Back in August, when we experienced the first real sharp market selloff in quite some time, on our conference call and subsequent emails we opined that it is likely that we will test the lows established that week in the days and weeks ahead. It is not uncommon for markets to test support levels, possibly several times, before a solid base can be built and progress to upside made. Basically, the point is that the recent weakness we have seen in stocks, including today, is not unexpected and as we often say “part of the process”. If those previous lows hold, then perhaps the “reset” has been accomplished and a new up move can begin. If they don’t hold then more work is needed to establish a new base. Whatever the case, it is a temporary phenomenon when viewed over the life of a typical investment plan.
As for today, stocks were down right from the opening bell, and remained decisively in negative territory throughout the trading session. By the close, the Dow Jones Industrial Average was down 312 points to finish the day at 16,001. The S&P 500 was down 49 points to close at 1881. Gold was down $13 to trade at $1132 per ounce, while oil was down $1.14 to trade at $44.56 per barrel WTI.
The damage has mainly come from the biotech industry as well as commodity based industrials such as metals and mining, and of course oil. They have suffered the most from the recent decline in the market, but there are very few stocks that are emerging unscathed. Today’s personal income and outlays number showed continued strengthening in wages and salaries, and that folks are spending a little more. The pending home sales index was worse than expected and the Dallas Fed Manufacturing survey showed general activity quite negative. Hence, as we have seen for some time now the domestic economic picture, though better than most other countries, continues to be mixed. As for the remainder of the week, we will get the Case-Shiller housing price index and consumer confidence tomorrow, ADP private sector payrolls on Wednesday, jobless claims, PMI and ISM manufacturing numbers on Thursday, and the all-important non-farm payroll number on Friday. It should be a busy week. We’ll keep you informed.
Have a nice evening everyone.