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No Follow Through for Stocks; Commodities Soar - Money Matters for 10/25/05 Don Bravo | 10/25/05
A day after the markets posted the best gains in six months, investors apparently were content to let their money sit a while, as the markets played below the unchanged line most of the day. Losses on the major indices bottomed out around 2:00 in the afternoon and perked up into the close.
Much of the temper on Wall Street was colored by the Conference Board's Consumer Confidence survey, which was down again, checking in with a reading of 85.0, lower than last month's revised 87.5 number, which was a shocking drop of nearly 20 points. Since the survey is comprised of opinions of 5000 households, there isn't any hard economic data involved, but it the survey does provide an overview of the mood of the average American consumer. By this gauge, Joe and Jane Sixpack are not happy campers and aren't very optimistic about the future.
Along with this sorry report, oil and natural gas prices rose sharply, once again raising fears that high energy costs could derail the economy. At the same time, bond yields rose, dealing a double dose of inflation shock. That the markets didn't react completely negatively was somewhat of a surprise, though little is surprising about this market which continues to act like a bear with some dead-ender bulls hanging on for dear life.
The advance-decline line was strongly in favor of the bearish argument and earnings reports were non-eventful, though a smattering of poor reports by the likes of Texas Instruments, American Express, Daimler-Chrysler and even British Petroleum did little to alleviate the dour mood.
Along with the gains in crude, gold and silver shot higher, as they should, if more price inflation is in the cards. Investors have now gotten themselves into a serious bind. Stocks are not cheap, but they certainly are risky. While corporate profits have been less-than-encouraging, the signs for a wholesale sell-off are beginning to set themselves into place.
The Dow continues to trade below its 50 and 200-day moving averages, while the NYSE and Nasdaq vacillate between theirs. Earnings haven't moved the markets and the A-D and new highs vs. new lows indicators are all trending downwards. Economic reports have been discouraging, as have the recent hikes in the prices of oil, gasoline and natural gas.
The market sorely needs a catalyst, though the only potential seems to be one which would encourage a massive sell-off. With the leaves falling and the political situation contentious, one could easily be led to believe that a political event - yes, I'm talking about the investigation by Special Counsel Patrick Fitzgerald - could turn things very ugly, very quickly.
Dow Jones: -7.13; 10,377.87 close
NYSE Advancers: 1284
Nasdaq Advancers: 1221
NYSE New Highs: 56
Nasdaq New Highs: 74
Gold: +7.70; 474.70 close
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