Why Does the Dow Go Up When Everything Else Goes Down?

Divergence between the NASDAQ and the Dow Industrials has been a persistent feature over the past year, although recently, the up versus down daily routine has taken on nw dimensions, with the 30 Dow stocks outperforming all other indices routinely.

Tuesday was a case in point as all major indices, including the S&P 500, NASDAQ, Dow Transportation Index, and the Russell 2000 all ended in the red, while the Dow rose majestically to a new all-time closing high. Additionally, almost all foreign markets finished lower on the day.

While there has been no rationale to sufficiently explain the phenomenon, one might easily conclude that the Dow stocks are more stable than the more speculative offerings on other indices, or that Dow stocks, in addition to steady appreciation, offer regular dividends and are generally regarded as the best behemoth companies in the American market.

None of this can fully explain why the Dow gains while other stocks fall, but the pattern has been so obvious and consistent for so long, it merits further investigation.

Conspiracy theorists can claim manipulation in order to keep the unsuspecting masses complacent, as the Dow Jones Industrial Average is the most-widely watched index on the planet. Such an explanation would be difficult, if not impossible, to prove.

Others rightly point out that the Dow is unique in that it is not a weighted average, and gains or losses by the highest-priced offerings can send the index up or down in rather large ways.

In any case, the Dow keeps going up, no matter what other markets or indices are doing.

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

At the Close, Tuesday, October 2, 2018:
Dow Jones Industrial Average: 26,773.94, +122.73 (+0.46%)
NASDAQ: 7,999.55, -37.76 (-0.47%)
S&P 500: 2,923.43, -1.16 (-0.04%)
NYSE Composite: 13,106.01, -19.34 (-0.15%)

Stocks Enter Fourth Quarter With A Bang, NASDAQ Fades To Red, Oil Rallies

At the open, on the first day of trading in the fourth quarter, stocks powered ahead, posting massive gains on the back of President Trump's successful renegotiation of the NAFTA treaty with Mexico and Canada.

It was a giddy start to October, generally a month with plenty of volatility, due partially to funds which tend to close out their books prior to November, short and long term rules of capital gains taxation, and sometimes explosive conditions in the political realm prior to November elections.

On the trade Monday, the divergence pattern which has persisted for more than a year now, appeared again, as the NASDAQ sold off while the Dow and S&P held onto gains. This divergence of mainstream vs. largely tech stocks has been confounding to index and passive investors, as the old world and new have often traded in opposite directions. The solution has been to own some of both sides, with Dow and dividend-paying stocks on one side and speculative, tech stocks on the other.

In such a case, Monday's moves were a win for the old school, as the Dow powered ahead while the NASDAQ soured during the day. Over the long term, the two varieties of stocks have moved up in tandem, producing quality gains this year.

While stocks were hot and bonds stable, the big move of the day was in the oil field, with WTI crude futures up sharply, above 75.50 into the close. The higher price is possibly a reflection of easing of concerns over trade wars, with the new North American agreement at the forefront. In addition, coming sanctions on Iran - which begin on November 4 - are expected to crimp supply. Crude prices are currently trending at four-year highs. If the condition persists, high prices at the pump for consumers could hurt holiday sales, with the big shopping season less than two months ahead.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90

At the Close, Monday, October 1, 2018:
Dow Jones Industrial Average: 26,651.21, +192.90 (+0.73%)
NASDAQ: 8,037.30, -9.05 (-0.11%)
S&P 500: 2,924.59, +10.61 (+0.36%)
NYSE Composite: 13,125.35, +42.83 (+0.33%)

Weekend Wrap: Stocks Slip, Yields Rise, Precious Metals Bid

Stocks closed out the week n subdued fashion, with the major averages hugging the unchanged line throughout most of Friday's session.

Overall, the close-out of the quarter was less dramatic than usual, with little to no "window dressing" done by traders and/or speculators. Stocks were generally down for the week, with the notable exception of the NASDAQ, which was the only one of the major indices to post a weekly gain.

Other than Tesla (TSLA), in which, over the weekend, CEO Elon Musk's deal with the SEC on the heels of their lawsuit, there was little to hang a trade on in the final week of the month. Musk agreed to pay a $20 million fine and the same amount from company coffers. While Musk was stripped of his role as chairman of the Tesla board of directors for three years, he will continue on as CEO.

Stocks remained near all-time highs, and October usually brings additional volatility, such with elections on the horizon and third quarter earnings trickling out after the first week of the month.

After the Fed's FOMC raised the federal funds rate to 2.00-2.25% on Wednesday, stocks fell somewhat out of favor, as bond yields continue to attract large, safety-seeking money. The 10-year note finished the week comfortably above the 3.00% demarkation line, at 3.056%, a number some analysts suggest may cause the demise of some stocks, especially the more speculative variety (read: tech) and those that do not offer a steady dividend.

Crude oil was higher for the week, with WTI topping out over $73 per barrel, a four-year high. Pinching drivers at the pump may not be conducive to gains in equity prices. High gas prices act as a tax on all consumers, but affect the poor and middle class the hardest.

Gold and silver caught some bids late in the week though they continue to wallow in a prolonged slump near three-year lows. Inflation, being still somewhat tame, will likely keep a lid on the prices of precious metals and commodities overall.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14
9/19/18	26,405.76	+158.80	+440.94
9/20/18	26,656.98	+251.22	+692.16
9/21/18	26,743.50	+86.52	+778.68
9/24/18	26,562.05	-181.45	+597.23
9/25/18	26,492.21	-69.84	+527.39
9/26/18	26,385.28	-106.93	+420.46
9/27/18	26,439.93	+54.65	+475.11
9/28/18	26,458.31	+18.38	+493.49

At the Close, Friday, September 28, 2018:
Dow Jones Industrial Average: 26,458.31, +18.38 (+0.07%)
NASDAQ: 8,046.35, +4.38 (+0.05%)
S&P 500: 2,913.98, -0.02 (0.00%)
NYSE Composite: 13,082.52, -23.20 (-0.18%)

For the Week:
Dow: -285.19 (-1.07%)
NASDAQ: +59.40 (+0.74%)
S&P 500: -15.69 (-0.54%)
NYSE Composite: -153.92 (-1.16%)

Stocks Gain On Positive Economic Data; Elon Musk, Tesla Sued By SEC

The Dow Jones Industrial Average snapped a three-day losing streak and the S&P ended its own four-day skein as positive economic numbers boosted confidence, leading to spirited buying early in the session.

Euphoria faded as the day wore on, however. The Dow was up nearly 170 points close to 1:00 pm EDT, but sold off through the afternoon into the close, losing two-thirds of the day's gains. Similar patters were noted on the S&P and the NYSE Composite. The NASDAQ lost some value, though the afternoon swoon was not nearly as severe as on other indices.

The good news came prior to the opening bell. The third estimate of second quarter GDP held steady at 4.2% and durable goods orders for August soared by 4.5%. Upon further review, the durable goods number appeared much weaker than the headline, as much of the increase was supplied by non-defense aircraft orders, which were up 69% and defense capital goods order were up 44%.

Late in the day, word circulated that Elon Musk, CEO of Tesla Motors (TSLA) was being sued for fraud by the SEC.

The SEC alleged that Musk made "false and misleading statements" when he casually stated and tweeted that he could take the company private at $420 a share and also alleged that Musk's tweets caused market chaos, harming investors.

If the SEC's claims hold water, Musk could be stripped of his position and barred from ever running a publicly-traded company. He would also face stiff fines.

The news came too late in the day to affect trading on Thursday, though the stock was down between 10 and 13 percent in pre-market trading Friday morning.

Musk has been a controversial leader of the company he founded, but seems to be beset by psychological demons and may be bi-polar. In addition to his frequent affronts to sensibility, the company has never turned a profit and is deeply in debt. Additionally, Tesla autos have been known to burst into flames upon impact and its auto-pilot feature has been cited by some as a cause for lack of control, leading to a high rate of accidents.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14
9/19/18	26,405.76	+158.80	+440.94
9/20/18	26,656.98	+251.22	+692.16
9/21/18	26,743.50	+86.52	+778.68
9/24/18	26,562.05	-181.45	+597.23
9/25/18	26,492.21	-69.84	+527.39
9/26/18	26,385.28	-106.93	+420.46
9/27/18	26,439.93	+54.65	+475.11

At the Close, Thursday, September 27, 2018:
Dow Jones Industrial Average: 26,439.93, +54.65 (+0.21%)
NASDAQ: 8,041.97, +51.60 (+0.65%)
S&P 500: 2,914.00, +8.03 (+0.28%)
NYSE Composite: 13,105.72, +3.77 (+0.03%)

Fed Raises Rates, Stocks Tank, Regular People Get Squeezed

Sometimes, there's just too much of a good thing.

Like booze, or sex, or food, or federal funds interest rate increases.

Yes, one of those is different from the others, but, if you're a big brain at the Federal Reserve, maybe not. People who live for an love money might have the same kind of reactions ordinary people have to normal stimuli from money-induced pleasure.

Keeping interest rates at near zero for such a long time, from 2008 to 2015, had to be hard on people at the Fed. There was a lot of stress during that time, and the FOMC governors and presidents of the regional banking hubs had to make up for their lack of money pleasure (ZIRP) by printing oodles of dollars out of thin air (QE). It was an artificial high, a necessary evil to some, and everybody knew it would have to come to an end.

Nothing brings a smile to the face of a banker, central or otherwise, than interest rate increases. It means more money in their silk-lined pockets.

Ordinary humans may not be able to comprehend the exhilaration of a 0.25% increase in the federal funds rate, but central bankers do. They revel in it. Imagine, with one simple policy announcement, making an extra $2.5 billion per year. That's real excitement. And that's just the interest on a trillion dollars. The Fed is handling one heck of a lot more than just a didly trillion. By golly, that's just pocket change.

Rest assured, there are a lot of bemused smiles at the Fed this afternoon. Probably some good old back-slapping, toasting with fine wine, and smoking of expensive cigars, such is the wont of the central banking elite. They've made themselves a mighty handy profit today, and you're paying for it, on your credit cards, mortgages, personal loans, car loans and leases and just about every other negotiable debt instrument you can think of. Business is paying the piper as well. In spades.

So, does the market reaction to the Fed's scheme surprise anybody? Nope. Higher interest rates are always bad for consumers, especially those carrying debt, which is just about everybody these days.

The major indices were cruising along with decent gains until the Fed's announcement at 2:00 pm EDT. After a pause and a slight rise, stocks began to slip. From it's intra-day peak at 2:15 pm, the Dow shed 231 points, the NASDAQ lost 78 points. The move was significant. The Dow has posted losses three days in a row. Correlation, in this case, seems to imply causation.

Wall Street investors aren't immune to the interest rate malaise. They know where their bread is buttered and some surely shifted some dough out of stocks and into bonds, or cash, or art, or expensive cars.

The Fed's insistence on raising rates every quarter has gotten to be a pretty definable pattern by now, but some people are beginning to question when it's all going to end and also, how it's going to end.

Will the stock market and all those juicy profits go down in flames? Hard to say, but a 3.10% yield on a ten-year treasury note ($31,000 a year risk free on a $1,000,000 investment) isn't hard to take, and, in the world of rich people with millions of dollars, yen, or euros to throw around, many will take it.

The rich just got a little bit richer. The poor didn't get any poorer, but the people in the middle (debtors) did.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14
9/19/18	26,405.76	+158.80	+440.94
9/20/18	26,656.98	+251.22	+692.16
9/21/18	26,743.50	+86.52	+778.68
9/24/18	26,562.05	-181.45	+597.23
9/25/18	26,492.21	-69.84	+527.39
9/26/18	26,385.28	-106.93	+420.46

At the Close, Wednesday, September 26, 2018:
Dow Jones Industrial Average: 26,385.28, -106.93 (-0.40%)
NASDAQ: 7,990.37, -17.10 (-0.21%)
S&P 500: 2,905.97, -9.59 (-0.33%)
NYSE Composite: 13,102.68, -57.92 (-0.44%)