The stock market traded with no real purpose in mind, the whipsaw continues. The news was mostly negative on the day with durable goods down and new home sales coming in below expectations. The September new home sales are a little bit misleading because, while they came in below expectations and expectations were for lower sales, they were above August figures. "How can this be?", you might ask. It's called revisions and in this case a large downward revision in the August number, as well as the July number.
Crude oil had a giant up day with a jump of over $3 to over $90 a barrel. That may sound bearish to some but as we have mentioned here many times, the stock market and the oil market are driven by similar thinking processes in this environment. They went up together and they will probably go down together, too.
During the day there were a couple of strong rumors about the Fed and AIG. First, AIG started to trade down and was down over 5 points at one time on speculation that it too would show some major subprime mortgage losses in its portfolio. This initially dragged the market down but then another rumor surfaced and traveled about as fast as the California wildfires. This rumor was that the Fed was going to do a surprise rate cut today. Please. Don't they know the Fed meeting is just days away?!? Oh well, the market rallied out of its lows on this rumor and AIG managed to close down only 2 bucks.
There was one stunning item that is being mentioned in a few places, Friday's WSJ being one of them. We read that WellCare Health Plans (WCG) halted trading on Wednesday as the company had been raided by the authorities due to alleged Medicaid fraud. So, after halting trading at $115 a share Wednesday, WCG opened Thursday at 64 closing later at 42 down about 65% on the day. We read that there were a few quants in on the company due to the mere fact the stock price was going up. As one analyst put it, computers can only read the trading, fundamentals are sometimes missed.
After the market closed for the day, MSFT announced some stellar earnings and the stock traded up 10%. This news should lead to an up opening but the overnight futures are showing only minor upside. We'll have to wait until morning.
In the broader scene though, the rally we have talked about is nearly over and this should lead to significant selling at least for a while. We'll be back on Sunday evening. Take care.