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Decision Time for US Investors - Money Matters for 10/18/05 Don Bravo | 10/18/05
After watching the Dow gain 60 points (mostly in the last half hour of trade) yesterday, the same index fell 62 points today. As for indicators, the Dow is supplying none, as it closed at the highs of the day on Monday and the lows of the day on Tuesday.
For real insight, we have to focus on the broader gauge, the NYSE, which gained a mere 8 points to open the week and was hammered right out of the gate today, posting a loss of 92.93 points and closing at its lowest point since July 7.
On a percentage basis, the NYSE diverged from the Nasdaq by .57% and from the Dow by .65%, a fairly large spread. This is a significant move, in light of the fact that the NYSE has outperformed both of those other indices for the past two years.
This is no piddling amount either, the NYSE outgained the Nasdaq and Dow by nearly 20% over the two years ending this month. Surely, something is in the works.
Notable is the relatively high volume of trade on the NYSE as compared to the Nasdaq and the once-again-widening gap between new lows and new highs. Simply put, the NYSE is telling the truth, while the Dow is fumbling around and giving nobody any kind of clue.
Looking back to yesterday's column, it's pleasing to note that my call on GM looks to be correct - that the gains of yesterday are soon to be wiped out. Already, GM lost .91 today, so it's already moving in the right direction.
Today's earnings reports were more of the same: mostly in line, nothing too startling. Intel reported record revenues of $9.96 billion and EPS of 32 cents. Johnson & Johnson (JNJ) reported 3rd quarter results a penny ahead of expectations at 87 cents per share. Both companies are components of the Dow Jones Industrial Average.
A block sale of more than 20 million shares of Exxon-Mobil (XOM) - the world's largest energy company - shook up investors today. A similar sale of XOM in March signaled the beginning of a dramatic stock market decline. Believers in deja va will take particular note of this development.
In what could be the most obvious trade of the day, the big block Exxon-Mobil trade was made right after weather forecasters confirmed that hurricane Wilma, now in the southern Gulf of Mexico, was likely to hit the west coast of Florida rather than the oil producing area south of Mississippi and Louisiana. Oil futures were also off significantly on the news.
Internet portal Yahoo (YHOO) reported 3rd quarter results of 17 cents per share, 2 cents better than analyst estimates. Shares were up slightly after hours, though all of the company's metrics showed significant improvement. Tomorrow's open is likely to be telling for this company's fortunes.
Overshadowing all of the trade today was the 1.9% increase in the Producer Price Index (PPI), which is a strong signal of pending inflation. More than anything else, the PPI influenced the market's downward movement today.
The market, and more importantly, US investors, have serious decisions facing them squarely now. Stocks, which as an asset class, have overall been overpriced, are either going to be sold off, held or priced higher. The likelihood of each being roughly, sell: 40%; hold 35%; buy: 25%.
It should also be noted that I forgot to post my weekly Google News watch for the word "recession" which came in at "about" 6,020 results yesterday, virtually unchanged from last week. I am of the opinion that the word will not be used much during the upcoming holiday season, and like most bad news, recession will suddenly just appear, as if from out of the blue, which, as we all know, is really never the case.
Dow Jones: -62.84; 10,285.26 close
NYSE Advancers: 918
Nasdaq Advancers: 952
NYSE New Highs: 26
Nasdaq New Highs: 47
Gold: -2.00; 474.60 close
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