYSE Composite 5,452.63 -263.16
As expected, there was no follow-through on yesterday's rally. Instead, investors are scrambling to get their money out of stocks as quickly as possible, even though some companies seem to be in relatively good health. Nonetheless, share prices continue to decline with no end in sight.
Internals were decidedly negative. declining issues overwhelmed advancers, 5041-1378. There were 503 new lows, but only 10 new highs. Volume was on the low side.
NYSE Volume 1,449,427,000
NASDAQ Volume 2,273,926,000
On Capitol Hill, Rep. Dennis Kucinich called the Treasury Secretary's change in the TARP bailout plan - from buying up bad mortgage debt to taking equity stakes in troubled banks - a "classic bait-and-switch." Other members of the House finance committee (of which Kucinich is the Chairman) echoed his comments and plan on further hearings on the scope and nature of the $750 billion bailout.
Fed Chairman (and full time moron) Ben Bernanke hinted that the Fed could cut interest rates once again, at the next meeting of the FOMC in December, from their current 1%. Of course, talk is now cheaper than ever in Washington, as one administration (the one which caused the problems) is on the way out the door and the Obama people are lining up for high government positions.
Bernanke's absurd concept of lowering key federal funds rates below 1% is a desperate idea designed to inject liquidity into still frozen capital markets.
That same term, "liquidity," has already been bantered about at the economic summit which kicked off today in Washington. Here we have the economic and political leaders of major nations all in one place trying to figure out how to further cripple free market economics. No doubt they will encourage more government spending and various high-sounding concepts which will do nothing except extend the now-global contraction.
Here's where we are in a nutshell: 1930. It was at this point, at the very early stages of the global Great Depression, that the government intervened in all kinds of ways. Of course, their plans did nothing. It wasn't until the mid-30s, when FDR's jobs and public works programs began to take effect, that the economy began to improve.
There's some hope that President-elect Obama and his advisors will begin to implement middle class tax cuts and public works programs that will ameliorate the condition to a degree. But, there's no question that the US and other nations are in for a long - another two to three years at least - period of economic instability in which - get this - the rich get poorer and the poor get better.
So, the dark clouds you witness hovering over the stock markets and on the news do actually have significant silver linings, if you are already poor or middle class and can manage your assets and income reasonably well. Forget stocks, forget retirement. Keep yourself liquid and on the lookout for the varied economic windfalls which will present themselves in months and years to come.
Commodities, by the way, were mixed again. Oil dipped another $1.46, to $57.60, but gold gained $37.50, to $742.50 and silver powered higher by 69 cents, to $9.49. While those gains look good today, they will likely not be sustained. All asset classes continue to decline, and the precious metals are not immune. In fact, due to various cash-for-gold schemes, there is a growing amount of gold coming into the market, and that will only serve to depress gold prices.
Just remember: everything is getting cheaper. If something you want is not selling for an acceptably low price, ask for a discount. Sellers of goods of all kinds will take less today and even less tomorrow.
Thursday, November 13, 2008
Lows Retested, Big Rally Ensues
Today was the day of reckoning, as the Dow Jones Industrial Index dropped to the 8000 level by mid-afternoon, but then rebounded strongly on a combination of speculative fervor and short-covering. Other major indices participated in a broad-based rally that lifted all by 6-7%, one of the best one-day gains of all time.
As usual, there was no real warning or news to spark off the spectacular, three-hour rally into the close. There was only the indications that stocks were once again falling to, or below, the October 27 levels, which marked multi-year lows on the Dow, NASDAQ and the S&P.
With reasons known only to the geniuses on Wall Street who brought us such fundamentally stupid ideas as subprime loans, credit default swaps, and now, government bailouts, today's big move is probably as consequential as leaves falling from trees in November, considering the day was devoid of any news which could be labeled "good."
Instead, the morning got off to a horrible start when the Labor Dept. announced a sudden jump in initial unemployment claims to 516,000 and the federal government released fiscal first quarter budget figures which showed the government already $237 billion in the red.
Dow 8,835.25 +552.59; NASDAQ 1,596.70 +97.49; S&P 500 911.29 +58.99; NYSE Composite 5,715.79 +395.09
Also weighing on investors minds was Intel's dire forecast for the 4th quarter, predicting sales lower by $1 billion for the world's largest chip maker, which was released after the market closed on Wednesday.
Those data points and earnings forecasts set a dull tone for early trading, which is why the massive rally should be seen as nothing more than a technical bounce. Lows will almost surely be retested again, as the economic conditions in the US and around the world have deteriorated beyond the point of desperation. Going forward, it's difficult to see how stocks can gain much ground through the holiday season and into the end of the year.
On the other hand, stocks are quite cheap compared to where they were just a few months ago. Google dropped below 300 for the first time since 2005 on Wednesday, but was boosted back to 310 by the close on Thursday. Many stocks are now carrying dividend returns in excess of 5 and 6% due to low share prices. It's unlikely, in an environment of such historically low interest rates, that these relative bargains will persist.
Market internals reflected the headline numbers, at least in the advance-decline line, where gainers outpaced losers by a healthy margin, 4739-1718. New lows, however, continued to grow, to 1416, as compared to a mere 13 new highs.
Volume was spectacularly high, which normally would be a strong indicator on such a huge upside session, though the clouds of short-selling and covering lay all across this maligned market.
NYSE Volume 1,991,154,000 NASDAQ Volume 3,038,288,000
Commodity prices were mixed, but probably more a consistent indicator of where things are heading than equities. Crude oil gained $2.03, to $59.06, recovering some of the huge losses of the last two weeks, though the trade may amount to nothing more than a one-day aberration. Oil has come down quite a bit, from a high of $147 in July, to current levels, which seem to be more sustainable.
Gold declined by $13.30, to $705.00, while silver priced 68 cents lower, to $8.80. One could not blame anyone for dipping a toe in the precious metals market at this point, especially silver, which is down more than 50% from recent highs.
Friday is likely to be another bummer for economic news as retail sales figures for October are released at 8:30 am. At 10:00 am, business inventory data comes out, and there is every indication that goods are beginning to collect dust on shelves not only in retail, but in heavier, commercial goods, as well.
As usual, there was no real warning or news to spark off the spectacular, three-hour rally into the close. There was only the indications that stocks were once again falling to, or below, the October 27 levels, which marked multi-year lows on the Dow, NASDAQ and the S&P.
With reasons known only to the geniuses on Wall Street who brought us such fundamentally stupid ideas as subprime loans, credit default swaps, and now, government bailouts, today's big move is probably as consequential as leaves falling from trees in November, considering the day was devoid of any news which could be labeled "good."
Instead, the morning got off to a horrible start when the Labor Dept. announced a sudden jump in initial unemployment claims to 516,000 and the federal government released fiscal first quarter budget figures which showed the government already $237 billion in the red.
Dow 8,835.25 +552.59; NASDAQ 1,596.70 +97.49; S&P 500 911.29 +58.99; NYSE Composite 5,715.79 +395.09
Also weighing on investors minds was Intel's dire forecast for the 4th quarter, predicting sales lower by $1 billion for the world's largest chip maker, which was released after the market closed on Wednesday.
Those data points and earnings forecasts set a dull tone for early trading, which is why the massive rally should be seen as nothing more than a technical bounce. Lows will almost surely be retested again, as the economic conditions in the US and around the world have deteriorated beyond the point of desperation. Going forward, it's difficult to see how stocks can gain much ground through the holiday season and into the end of the year.
On the other hand, stocks are quite cheap compared to where they were just a few months ago. Google dropped below 300 for the first time since 2005 on Wednesday, but was boosted back to 310 by the close on Thursday. Many stocks are now carrying dividend returns in excess of 5 and 6% due to low share prices. It's unlikely, in an environment of such historically low interest rates, that these relative bargains will persist.
Market internals reflected the headline numbers, at least in the advance-decline line, where gainers outpaced losers by a healthy margin, 4739-1718. New lows, however, continued to grow, to 1416, as compared to a mere 13 new highs.
Volume was spectacularly high, which normally would be a strong indicator on such a huge upside session, though the clouds of short-selling and covering lay all across this maligned market.
NYSE Volume 1,991,154,000 NASDAQ Volume 3,038,288,000
Commodity prices were mixed, but probably more a consistent indicator of where things are heading than equities. Crude oil gained $2.03, to $59.06, recovering some of the huge losses of the last two weeks, though the trade may amount to nothing more than a one-day aberration. Oil has come down quite a bit, from a high of $147 in July, to current levels, which seem to be more sustainable.
Gold declined by $13.30, to $705.00, while silver priced 68 cents lower, to $8.80. One could not blame anyone for dipping a toe in the precious metals market at this point, especially silver, which is down more than 50% from recent highs.
Friday is likely to be another bummer for economic news as retail sales figures for October are released at 8:30 am. At 10:00 am, business inventory data comes out, and there is every indication that goods are beginning to collect dust on shelves not only in retail, but in heavier, commercial goods, as well.
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