In the world of investing, the outlook doesn't necessarily match
the performance. Yesterday stocks rose in the face of consumer
confidence numbers that took a drop to seven-month lows.
The index from the central Atlantic region shows that the
economy remains weak. But rather than having a negative impact on
the market, stocks rallied on the hope that the report would force
the Fed to embark on new programs to support the economy.
The health care sector led all other sectors with
) the best performer of the day. Better-than-expected earnings from
the giant drug store chain helped pop the stock for a gain of
The worst performer of the day was
), which fell 8.14% on news that its Australian subsidiary was
underperforming and questions about the company's seed
In Europe, the costs of supporting the Irish banking system
resulted in lower stock prices. The threat of another round of
ratings downgrades followed warnings from S&P that the cost to
recapitalize the Anglo Irish Bank could exceed $47 million.
Despite the Irish debt problem, the euro rose against the U.S.
dollar to $1.3571 due to a higher-than-expected increase in German
At the close, the Dow Jones Industrial Average rose 46 points to
10,858, the S&P 500 gained 6 points to 1,148, and the Nasdaq
gained 10 points at 2,380.
The NYSE traded just over 1 billion shares with advancers over
decliners by 2.4-to-1. The Nasdaq exchanged 626 million shares with
advancers up by over 2-to-1.
Crude oil for November delivery fell 34 cents to $76.18 a barrel
on worries that demand for energy products could create an
oversupply due to the falling consumer sentiment numbers. The
Energy Select Sector SPDR
) rose 39 cents to $55.45.
September gold rose to a record $1,306.60 an ounce, up $9.90,
PHLX Gold/Silver Sector Index
) closed at 199.31, up 3.79 points.
What the Markets Are Saying
Even though stocks made modest gains yesterday, a quick burst of
profit-taking reduced the impact of a late-afternoon charge by the
bulls. Low volume was again an issue and is being highlighted in
market discussions as one expert after another appears confounded
by the lack of institutional participation.
The volume issue is especially perplexing as the third quarter
comes to a close. Fund managers usually scramble to be invested if
they are underinvested causing stocks to rise at the end of a
quarter. They are sensitive to holding hordes of cash since they
are paid to achieve results in equities.
Nevertheless, upside volume is light and continues to lag
downside volume. This is troubling because the implication of
higher downside volume is that the bears are still in control and
that the current rally may be doomed to fail.
Yesterday, an article on Seeking Alpha titled,
"The Only Reason Stocks Have Rallied This
was brought to my attention by a reader in the Netherlands. It
points out that the Fed is pumping money into Wall Street through
its Permanent Open Market Operations (POMO). This operation allows
the Fed to buy Treasuries from primary dealers (Goldman Sachs,
JPMorgan, Bank of America, Credit Suisse, etc.) with interest from
maturing securities without directly issuing new debt. The dealers
then take this money and plow it into stocks, which in a low-volume
situation with few sellers and even fewer buyers creates a run on
stocks on low-volume days.
The article says the market is "being juiced higher, plain and
simple." And with other indicators negative, those who buy into
this "farce of a rally are going to get what's coming to them."
I have little insight as to the authenticity of the article;
however, the anemic volume coupled with hyper volatility is
puzzling and does appear to point to a major source of funds that
is unrealistically pushing stocks higher. It is also curious that
the current push higher by stocks this month began on Wednesday,
Sept. 15. The article points out that the Fed has usually injected
cash into the system on options expiration weeks. September options
expired on Friday, Sept. 17 … hmm.
Readers who have further insights on this or any other topic are
invited to e-mail me directly at
For a sell alert, see the
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Earnings to be reported before the opening
Actuant, American Greetings and Family Dollar.
Earnings to be reported after the close include:
Omnova Solutions, Synnex, Worthington and Xyratex.
Economic reports due:
MBA purchase applications, EIA petroleum status report and farm
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