A Wild Day on the Street
Aug 2, 2011
Posted by Jody Eisenman | Filed under Uncategorized
As I wrote last week, “It seems likely that the market will continue to drop absent a deal.”
The stock market continued its fall on Thursday and Friday. Over the weekend, it became known that Congress had finally reached a deal that would prevent the US from a debt default. As such, the Dow futures were up somewhere between 150-180 points before the opening. Unfortunately for the bulls, this rally less than half an hour before selling took hold. The selling accelerated on a very weak ISM (Institute for Supply Management) number. Coming on the heels of a revision to GDP growth of an anemic 0.8% for the first half of this year was all the fuel the bears needed. By noon, the market had not wiped out all its gains, but was actually down 140 points. This action was very reminiscent of when the TARP plan passed. However, by the end of the day, the market rallied again to finally close down about 10 points on a wild day.
Although it would appear that this bill will pass both houses of Congress and be signed by Obama, there is still a lot of skepticism. Many people (myself included) just believe that we are merely “kicking the can down the road”. The spending cuts are not all that deep, and most of them don’t take effect for years. By then, who knows what will happen? In addition, it is now apparent to all but the most optimistic that the economy is really not recovering, fueling fears of a double dip recession. In any case, stocks have now fallen for seven straight days. Although today’s action was poor, I believe we are at least short term oversold, and would look for some sort of rally soon. Of course, any unexpected event could change this picture quickly.
