U.S. markets stabilized for the most part Thursday as oversold sectors like banks, energy and small caps were snapped-up as some bulls believed the selling was overdone. With small caps it’s likely that some short positions were squeezed.
Overseas markets remained weak. For example, China saw the largest reserve forex decline ever and equities there declined. Europe continues weak as investors fear another round of the financial crisis may occur. Stocks declined there and by way of example, Greek debt was routed. Emerging markets were also weaker with BRIC countries leading the declines.
In the U.S. there was mostly upbeat economic data as Jobless Claims fell sharply to 264K vs 290K expected & prior 287K. Some of this may be due to the shortened Columbus Day holiday. Industrial Production rose 1% vs 0.4% expected & prior -0.2%. The Philly Fed Survey fell slightly to 20.7 vs 20 expected vs prior 22.5. Unfortunately the Housing Market Index fell to only 54 vs 59 expected & prior 59. This decline reflected a large drop in traffic for homebuilders which may affect readings there.
Also much watched were comments yesterday from Fed Governor Williams that QE could be extended which was seconded today by Fed Governor Bullard that ending QE may not occur if data weakens. Further Janet Yellen is due to speak Friday and she may echo these dovish comments and markets would rally initially. But I question the Fed’s credibility, among other reasons, regarding their misreading of economic conditions.
Leading market sectors higher included: Small Caps (IWM), Banks (KBE), Regional Banks (KRE), Energy (XLE), Metals & Mining (XME), Industrials (XLI), Natural Gas Producers (FCG), Materials (XLB), Transports (IYT), Small Cap Value (VBR), Semiconductors (SMH), Biotech (IBB), Solar (TAN), Canada (EWC), Coal (KOL), Crude Oil (USO), and Commodity Tracker (DBC)
Leading market sectors lower included: Tech (QQQ), Steel (SLX), Internet (FDN), Healthcare (XLV), China (FXI), India (EPI), Brazil (EWZ), Emerging Markets (EEM), EAFE (EFA), Europe (IEV), Base Metals (DBB), Germany (EWG), European Monetary Union (EZU), Spain (EWP), Greece (GREK) and many more.
The top 20 market movers by percentage change in volume whether rising or falling is available daily.
Volume was once again quite high and breadth per the WSJ was positive.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.