Daily Investment Interpretations

December 1, 2010

2010-12-1 (Wednesday Night): The markets surged today on various kinds of good news. The NASDAQ Composite sprang upward 53.41 points (2.05%) to 2,551.64. The Dow exploded 249.76 points 2.27%) to close at 11,255.78, and the S&P 500 hopped up 25.52 points (2.16%) to end at 1,206.07. Oil slipped to $86.59 a barrel, and Gold climbed to $1,394. The VIX fell 2.14--about as much as it rose yesterday-- to 21.40.
    Domestically, the federal Reserve reported that the U. S. economy seems to be recovering well: Fed: It's getting better. Goldman Sachs raised its estimate for GDP growth next year from 1.9% to 2.7%: Stocks rally: Dow soars 249 points
    "
Stocks opened sharply higher Wednesday as investors cheered a batch of upbeat economic reports, including a strong gain in private-sector payrolls and better-than-expected auto sales. The rally gained momentum after economists at Goldman Sachs (GS, Fortune 500) raised their forecast for U.S. growth next year to 2.7% from 1.9%. The Federal Reserve's latest snapshot of economic conditions showed the nation's gradual recovery continued in October and November. 'There's a growing sense the economy isn't doing as badly as was priced in three months ago,' said Brian Gendreau, market strategist at Financial Network. 'All it took was mixed news to price out the double-dip recession, now we're getting genuinely good news.'"
    Some other upbeat news was Private-sector employment up 93,000: ADP  
     U.S. third-quarter productivity revised higher 
    Fed shows hand in crunch
    In How fast have the bulls run for the exits?, Mark Hulbert concludes that investor sentiment has plummeted during this current drawdown, reaching the depths it did after last April's peak. However, he also notes that the ensuing correction lasted all summer.
    The only slightly bad news was that the ISM Manufacturing Index Slows Slightly in November
    David Moenning, the founder of TopStockPortfolios, has raised the question of market manipulation: Questioning The Timing. We know that at least some efforts to manipulate markets are made, even if illegally. (The appellation "Pump-and-Dump Shop" comes to mind.) It would be very surprising if large investment banks that underwrite Initial Public Offerings didn't encourage their brokers to push their new issues with their customers. 
    Yesterday, the news was ghastly: the world as we know it was about to end. Today, the storm is forgotten, skies are blue, and the birds are singing. Today's news has been very uplifting, no doubt about it, but the markets are so bipolar, I'm thinking that whether they're rigged or not, they might as well be. Bad times will come upon us again. But Marketwatch columnist Nick Godt makes the case that the markets' willingness to rebound so sharply from such a tenebrous outlook bodes well for a Santa Claus rally: It could very well be your grandmotherís rally
    Stock futures are neutral tonight.
    I'm working intently on a lengthy treatment of money-making investment options.

    With respect to overseas affairs, Jean-Claude Trichet reprised Fed Chairman Bernanke's phrase that the Central Bank is prepared to do whatever it takes to keep the European economy on its rails: Quick Hit: Thank You Monsieur Trichet. And a U. S. Fed official was heard to say: US Ready to Support Extended EU Stability Fund. The U. S. is prepared to act through the International Monetary Fund to help Europe escape its financial quicksand. A solvent, trusted Europe is central to a properly functioning world economy.  
    Among other good news, U.K. manufacturing surges to 16-year high, and Chinaís November PMI strengthens further.
    Bolstering the U. S. markets: European stocks rally, led by Spain, and  Asian stocks reverse course to end higher.  

    The Big Picture: Is Gold Going to $4500?  This article concludes that higher gold prices are a reasonable possibility over the next year or two.