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3:00 Sell-off Erases Earlier Gains - Money Matters for 12/6/05
Stocks were sent soaring early today as revised productivity information boosted spirits on Wall Street against a backdrop of uncertainty regarding December retail sales and interest rates.
By 3:00, however, the euphoria had waned and the markets gave back most of the advances made earlier in the day. The Nasdaq was especially hard hit, losing 20 points in the last hour after having been up by nearly 25 earlier.
The Dow dropped 80 points in the final hour of trading as investors took profits and technical indicators prompted most of the selling.
US markets were boosted near or beyond 52-week highs, but could not maintain the highs in what looks like the last gasp of 2005 for stocks. With less than 20 trading days left in the year, hopes for a Christmas rally are pinned to retail sales as the days dwindle down toward the holiday.
Both Target and Wal-Mart have recently made announcements that December forecasts will be met. Target expects same-store sales to come in at 4-5% above last year, while Wal-Mart is looking for 2-4% growth. The paucity of these predictions is not enough to instill great confidence in the markets overall, especially with the overhang of the FOMC meeting a week from today, on December 13.
Adding to the skepticism is the up-and-down movement in both crude oil and natural gas futures, both of which have spiked higher this week after a period of some consolidation. Crude was back over $60/barrel today before closing slightly below that benchmark, while natural gas has been consistently flitting round the $13-14 level, some of the highest prices for home heating fuel ever seen.
Consumers aren't exactly shocked at the gas pump and they've yet to see huge increases in the costs of heating their homes as November bills are just arriving in many Northeastern locales and the weather for the month was on the moderate side. Relatively tame prices for gasoline and a non-shocking November heating bill should allow consumers to spend with some abandon this holiday season, though analysts aren't expecting bang-out numbers from retailers.
Meanwhile, gold and silver continue to drive forward, with both metals trading at new highs again today. With the Fed showing no signs that they will forego another .25% interest rate hike next week, expect the metals to maintain their strong positions at least into the first few months of next year.
What today's selling in the final hour tells us is that investors aren't exactly sure about anything, especially the outlook for 2006, which remains stoic and clouded. An unexpected boost in retail sales over the next week to 10 days could unlock some tepid buyers and force stocks to new highs, though there aren't a lot of people betting on that at the moment.
More and more, it looks like the markets won't be able to launch another rally this year, having already done so from mid-October through the end of November.
Dow Jones: +21.85; 10,856.86 close
NYSE Advancers: 1795
Nasdaq Advancers: 1625
NYSE New Highs: 221
Nasdaq New Highs: 206
Gold: +1.20; 513.80 close
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