Stocks Tank on US Worries
- Debt Commission failure diverts attention, momentarily, from Europe, but the effect is the same.
- Stocks sell hard, manage to bounce off the lows as NASDAQ holds some support, but it will take more than holding support.
- Moody’s eyeing France for a downgrade.
- US bond sale garners highest demand ever as US house is the best on a bad block.
- October Existing Home Sales 1.4%, reversing 3.2% September decline.
- Gold sells as stocks dive: liquidating for gains to offset margin calls.
- Stocks down but even so many quality stocks still holding nice patterns. Interesting carrot for the upside, but they have to show they can make the moves.
Stocks tank on US worries, but Europe is still there.
The news shifts from Europe to the US, and Monday it was back in the US’ court as the so-called and absurdly named ‘super committee’ was set to announce a deal . . . or not. Everyone knew it was the ‘not,’ but hope springs eternal, correct? Thus when the morning rolled around and the word remained that the unconstitutional committee had no agreement, the markets showed disappointment. Not that the committee could not strike a deal, but that they could not agree to $1.2T in cuts over 10 years, a measly $120B a year. At $4B in deficits per day, that is just a month of deficits per year. One-twelfth a yearly deficit is too much to agree to cut. Hell they could have cut health costs, club costs, travel costs, and congressional staffs in half and made a big dent on that number.
Or why not simply disgorge those insider trading profits from the past 20 years? If we do what they did we are in the slammer for 20 years to life. For them it is one of the perks they wrote for themselves. They want to tax small businesses making $200K to $250K per year, claiming they are ‘millionaires,’ because they have to pay their ‘fair share of taxes.’ Yet they basically steal the money in a rigged game that we fight tooth and nail through guile, intelligence, education, and moxy to achieve success. It is enough to make you want to go postal. Oh no. I can hear the Feds coming up the drive now . . .
So the debt boys cannot strike a deal. Surprise, surprise. The President showed up just in time to blame the rich for making money and not giving it to everyone else who does not. Socialism 101 once more. Pay your fair share but don’t ask Congress to cut any of their perks, the President to reduce the number of rounds of golf he plays, or just recognize that some people will make more money than others and that the free enterprise system is one where if you want to make more, then you can do it if you can. It does not guarantee success, just that you have a shot to try it. Even Jesus said there would always be poor; it was not up to the government to make sure they got what we had but for us to realize that it was our duty to help those who need help. He said it didn’t come from institutions or government, but from us. With the government in our back pocket for 60% of what we make (all taxes from federal to local, income to excise) and charitable deductions limited, it is harder and harder for us to live up to those standards. But I digress. Just bitter I suppose.
THE NEWS
The debt commission was the lead. A Moody’s threat to downgrade France’s debt rating was another issue. Let’s face it, if the US’ rating is worth downgrading France should already have been taken down a notch or two.
US Existing Home Sales rose 1.4%, looking much better than the -3.2% in September. Prices still fell 5.8% and most of the sales were distressed; this is part of the inventory liquidation, not any great surge in buying. Inventories fell to 8 months the lowest since 2005. Cancellations were high at 33%. Still tough out there. Still a market that is finding bottom, but it looks to be finding bottom.
US bonds are the toast of the town. A 2 year auction fetched a bid to cover of 4.07 versus an average of 3.32 on the past 10 auctions. Big demand as Europe implodes and the US looks as if its economy is actually trying to move upside. Hot money from Europe again moving back to the US after that last ‘deal’ from a month back shows it is illusory. Germany does not want to go forward with any bailouts. It wants the other EU countries to go through what it did many years back when integrating the east and west. Not really a surprise; the surprise was that it appeared Germany wanted to actually help the other nations out.
Despite the US good tidings, the debt commission failure loomed large. Futures were down and stocks gapped lower. Big losses in the 3% range. Then NASDAQ found some support at 2500. Oh yes, the news from a democrat member of the committee said they were going to stick with it and offer a new deal helped. It was the trigger for an oversold market to bounce. NASDAQ held 2500 and stocks cut large chunks off their lows. They did not get near positive but they did manage to pare the losses.
SP500 -1.86%. NASDAQ -1.92%. DJ30 -2.11%. SP600 -2.40%. SOX -1.9%.
NASDAQ held some support and bounced. SP500 didn’t really hold anything, indeed giving up 1200 that many are watching. The Dow bounced off the top of its range. SP600 sold into its range. Definitely a mixed bag as more and more of the indices break lower. Of course more stocks had to do the same, but many are still holding up rather well. That makes it at least interesting.
TUESDAY
Another round dealing with the failure of the debt commission and Europe. Frankly the debt commission joke will have the half life of a popcorn fart. Europe is likely to swing back into prominence. Earnings are not dead yet; HPQ announced after hours. It was up on the news and then sold off all after hours gains on, you guessed it, a weaker outlook. The back half of the earnings season, and indeed a good part of the first half, had questionable guidance. Yes those with exports as a big part of their earnings have great outlooks; those without and even some of those with, however, don’t look great.
That leaves the market with still a big problem. Europe and what is escaping many right now, the US economy in 2012. I note that Monday Barton Biggs said the US was going to experience recession again in 2012. Another one of the smart ones I would say . . .
Stocks are struggling. Some are fine. Many gapped lower and showed some strength at support. So . . . perhaps an oversold market gets a bounce. Some of these strong stocks will make good upside plays, more like trades, in this market. We are going to look at those. The downside is a bit stretched right now and we want to make money if it is there for the taking. So we look to play these stocks upside, those that give us a good return in just a bounce. Then if the market cannot be a ‘show me’ market and hold the move, we have to look for more gains downside a la AMZN, WYNN, AAPL, SINA, etc.
