Friends
Stocks continued the rally that we have seen over that past week, although they did finish quite a bit off their highs. The Dow Jones Industrial Average was up 102 points for the day to close at 11,518, while the S&P 500 was up 11 points to finish the day at 1207. As for the Dow, we finished just below the breakeven point for the year which is 11,578. The S&P 500 moved above the 1204 resistance level early in trading and by early afternoon had made a beeline for the 1220 resistance level. 1220 proved to be stiff resistance (at least for the day) as stocks turned down right at that level. Volume through all of this has actually been rather light, but nevertheless stocks are up about 7% for the month.
It seems traders are pinning their hopes on Europe, since we have had signs that they are preparing a recapitalization deal for the banks. It just seems a little unlikely that after all this time the Europeans are going to be able to come up with a grand solution in just a couple of weeks. We’ll see, but color us skeptical. In the meantime, we turn our attention to earnings. Alcoa disappointed, but Pepsi seemed to satisfy traders as the earnings season has begun. Over the next couple of days we will get earnings reports from the banks, which will likely set a tone as to how investors feel about the financials.
If Europe is quiet for a week or two it will allow market participants to focus on earnings of U.S. Corporations. As we have seen for some time, stocks have pretty much moved in unison (“risk on” or “risk off”). Perhaps we will see a little divergence over the next couple of weeks, as traders identify winners and losers during this earnings season.
We’ll keep you informed as the week progresses. You should have received our 4th quarter outlook yesterday. Let us know if you did not and we will be sure to pass it along.
Have a nice evening everyone.
