Do the Market Dance
by Jamie Dlugosch 01/30/09
Jamie Dlugosch takes a look at the hottest topics to keep an eye on throughout the day.
Two steps forward, one step backward.The market took a big step back yesterday after a nice rally the day before. Yesterday concern grew throughout the day that the government and its various plans to aide the economy may do more harm than good.
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Are we spending on the right things? Will a bad bank/good bank only reward those that got us into this mess? Does any of it really matter? With no easy answers and very little clarity traders do what they do when in the dark and that is to sell stocks.
The Dow opened down in triple digits and stayed there for most of the day. At the close the Industrial index finished the day with a loss of 226 points. The technology heavy Nasdaq and the broader S&P 500 were down more than 3%.
There were very few bright spots in the market. Banks and financials led the way lower with big profit taking of substantial gains made the day before. The spotlight now turns to the GDP report.
Today we get a first read on how bad the fourth quarter really was. The number will drive trading the entire day.
Oil prices dropped in concert with stocks, but the losses there were not as bad. Crude slipped below $42 yesterday having been down testing the $40 level earlier in the day. The U.S. is awash in oil. Storage tank levels are up some 15% versus levels a year previously. OPEC production cuts are helping keep that excess from growing, but more needs to be done to prevent oil slipping to $30 or lower.
The pipe dream that the U.S. economy will begin gaining steam this summer is just that: a pipe dream. OPEC's secretary general was out with a statement saying that cuts by the cartel appear to be working, but that more cuts could come if needed. It was a weak statement, but a start.
As I mentioned yesterday I do think that the cartel is hoping for a reduction in stocks due to the summer use season coming around the corner. February and March will be interesting months. We might not get a cut until April although anything could happen. Oil prices are up slightly this morning.
Global stocks were mixed overnight. Japan was a big loser on poor economic and earnings data. The Nikkei lost 3.1% while Hong Kong managed a slight gain. In Europe stocks there were treading water waiting for the U.S. GDP number to provide some direction. Britain was up a fraction while Germany and France were down slightly.
