U.S. stocks tested 11,000 on the Dow Jones Industrials again. Successfully again.
The Standard & Poor’s 500 Stock Index and the NASDAQ Composite index held near last week’s lows of 1150 for the S&P 500 and 250 for the NASDAQ.
All in all a reasonably promising day, April 28, for U.S. stocks.
Can’t say the same for the rest of the world’s markets.
Stock prices in Greece, Italy, Spain, and Portugal completely broke down today, according to Arthur Hill on StockCharts.com. The Dow Jones Greece Index (GRDOW) first turned down in October, so nothing terribly surprising in today’s further decline. But after turning negative in January the Dow Jones indexes for Portugal (PTDOW), Italy (ITDOW), and Spain (ESDOW) have all turned even more negative in the last few weeks, according to Hill. While the FTSE Eurotop 100 Index (EUR) was making a new high in April—thanks to stocks from Germany, France, and the Netherlands—stocks in Greece, Portugal, and Spain were making lower lows. (Italy has held up relatively better.)
Stocks aren’t doing any better in some of the world’s biggest emerging markets. China’s Shanghai Stock Composite Index continues to fall. In the last three weeks says Hill, the index has broken below its trend line and has fallen below support at 2900. The low on the index today was 2865 although the index managed to rally and close at 2900.33.
Stock markets in other big emerging economies didn’t do much better. India’s BSE Sensex 30 Index was down 1.76% today. Brazil’s Bovespa managed a 0.22% gain but I’d be surprised if the market holds up tomorrow. Brazil’s central bank is widely expected to announce the first interest rate increase in South America.
In the next few days I’ll be looking to see if uncertainly and falling prices in Europe and in emerging markets work to support U.S. stock prices (as the best of the bunch) or if fear proves contagious.
If I had to bet, I’d bet on the latter.
Obama’s new Fed appointees really worries me. You know all politicians want to inflate their way out of their ridiculous spending and don’t want to face the pain.
Jim,
Can you comment on the HPQ acquisition of Palm? The talk is that it may affect several of the stocks on your “Picks List”.
Apparently HPQ wants to enter the smart phone business and try to keep up with Apple. They are interested in having their own OS for this as well as for their new Slate (an iPad type device). They were going to partner with GOOGLE and run Android or maybe Chrome but that is out now. They have partnered with MSFT in the past and continue to partner but they are tired of waiting through the long development time for MSFT software (Windows Mobile 7 is not coming out til the end of the year). So this is not good for MSFT but is worse for Google whom some companies feared was in danger of becoming a monopoly. On the other hand the success of this merger would help QCOM and other chip makers. Does this change your sell call on QCOM?
Do you feel RIMM may be next? The new Blackberry 6 is suppose to be “spectacular” and capable of giving Apple a run for their money. But this is a much more expensive buy at a current share price of $71. HPQ was able to pick up Palm on the cheap and has people on the hardware side that are excellent at execution. HPQ stock may be a buy here on weakness.
Liz Ann Sonders says the US stock market is the place to be for the next few months. US corporations have cash and are reporting good profits and US economy is showing signs of recovery. As Ed notes it looks like the Fed is stacked to “keep the punch bowl full” for awhile longer. Smaller EMs that have commodity based economies that have done very well in the recovery may flatten out as their major customer, China, tries to cool its real estate market. I agree with Jim that we may see panic selling with any bad news. I’d be scared too if I was leveraged 50-100X like some of the self described “market makers”.
For what it’s worth, GLD does seem to move historically well with the price of gold. I can live with that.
Yeah, I would be a lot more comfortable holding it if I knew for a fact that the shares were backed by at least 75% bullion but I don’t trust bankers and there is so much smoke around the situation I am afraid there might be a fire at some point. With GDX I know exactly what I am holding (Although the miners make me crazy with their swings 🙂
dmat911,
From what I saw on the 12/31/09 GLD statement, it looks more like 75% of the GLD shares, based on NAV. Not perfect, but still pretty good.
Just in time to support the old adage, “sell in may, and go away.”
Ed,
I too am overweight gold but from what I can read of the situation GLD may only hold 1 oz of physical gold for every 100 oz equivalent of GLD shares.
Long GDX.
An important news story that has been buried under the avalanche of Europe and Goldman news: Obama is set to appoint three new board members to the Federal Reserve board today.
As covered by the WSJ back in this March story: http://online.wsj.com/article/SB10001424052748704131404575117713818507390.html
Expect the three new board members to be inflation doves, meaning we can expect low Fed rates for some time to come.
If you don’t already have exposure to gold in your portfolio, I would urge you to add some immediately. I’m partial to GLD.
Knee jerk, Volitility index, and sell the news are some of the phrases I’ve seen and heard talking heads and columnists bat around since the recession was declared “officially over”. Investors here in the US, although more money is being put to work that was left on the sidelines, still are tenuous and are somehow not completely sold on the market.
I think they (we too who read this comumn and others like it) see the handwriting on the wall. The handwriting goes something like this: US get your financial house in order before cancerous debt issues kills our rating, our market, our standing in the world like it has in Europe.
This global recession we’re in has effected all markets…ours not as bad…not yet. How much time? Don’t know.
Short term…I bet VIX going up. Fasten your seatbelts, it’s gonna be a bumpy ride!
Bought IDX and TUR during the beginning of the year correction. Went up a lot since then.
You suggested Turkey (TUR) and Indonesia (IDX) awhile back and though they never made your watch list they have been holding up quite well.
Europe needs to stop screwing around. In spite of all the negative blow back about the US’ bail-out of financial institutions. Paulson and Bernanke bit the bullet and saved the US and world economies from the next great recession. What do the Germans and the French think? The rest of Europe will go down the tubes and they won’t suffer any consequences?
Just like the US, they need to hold their noses and stop the bleeding. They can always punish Greece later (ala Goldman Sachs?) once they’ve avoided the 2nd potential great depression of 2009/2010.
Their bailout of Greece, Portugal. Spain, Italy, etc. needs to be massive and unequivocal. And it needed to happen yesterday. Likewise, in our own self interest, the US and China too? need to advocate for a much broader and deeper effort.
Jim, RBA didn’t make it to your sold list. Is it possible to put it there? Thanks.
FROM WHAT I READ IT SEEMS ISRAEL WILL HAVE TO START AND FINISH A BIG MILITARY ACTION BEFORE THIS NOVEMBER. WHAT ARE YOUR INVESTMENT IDEAS FOR AFTERWARDS IN ISRAEL. ( I.E TEVA, CEL,PNTR, ETC)