Trust me. If you just look at today’s closing numbers, you won’t have a clue as to what really happened.
The market rushed out of the gate again today, in Fed-phobic fashion, rejoicing over more bad economic news in the morning jobs report - again celebrating a likely pause in / end to Fed rate hikes. The Dow soared to a gain of more than 100 points. But as the morning wore on, the reality of what the jobs number really meant and the economic weakness that was ultimately putting the brakes on the Fed began to sink in - at least that’s what it seemed like. Stocks fell throughout the day - the Dow falling to -53 at the low point - only to be propped up by some dip-buying in the last hour.
The Dow finished the day down only 2 points to 11240. The S&P 500 fell less than a point to 1279 and the Nasdaq dropped 7 points (-0.4%) to 2085. The Russell 2000 lost 3 points (-0.4%) to 701. The Dow Transports gave back 1.4% and the Utilities slipped 0.2%. Bonds had another good day, and yields done nothing but head south for over a month now: 6-month 5.14%, 2-year 4.91%, 5-year 4.83%, 10-year 4.90% and 30-year 4.99%.
Market internals were mixed, and despite the wild movement, volume came in lower than yesterday. Advances/declines were 5 to 4 on the NYSE but 8 to 11 on the Nasdaq, with up/down volume 4 to 5 on the NYSE and 2 to 3 on the Nasdaq. New highs/lows were 179/46 on the NYSE and 98/78 on the Nasdaq - keep in mind that there are a number of bond-related issues on the NYSE that skew the internals somewhat.
Looking at the groups, we see quite a bit more red than green. REITs (+1.5%) and brokers (+1.2%) led the winners, while steel stocks (-2.6%), oil services (-2.5%), paper stocks (-1.5%), transportation (-1.2%), airlines (- 1.2%) and semiconductors (-1.0%) led the losers.
Energy prices fell for a second day, with crude oil dipping 70-some cents to $74.73/barrel, gasoline falling 6 cents to $2.23/gallon and natural gas losing 4 cents to $7.25/mmBTU. The dollar took a beating, and the dollar index fell to 84.53. Gold held firm at $645/ounce and silver had another strong showing, up 34 cents to $12.37/ounce.
BMB Note: So does today’s action mean anything? I think it does. Is a short-term top in? I’m not willing to go quite that far, seeing as how there wasn’t a complete meltdown, volume was on the light side, and there still seemed to be some buyers stepping in at the end of the day. So I’m not convinced that we’re headed straight down from here, but I think we may be close to a top.
What I think is important about today’s action is this: I think the market has finally broken free of the Fed fetish. By that I mean that I believe, as of today, a Fed pause is now priced in. The bond market is now putting the chance of a rate hike next week at 18.5%. I think that a Tuesday pause now becomes a non-event, unless the Fed surprises everyone and decides to go through with a rate hike. If that happens, all hell could break loose.
Today was actually the market’s response to the Fed pause, and may be the day when the market finally stopped caring about whether the Fed was going to raise rates or not, and starting caring - once again - about the state of the economy, the potential for growth, and where inflation really stands. Where that takes us from here remains to be seen.
And if you think I sound like I know what I’m talking about, you’re way off base. I just make this stuff up.