MARKET WRAP – RUNNING SCARED BEFORE HALLOWEEN
Investors were running scared this afternoon as comments from Wilbur Ross & Carl Icahn spooked investors about the state of the commercial real estate markets. Investors were also piling out of the risk trade as the dollar reversed course on weak consumer data. The market finished the day down 2.8%. Daily futures has the action from all markets:
U.S. Economy
The U.S. Commerce Department said that personal incomes were down less than .1% in September while spending was down .5%, roughly as expected. The December S&P 500 is trading lower, just one day after a positive third-quarter GDP report.
The University of Michigan’s index of consumer sentiment fell from 73.5 to 70.6 in October, a little better than expected. The December 2010 eurodollars closed up .11 at a new contract high of 98.46.
The National Association of Purchasing Managers said that its Chicago index increased from 46.1% to 54.2% in October, the first sign of expansion in over a year.
Grains and Cotton
Rain continues to hammer the Midwest in a line from Michigan to Louisiana, making the harvest difficult. The ten-day forecast, however, looks drier overall. December corn fell 13.5 cents to $3.66.
Earlier this week, the USDA said that 76% of the winter wheat crop was planted, slightly behind schedule. Recent rains are likely giving the crop a good start at a time when there is plenty of wheat already available in the U.S. December wheat closed down 9.5 cents at $4.942, pressured by today’s stronger dollar.
Livestock
Its been a tough time for the cattle industry. R-CALF USA, representing independent cattle producers, sent a letter to the White House, asking for help. They said, “The losses to U.S. cattle feeders continue and are compounding rapidly. Those remaining in the cattle feeding business are becoming fewer and fewer each day.” December cattle closed down .60 at 85.67.
After the close, the USDA estimated this week’s beef production at 518.9 million pounds, up 4.0% from a year ago. Pork production was estimated at 463.9 million pounds, down 3.5% from a year ago. December hogs finished down .50 at 56.70.
Lumber
It looks like yesterday’s GDP report triggered some short-covering in lumber. January lumber was up $8.50 at $211.00 after yesterday’s limit-up close.
Housing starts in Japan were up 3% in September, but down 37% from a year ago.
Energies
December crude oil fell $2.87 to $77.00, giving back yesterday’s big gain from the positive GDP report.
Metals
December gold closed down $6.70 at $1,040.40 with growing concerns about the economy’s ability to keep recovering.
Currencies
Japan’s Statistics Bureau said that the unemployment rate improved from 5.5% to 5.3% in September, the best in four months. Also, consumer prices were down 2.2% in September from a year ago. The December yen jumped up .0185 to 1.1113, the highest close in two weeks.
The Bank of Japan also said that it would stop buying corporate debt by the end of 2009, a sign that things are getting better.
Statistics Canada said that real GDP was down .1% in August and down 4.0% from a year ago, weaker than expected. The December Canadian dollar fell 1.17 cents to 92.62, the lowest close in nearly four weeks.
Eurostat said that the unemployment rate in the EU-27 inched up from 9.1% to 9.2% in September, the highest rate since the data began in 2000. The December euro closed down 1.18 cents at $1.4726.
Germany’s Federal Statistics Office said that retail sales were down .5% in September and down 3.9% from a year ago.
Source: DF
Thinking that the market would pull back a bit before surging up the mountain again – I tried a small long position. That didn’t work out so well – good thing tight stops were play. Holy cow.
Now we have a nice white candle sandwich on the daily SPX charts and what looks like a red doji on the monthly.
I am still the lion in the grass. I can wait here for months before I pounce. Wait and see mode for me….
Yep – ominous signs – fitting for Halloween.
SPY, DIA, QQQQ all got big red candles on high volume. Best to wait and see.
AFter yesterday jump, i’d expect some pull back, not a 100 tons wrecking ball. And not sure what is the exact catalyst for today horrendous hit.
According to briefing
“There wasn’t any immediate cause for this session’s decline, though some market watchers point out that stocks have had an increasingly difficult time of climbing higher since making their strong runs in recent months. Others have pointed out that there may be some month-end portfolio rebalancing and window dressing accounting for the recent whipsaw trade”
This part from bloomberg which is amusing. CIT, the last couple times of almost bankrupt didn’t do anything to the market. Now suddenly it does??
“By Rita Nazareth
Oct. 30 (Bloomberg) — U.S. stocks tumbled, ending a seven- month streak of gains for the Standard & Poor’s 500 Index, as declines in consumer confidence and spending and the threat of a CIT Group Inc. bankruptcy raised concern over the durability of the economic recovery. The dollar and Treasuries gained, while commodities retreated. “
There was a lot going on today. The weak consumer data in the morning, the McTeer comments, the Ross and Icahn comments, the Mayo comments on Citi.
Plus there was the whole agreement that yesterday’s rally on the GDP was just overdone.
The bears are now back in control short term. Over the next couple weeks,I think the market keeps fighting back and makes repeated attempts to break to the upside. Expect more one-hit-wonder days like yesterday with a couple big up days off oversold, increasingly negative sentiment. I think bears are emboldened and will beat down bull advances. Still think this mini correction sets us up nicely for a last hurrah rally towards the end of the year that takes us near or past recent highs. The real down leg won’t start until we get into 2010 and i think it will be ugly.
I’m guessing that with the earnings season winding down and the posting of a positive GDP, investor focus and expectations have changed. Looks like we got the bounce from earnings and now investors are looking at economic news to confirm that the recovery is on track. Effectively, the bar has been raised and “less bad” (except declining layoffs) is no longer good enough (the posting of a positive GDP is the trigger for the change in expectations).
Next week some major monthly economic statistics come out. The safest thing to do was to take profits on Friday and not wait to see whether the reports will confirm that the expansion is “expanding”.