Stocks Finish Week Higher on Bernanke Blather

Wall Street has become Disneyland.

Despite economic reports that generally signal a continued downturn through the 4th quarter and into 2008 - Personal Income was up just 0.2% while consumer spending increased by the same amount, but the core PCE deflator was also up 0.2%, with the year-over-year increase at 1.9%, within the Fed's "comfort zone."

Despite numbers begging to be interpreted as benign, the words "alert" and "flexible", when uttered yesterday by Fed Chairman Ben Bernanke, somehow signaled to investors that the Fed would cut rates again at their December 11 meeting.

Like I said, Disneyland. When you wish upon a star...

Dow 13,371.72 +59.99; NASDAQ 2,660.96 -7.17; S&P 500 1,481.14 +11.42; NYSE Composite 9,856.84 +83.27

Additionally, Construction Spending fell 0.8% in October, adding more impetus to the already dismal housing picture and indicating that economic woes are spreading into the commercial sector.

Advancing issues led decliners, 4054-2373, but new lows continued to hold sway over new highs, 239-172, though the gap has narrowed considerably over the past four sessions.

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Crude fell below the $90 mark, dropping $2.30 to $88.31. Precious metals continued to retreat from recent highs. Gold was down $13.20 to $789.10, while silver declined 28 cents to end the week at $14.17. The drops in commodities are beginning to make sense against the backdrop of a inadequately-growing US economy.

Slower growth, or even recession, here, is going to crimp demand for all raw materials. Forget inflation. We're staring straight at Japan-style deflation.

So, that makes stocks go up? The Dow registered a gain of 628 points over the past four sessions, mostly on speculation that the Fed would lower interest rates to avert a recession. And that, dear reader, is why they call trading equities "speculative." Sometimes, everybody's wrong. And this time, it sure looks like they are.

Pass the fairy dust, Tinkerbell. I'm ready for another ride on the Magic Mountain.

NYSE Volume 4,335,490,000
NASDAQ Volume 2,571,377,500

Consolidation Day

After two days of unprecedented gains, the markets were a bit worn out, and by Thursday, they traded in a more narrow range, ending mostly to the upside, with the notable exception of the NYSE Comp.

Overnight, the Fed released guidance that the US economy would slow in 2008, than during the day made overtures to the public that they would stand vigilant and flexible to confront a variety of concerns. With most of the economic news being mostly credit and mortgage-related and negative, investors mostly sat back, took some profits and continued to worry-waiting game.

News that mortgage delinquencies were actually on the rise calmed the pace of trade and that was magnified by a major fire at a vital oil pipeline serving the Midwest which prompted a five dollar spike in the price of crude early in the day. By the end of the day, however, oil only added 39 cents on the NY Merc, finishing the day at a more reasonable $91.01.

Dow 13,311.73 +22.28; NASDAQ 2,668.13 +5.22; S&P 500 1,469.72 +0.70; NYSE Composite 9,773.57 -17.48

Internally, decliners took back the advantage over advancing issues, 3466-2903, but new lows remained in control, 286-133. While the new lows have been declining over the past three days, few stocks are making new highs. This indicator is currently at even, with a slight bias to the downside. Unless markets improve even more in the next few trading days, the trend to the negative will remain in place.

It doesn't take a genius to understand the movement of the markets over the past few days. Stocks were oversold on a purely technical basis. November was a brutal month for stocks until the nearly 600-point recovery of Tuesday through Thursday. The chances for a continuation of the rally into the weekend remain slim.

Volume moderated, indicating the widely held wait-and-see attitude. With traders expectant of nothing but moderately bad to outright horrible economic news, it wouldn't take much to stoke the flames and ignite another rally, though the strength and breadth would be largely constrained.

Since we're in the midst of the holiday season, more attention will be focused on retailers. Considering the uphill fight they have ahead of them, prospects are mixed at best.

NYSE Volume 3,539,243,500
NASDAQ Volume 2,180,081,000

Wall Street Rallies Back

In the face of a continuing credit crisis, a woeful housing market and whispers of recession in the air, US investors drove stocks forward for the second straight day.

Dow 13,289.45 +331.01; NASDAQ 2,662.91 +82.11; S&P 500 1,469.02 +40.79; NYSE Composite 9,791.05 +269.29

Early news to the markets was less-than-jovial, with the National Association of Realtors announcing the 8th consecutive month of lower existing home sales, news that the market had expected. Unexpected was the pronouncement by Fed Governor Donald Kohn, who told the Council on Foreign Relations in New York, "should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses."

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Additionally, Kohn mentioned that the Fed would remain "nimble" in the face of any setbacks. Fed watchers took this as a clear signal that the Federal Reserve would vote to reduce the federal funds rate another 1/4 point at its next meeting, December 11.

While that can hardly account for the massive run-up in stocks over the past two days - the best two day performance in five years - most of the financial press was heralding more rate cuts (and the coincident weakening of the dollar) as the savior for the sickening US economy.

The financial news is nearly as insipid and useless as what passes for mainstream media these days. They swallow even the most blatant lies from corporate types and it seems as if the scripts for the never-ending rally have been penned by out-of-work Hollywood screenwriters.

Everybody's a pitch man and the news is always upbeat and jovial. With Rupert Murdoch taking over the Wall Street Journal and launching his own Fox Financial Network, it's likely to get worse before it gets better.

There's little in the way of honest analysis, as every word is spun to the positive, led all the way by the drooling cheerleader Jim Cramer on CNBC.

So, today's rally can be seen as a victory of sorts of media over material reality. Nothing really changed in the overall economic scheme other than the minds of the investing horde.

In any case, advancing issues got the nod over decliners, 5343-1095. New lows retained their long-standing advantage over new highs, however, 325-131.

More upbeat news came the way of the oil trade, where crude slid another $3.80 on the day, closing at $90.62. Gold lost $14.00 to $807.20, and silver fell 15 cents to $14.53.

Despite the two days of gains in the markets, there are still storm clouds on the horizon, if not directly overhead. Bear in mind that Wall Street's gains were predicated on the notion that the economy would continue to lose steam, prompting Fed cuts. It's simply pretzel logic at it's very best.

Please, don't swallow the whole thing at once.

NYSE Volume 4,610,242,500
NASDAQ Volume 2,543,293,000

Volatility and Violation

Stocks surged today on all major exchanges, despite generally dour economic news, including another poor reading on consumer confidence and a report on existing home sales which was also market-deflating.

Consumer confidence fell to 87.3, from 95.6 in October. Analysts were expecting a reading of 92.0. The S&P/Case-Shiller Home Price Index showed a 4.5% year-over-year decline for the 3rd quarter, adding more fuel to the sub-prime/housing/credit fire.

Stocks, which were buoyed at the open by news that CitiGroup (C) would receive a $7.5 billion injection of cash from the Abu Dhabi Investment Authority for a 4.9% stake in the troubled financial firm, fell quickly at 10:00 am when both the consumer confidence and home sales figures were released.

Dow 12,958.44 +215.00; NASDAQ 2,580.80 +39.81; S&P 500 1,428.23 +21.01; NYSE Composite 9,521.76 +132.26

But, in a day full of volatility and violation of key support and resistance levels at various times, stocks soared to intra-day highs before and after the noon hour, with the Dow leading the way - at one point up more than 240 points.

The afternoon witnessed a series of rapid sell-offs and rebounds, culminating in a mammoth 100-point spike with half an hour left in the trading day.

Despite the rise, stocks continue to be mired in a negative funk, though recently the markets have become extremely volatile. Stocks were up sharply on Friday, down hugely on Monday, only to be followed by Tuesday's massive upswing.

Inside the markets, advancers beat decliners, 3978-1421, though new highs were trounced again by new lows, 666-80. The bias continues explicitly to the downside.

Commodities contributed to some of the upside in stocks. Oil for January delivery lost $3.28 to $94.42 on the NY Merc. Gold lost $12.50 to close at $814.00, while silver fell 35 cents to 14.49.

While buyers were dancing through most of the day, Wednesday could bear witness to another dramatic turn around. The National Association of Realtors (NAR) announce their own reading on existing home sales at 10:00 am and crude inventories - which have been next-to-impossible to predict recently - come out at 10:30 am.

While the news from the NAR is somewhat predictable, an unexpected decline in oil and gas reserves could trigger more price gains in crude and derail any chance of a continuation of today's rally.

Of course, considering today's wicked trading patterns, there's also the possibility of insiders working the markets to the upside, in their ongoing effort to prevent the inevitable meltdown.

The Abu Dhabi investment in CitiGroup serves as clear evidence that America is losing ground in the war on terror. While we have yet to suffer another attack, the original main target - financial companies - are now being bought by Arab nations, along with plenty of other American companies.

In the long run, it may be best to just sell out to foreigners - for now. When the investments go bust, American taxpayers and investors will be able to pick them up on the cheap.

NYSE Volume 4,273,844,000
NASDAQ Volume 2,220,407,250

Stocks Trampled Into Correction

Remember that little 180-point Black Friday rally on the Dow?

Well, forget about it. On Monday, the Dow wiped out all of that half-session gain and then some, pushing the Dow into negative territory for the year and the blue chip index officially into a correction - down 10% from the highs.

Dow 12,743.44 -237.44; NASDAQ 2,540.99 -55.61; S&P 500 1,407.22 -33.48; NYSE Composite 9,389.50 -193.48

Additionally, Monday - the first full day of trading during the "holiday season" - saw the S&P 500 fall into negative territory for the year.

The NASDAQ fell into "correction" territory as well, off its October 31 high of 2859.12. It has shed more than 11% of its value in less than a month - 17 trading sessions.

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As usual, the main culprit for the fall in US equities was the continuing credit/mortgage/housing crisis. Two stories were front and center on the topic. CitiGroup (C) announced that another round of cost-cutting might include layoffs, and financial network CNBC commented that the layoffs could number 45,000.

Embattled lender Countrywide Financial (CFC) was the subject of a letter from NY Senator Charles Schumer, who sought a probe of more than $50 billion Countrywide borrowed from the Federal Home Loan Bank system.

Countrywide fell $1.01, or 10 percent to $8.64, while CitiGroup slumped 1.00 (3.15%) to $30.70.

In the overall market, declining issues led advancers, 4843 to 1603, a ratio of better than 3 to 1. New lows surged to 627, as opposed to 99 new highs. While housing and credit are getting most of the headlines, the declines are being seen in all market segments.

Oil dropped 48 cents to settle at $97.70 per barrel on the New York Mercantile Exchange. Gold and silver posted modest gains, though commodities were barely the focus of Monday's trading.

The 200-point decline on the Dow was the 6th of that magnitude this month, making November easily the worst month for the markets this year. In all, the Dow has lost 1187 points during the penultimate month of 2007.

NYSE Volume 3,706,467,250
NASDAQ Volume 2,019,342,250