The market is trying its best to rally out of the selloff that occurred this past week. The SOX was the leader again today, up about 3%, again leaving INTC beside the road. Both the dollar and gold were up today in another wild day for gold up about $15. Gold likes the Fed not raising rates either but the dollar shouldn’t like it???
The day was full of news so let’s get to it. First, we note with interest that home construction dropped 8.9%, not a total shocker but a key indicator for the Wednesday Update. For its part the stock market liked that news as it means the Fed can slow its onslaught of interest rate increases. This line of thinking seems contra intuitive because a stronger housing market should be good for the economy but who am I to judge. The entire rally from the first trading day of the year has been all about the Fed stemming the tide.
With the long post last night we failed to mention the CPI which was down 0.1%. I want you to note that this was the headline since it was in the bulls favor. How long have we been told that the core rate is the important Fed watching rate? Of course, there was mention of the core rate being exactly as expected up 0.2%. Just wanted to remind you of the wonderful spin the media uses. (Speaking of the CPI we are going to have to drag out the deflation story pretty soon what with both housing and the CPI going down.)
Our old arch enemy bin Laden was in the news on Thursday, making threats and demands. What a happy guy. He could have some ability to move the markets one way or the other, at least for a few moments.
In earnings news, after the close, MOT, Motorola said that its earnings jumped 86% but the stock took a dive after the news. MOT said it couldn’t meet the holiday demand for its RAZR thin cell phone. This and the bin Laden news seems to be putting drag on the overnight futures this evening. We’ll see how the market trades in the morning.
One of our readers sent me an article on three warning signs (thanks CM) that we should be paying attention to. One of them is the fact that consumer credit has contracted in the last two consecutive months, another is that home sales have turned down, and the last is that the yield curve inverted briefly in December. These are three signs that the economy is not on as firm ground as many think, and it enhances the recession thinking as well as the deflation thinking. The article is on foxnews.com/story/0,2933,182076,00.html.
We are certainly interested to see if the market can hold this latest advance. Thursday’s market was not a strong affair, just a bounce. For a while it looked as if the market would just go merrily on higher but as soon as the highs were in, the market struggled. Talk to you Sunday evening.
Dow Industrials: 10,880.71 +25.85
RYVNX: 17.58
RYAIX: 21.28
TLT: 92.14
BEGBX: 13.30
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