Breakout, Or Bear Trap? - Markets This Morning

  • Stocks ended the month on a high all around the world.
  • This did not make up for the gloom of a very bad month.
  • Uncertainty is the watchword for today, the start of a new trading quarter.

Stocks rose around the world yesterday, which could mean the bear market is over. Or, as some warned, it could just mean that mutual funds stopped selling in anticipation of the end of the quarter, and that normal, downward service will resume this morning.

Markets started strong, fell from 11 am through the noon hour, then resumed their advance, finishing near the highs of the day. The Dow Jones Industrial Average (INDEX:INDU) wound up rising 235.57, to 1.47%, to finish at 16,285 and that was the worst performance among the major averages. The S&P 500 (INDEX:SPAL) rose 35.95, 1.91% to 1920. The Nasdaq Composite (INDEX:COMPX), which has been hit hardest in the latest downturn, came up the smartest, rising 102.84, or 2.28%, and finishing at 4,620.

The World Rose As One

The Nikkei gave permission for stocks to rise during its session, rising 2.70% on hopes for more stimulus from Prime Minister Abe. China was relatively quiet, the Shanghai average rising .48% and the Hang Seng in Hong Kong 1.28%, with Mumbai up 1.48%.

Europe kept the party going, with the German DAX rising 2.22%, the French CAC-40 rising 2.57% and the English FTSE 100 going up 1.91%. Against all that, the Dow’s rise was practically black coffee.

Still what all analysts emphasized, around the world, was that the day’s gains were not enough to make for a terrible, horrible, miserable and very bad quarter for the world’s stock markets. The same problems that existed on Monday – low commodity prices, worries about China, and the Volkswagen (OTC:VLKAY) scandal – will also exist today.

Commodities: Good Day, Bad Month

Commodity prices had a good day, with West Texas Intermediate oil up .71% to $45.41. But it finished the month down 5.83% and remains mired below replacement costs.

The piper is going to be paid. Arabs are raiding their rainy day funds, and Texas oilmen are looking ahead to some hard meetings with their bankers. Their equity may be watered down, if they’re lucky, in swaps for debt, or they could be taken out entirely, merged into larger entities for pennies on the 2014 dollar.

Carl Icahn tried to show confidence by raising his stake in Cheniere Energy (NYSEMKT:LNG) and giving a TV interview where he predicted financial gloom if his bets don’t come back. He didn’t get a lot of sympathy.

So What Went Up?

In general, what had fallen hardest earlier in the week got the best gains yesterday. Amazon (NASDAQ:AMZN), a $540 stock last week, gained $15.80 or 3.14% but still finished at just $511.67. Facebook (NASDAQ:FB), which started Friday near $96, was up $3.23, or 3.73%, but still finished at $89.90. Drug maker Allergan (NYSE:AGN) was up $19.71 on the day, a whopping 7.82%, but those who bought at $290 last week are still out of the money – it finished at $271.81. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) rose $15.76, 2.53%, to $638.37, but on Friday it was trading at $650.

Apple (NASDAQ:AAPL), the largest cap stock in the world, typified the ambivalent action. The company is becoming an enterprise player, but doesn’t that mean it’s going the way of Microsoft (NASDAQ:MSFT)? The company is getting both sales and production savings out of China, but doesn’t that mean it’s tied to China?

Thus the shares started strong, and rose to what turned out to be the day’s high of over $111 by mid-morning. Then it lost nearly all those gains by 12:15, and began a long sideways slide – it was actually down for the day at 2:30. Then the bargain hunters arrived and it rose to its closing price right near $110.

So What Happens Now?

This morning is the start of a new quarter. October is usually a good month in financial markets, except in years of sheer panic like 2008, and there will be hopeful faces walking into offices. But it’s anyone’s guess how they will feel when they go home.

For a quick roundup of key news and events before the bell, check the daily news section - Markets This Morning.

Dana Blankenhorn Dana Blankenhorn   on Amigobulls :
Author's Disclosures & Disclaimers:
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  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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