Top Line: The stock market continues to hang tough at these higher prices but the next move should be down. The next down move should also be strong even though it doesn't seem to want to go down, it's definitely ready.
The news prior to the opening bell this morning (Tuesday) was not very encouraging such as the PPI which was up 1.4% for the Month. Straight from Bloomberg: Producers paid 7.2 percent more for goods from May 2007, compared with a 6.5 percent gain in the 12 months ended in April. Excluding food and energy, the increase was 3 percent from a year earlier, the same as in the prior month. In other "not so bullish" news, the housing starts were down 3.3% to a 17 year low...how long ago was that? Yes, back in 1991, a year we have mentioned once in a while here in these pages.
But, it seems the real news was on page one of the WSJ where we learned that the "Fed Mood Tilts Away From Rate Increase". [This may be a pay site but take a look at the paper version sure to be coming to your desk in the next, oh, week or so, June 17th.]
This article is telling the stock market not to worry about the pesky Fed raising rates until at least the fall sometime. You have been reading Here that the Fed will Not raise rates. That does Not prevent the stock market from going down, in fact more to the point, the market going down will actually insure the Fed will Not increase rates.
The other ingredient is oil and our position on oil is the same as it's been for a while--oil and the stock market go in the same direction because of the huge liquidity available that needs to be put to use somehow. It goes into commodities because the "dollar is weak"...let's not go there tonight since we have argued for some time that the Dollar has probably put in an intermediate term bottom and is now on its way up. No, not everyday, that would not allow all this talk about interest rates and oil and the stock market and how they interact.
The real losers today were the financials with C (Citigroup) and LEH (Lehman Brothers) leading the blue chip indexes lower. The Bank index (KBW as reported by the WSJ) was down nearly 4% on the day. This index was around 120 about a year ago and is now at 65. These stocks have been affected by the deep pull of their mortgage loans. All of the components were down with one, Zions Bancorporation, down over 10% on Tuesday.
Erick reminded us that the Chief at AIG has stepped down. Most people know how this works, give the guy a nice sendoff and Hope that the new guy can bring some stability to the price of the stock--does no one get that they need to tend to Business and the price of the stock will take care of itself. Well, in the taking care of itself business, AIG's stock took another dive along with many financials, this to a 10 year low.
FSI: 94.78 (up on the day but GOOG held the index back with all three other components up)