Friends
After a nice calm Wednesday, where the Dow was up a mere 4 points, this morning promises to provide plenty of fireworks and some additional volatility. Rumors in Europe once again center around European banks, and the markets around the world are lower as gold continues to rise. Until the banks in Europe have a “Lehman moment”, European leaders just don’t seem to want to deal with reality. The problem is, we are not sure how a “Lehman moment” affects U. S. banks and U. S. markets. A”TARP” and restructuring is in their future, the Europeans just don’t want to face the facts.
Domestic economic numbers are once again being overshadowed by the problems in Europe. Morgan Stanley is lowering their global growth forecasts predicting policy-induced slowdowns and a “negative feedback loop” where basically the world talks itself into recession. Never underestimate the power of leadership and positive thinking. Markets and economies are buoyed by positive expectations, and unfortunately when there is nothing but despair and negative dialogue, confidence is lost and the negativity feeds on itself. Needless to say, we could use some leadership right about now.
As I mentioned before, gold is moving up past $1800 again this morning and oil, with the expectations of global slowdown, is falling back toward $85 per barrel after rallying quite a bit in the last few trading sessions.
On the domestic front the inflation numbers measured by the PPI and CPI are a little hotter than expected and the weekly jobless claims ticked back up over 400,000. It is not likely, though a little hotter than expected, the inflation numbers will affect the Feds thinking at this point, as a slowing economy is still their number one focus. The 10 year treasury note is heading down toward the 2% level which signals that bond traders are indeed predicting a very slow economy and are not at all worried about inflation (at least for now).
With stocks looking like they will be down over 2% at the open, we will keep a close eye on things and let you know how things develop. We were expecting a test of last week’s lows before we can confidently move forward, and today may be the beginning of that test. The conditions globally as well as domestically are giving the bears plenty of ammunition today.
Boy, yesterday was such a nice quiet day. It looks like the last few days may just have been the markets centered in the eye of the hurricane. We’ll get the shopping list out again. You never know what might go on sale.
Have a nice day everyone.
