As far as the market is concerned, GOOG trumped Greenspan and Bush on Tuesday. GOOG announced earnings that were, shall we say, less than the market was expecting after the market closed. The stock was quickly down about 30 points and fell about 70 at one point before closing down about 50 in after hours.
The Fed did celebrate Greenspan’s last meeting with yet another giant interest rate increase of 25 bps, widely expected of course. The market spiked one way and the other for the rest of the afternoon but basically ended just about where it was right before the announcement. The Fed finally removed the “measured” language from the statement which might have been a reason to buy stocks but basically it failed to move the market much. We keep reminding you that rates went up today even though it wasn’t very much. A quarter point here and a quarter point there and pretty soon you are talking about some real money—ok I stole it, get over it.
The State of the Union (SOTU) speech seemed to be focused mostly on the war on terror but there were a few other things that Bush mentioned, some of which can be constructive to the market. He made comments on holding the line on taxes by making the current tax cuts permanent. And, at the same time, we are magically going to be able to cut the deficit in half by 2009. The SOTU was not endorsed by the overnight markets as they were down about the same as they were prior to the speech. Like we mentioned earlier, GOOG had the impact on the market, not the Fed or the SOTU.
We are flying a little blind this evening because we don’t have internet service but we will try to get this out in the morning if we get service back up and maybe we can make some comments on the pre-market. With GOOG causing havoc in the after hours, the first of the month trading could be a little soft to start out.
It’s Wednesday morning and the futures in the premarket have mostly stayed lower but have come up a bit, with GOOG only down about 48 as I write this. When the market opens we will see if they can rally them after a nice drop in the early going. The market is vulnerable as you can tell by a drop like GOOG produced. The rally that “couldn’t” make it back will now have trouble reinstating itself.
Dow Industrials: 10,864.86 -35.06