- A recovery may have started Wednesday as fear hit its peak in U.S. markets.
- Big techs have already recovered most of their losses.
- There remains damage to make up, but the wind is at traders’ backs again.
On Tuesday night CNBC TV host Jim Cramer showed off a copy of the October 4, 2011 Wall Street Journal he keeps by his desk. That paper was filled with doom and gloom, over the situation in Europe, over the fall of stock prices, over the likelihood of a global recession.
But stocks went up from there. And they kept rising until a few weeks ago. It’s when everyone thinks the sky is falling, Cramer said, that the sky usually clears.
Maybe the newspaper worked. Yesterday’s action was the reverse of recent days, with buying accelerating in the last half hour rather than selling. Credit Bill Gross, former “bond guru” Pimco, now working at Janus Funds, who told investors to raise cash because the economy is “out of whack.” Again, when the experts show fear, it’s time to get greedy.
For the day the Dow Jones was up 1.82%, or 293, finishing at 16,251. The S&P 500 was up 1.83% or 35 to 1,948. The star for the day was the NASDAQ, up 2.46% or almost 114 to finish at 4,750. A private ADP survey of new jobs showed the economy gained 190,000 during August, a little weaker than the expected 200,000 but not bad. Stock markets still seem to have a bumpy road ahead, but things do look better this morning.
Tech Stocks Again In The Winner’s Circle
Big tech stocks were once again in the winner’s circle, with Apple (NASDAQ:AAPL) up 4.62% to $112.34/share, Microsoft (NASDAQ:MSFT) up 3.68% to $43.36/share, Amazon (NASDAQ:AMZN) up 2.85% to $510.55 and Google (NASDAQ:GOOG) up 2.24% to $644.91. All are still well off their recent highs (and all fell back slightly in after-hours profit-taking), but they’re getting close, with Amazon within 5% of its recent top.
On the other hand reports of building inventories sent crude down in mid-day, although speculators then recovered their long-term view that oil will rise with falling production, and West Texas Intermediate finished at $45.06, with Brent at $50.33. Oil stocks were generally up a little bit, with Exxon Mobil (NYSE:XOM) finishing up 1.6% to $73.23, and Marathon Petroleum (NYSE:MPC) up 1.63% to $46.81. Not enough to make up for the previous day’s hammering, but kind of sort of OK.
Big banks that had been hammered on Tuesday came back Wednesday, with JP Morgan (NYSE:JPM) up 1.79% to $62.55, Bank of America (NYSE:BAC) up 2.12% to 15.86, and Citigroup (NYSE:C) up 1.61% to $51.76. The financial strength of U.S. banks, buoyed by bailouts in the wake of the financial crisis, and new requirements that they hold adequate capital to meet “stress tests,” what-if scenarios based on collapsing markets, make them appear stronger relative to global competitors.
Suspicion Over China
Chinese Premier Xi Jinping came in for a roasting from western analysts, convinced that Chinese markets are being manipulated in anticipation of the 70th anniversary of their victory over Japan.
The Shanghai market’s 0.37% drop impressed no one, with the Hong Kong Hang Seng Index’s drop of 1.18% seen as a better indicator of what’s happening, with orders for both goods and services slowing. Japan’s Nikkei was closed, but Bombay’s Sensex fell another 0.95%.
Gains were muted in Europe, with the German DAX up just .32%, the English FTSE adding .41% and the French CAC-40 rising .31%. All these markets were down early in the day, going into positive territory after U.S. markets opened.
So What Happens In The Markets This Morning?
It will take time, and a lot more good days like yesterday, to eliminate the pain associated with China’s fall from grace, but that work has begun. The VIX, or Volatility Index, fell almost 17% on the day to finish at 26.09, a far cry from the August 24 spike to 50, but a long way from the low trading range of 10-15 it kept for most of the summer.
But traders expect more volatility, not less. Government job numbers for August are due to be out on Friday, and many traders get back from extended summer breaks the Tuesday after Labor Day, ready to move markets.
There will be more bumps in the road, but the road seems pointed up from here.
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