In our last post we failed to mention that the earnings season got started on Tuesday evening with Alcoa (AA) being the normal first one to report their earnings. The numbers were pretty good but not as good as Wall Street had hoped for and the stock was down in the early going on Wednesday. AA closed the day down about 5% and helped the Dow close with a 15 point loss. (AA is a Dow component stock.)
During the day, the market was hit with a couple of other items namely the Fed’s minutes to their last meeting and the plane crash into a high rise in Manhattan. When this event was initially reported, some market participants sold stocks just in case it might be a terrorist attack. The Dow dropped about 50 points in five minutes right after the news and then the confirmation that it was an accident sent the prices back up again.
More important to the stock market was the news out of the Fed. Their minutes indicated they were concerned about inflation due to several factors one of which is “a possible acceleration in labor costs.” The market did show some signs of selling off right after the report but the plane crash kind of took the focus off the report and onto terrorists. Then when the terrorists didn’t materialize, the buyers forgot about the Fed and went about their business of buying.
The CNN Money website posted the headline “Rough day on Wall Street” after the Dow closed down 15 points. Some rough day indeed, fifteen points. The bulls must really have been feeling roughed up after that drubbing. We resort to sarcasm, and we apologize for that.
The facts are still out there and the market is choosing to ignore them at the moment. We are definitely getting tired of this high point in the market. We would like to see a sell off to see if it the move is worthy of a deeper correction. The market is struggling to maintain these prices but it is maintaining them. This is in spite of the craters that are occurring in some stocks like AA today.
Right after the market closed the Realtors said that home prices would advance just 1.6% basis the median price for 2006 and sales would be below the 2004 and 2005 levels which were white hot, especially in 2005 when prices appreciated 12.4%. Their prediction for 2007 was they “expect sales activity to pick up early next year.” What else would the National Association of Realtors say do you think?
Our momentum indicators have softened up here over the last couple of days which could mean that the bulls will need to come in buying pretty soon to move those numbers back to overbought. As we have said, the time for a correction is right here. A tough Fed and poor news from AA couldn’t make the market go down. We’re not sure what will but something will.
Dow Industrials: 11,852.13 -15.04