Not only did the highly anticipated September swoon never come to fruition, the stock market surged to historic proportions.
U.S. stocks defied expectations all month to register their biggest September rally since 1939 and best quarterly performance of the year. The Dow Jones Industrial Average rose 7.7% in September, traditionally the worst month of the year for equities. All of its 30 components rose this month, with Caterpillar Inc. (CAT), Alcoa Inc. (AA) and Home Depot Inc. (HD) powering the Dow’s gains.
The Dow rose 773.3 points during the September surge, its biggest monthly point gain since October 2002 and fifth-best September ever, while also pushing the blue-chip index into the black for 2010. The index is up 3.5% this year. Of the previous 68 years when the measure was up after three quarters, it continued to rise 71% of the time and ended the year in the black 94% of those years.
September typically isn’t a kind month for equities investors. Excluding 2010, the Dow, over its entire history, has averaged a 1.2% drop in September and has fallen 58% of the time. But this marks the second year in a row and fifth out of the last six in which the index has posted positive returns.
The outsized gains have been largely attributed to a plethora of improving economic data that have coincided with a decline in chatter on potential double-dip inflation. Widespread expectations that the U.S. Federal Reserve is prepared to pull the trigger on additional stimulus measures have also propped up the stock market.
“All we needed was the economic data to stabilize and the Fed to raise their hand and say, “Not on my watch,’” regarding deteriorating economic conditions, to prompt the rally, said Barry Knapp, head of equities portfolio strategy at Barclays Capital.
US stocks close out a big September with a whimper, dropping modestly amid some tepid signs on the economic front.
DJIA slips 47 to 10788, but gains 7.7% for its second-best September ever, and 10% in the 3Q. S&P 500 eases 4 to 1141, Nasdaq Comp loses 8 to 2369. It was a good quarter for gold (up 5%) and other commodities, but not for the dollar, which got beaten like a rented mule. Crude rose 5.7% this quarter, up more in percentage terms than gold, although it didn’t seem to rise very much. Currently just under $80/barrel at $79.97. We wonder what’ll happen if crude starts taking off.
Jobless claims fall, and GDP gets revised higher, but the numbers still point to a weakened, struggling economy. Moving into the fourth quarter, and the big holiday selling season, the economy is growing, but not enough to overtake the economy’s problems.
On a housekeeping note, we’re moving this site over to an a new platform overnight. It should be seamless and you shouldn’t have any problems, but if you do, you know why.
Posted by Paul Vignaon September 30, 2010 Markets, Washington /
Comments Off
I meant to highlight this earlier this week, but just got caught up in all manner of other things. Still, this week’s must read is Barry Ritholtz’s post at The Big Picture, “The Left-Right Paradigm is Over: It’s You Vs. Corporations.” Ritholyz says the old left-right split, a clear fault line since the heyday of Abbie Hoffman, has been replaced by a new fault line. If you’re a CEO, you may want to avert your eyes:
We now live in an era defined by increasing corporate influence and authority over the individual. These two “interest groups” – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power. The individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.
This may not be a brilliant insight, but it is surely an overlooked one. It is now an individual vs. corporate debate – and the humans are losing.
Everybody plays this left-right split like it’s Monday Night Football. We cheer and root for “our team” to win, win elections, win debates, just win. The right has a rally in Washington. The left has a rally in Washington. All the problems in the world are seen through this prism and the other side is always at fault. It’s an easy, familiar split, something even media pundits can grasp.
But that left-right split is just not the important one anymore. It’s not the fault line that matters.
Time to wave our geopolitical-risk warning flag once again, as the Dow Industrials aim to finish the month up about 8% and seem to be itching to soon summit the 11000 mark again.
As we’ve pointedout a number of times during the past 15 months or so, investors here in the US have been so absorbed by our own domestic economic melodrama that they’ve paid little or no heed to potential threats from overseas.
Sure, we had that brief nervous breakdown in the spring when the Euro-zone looked as if it might crumble, but otherwise there hasn’t been so much as a whiff of geopolitical risk priced into stocks, for a long, long time.
But the risks are clearly out there. The latest to stir is increased tension with Pakistan after a NATO helicopter attack killed three Pakistani border guards.
Our fight in Afghanistan against the Taliban and al-Qaeda isn’t going too well, partly because our enemies there tend to operate with impunity just across the border in Pakistan, and are able to move back and forth without much hassle from the Pakistanis.
So, hmm, looks like that stellar September is getting a little clipped here today, but regardless stocks staged an impressive rebound in September. You can, and should, question its real sources and how long it will last, but right now, it is what it is.
Still, the data this morning weren’t exactly supportive, and you wonder if at some point the market will succumb to plain old reality.
Gone are the cares of life's busy throng, Beautiful dreamer, awake unto me.
If you ever needed proof that the market believes what it wants to believe (not that you don’t get it on a near-daily basis anyhow,) today would be one of those Exhibit A kind of days.
The futures are pointing to a solidly “up” opening, with Dow futures up 53. They were lower before 8:30 a.m. when a couple of data points hit the tape. Must’ve been some bang-up data to spark a rally, right?
Er, no.
Initial jobless claims slid 16,000, to 453,000. This was greeted as good news, but it’s really no news. Initial claims have been stuck at roughly this level all year. It’s good only in that it didn’t move higher, back toward the recent high of 500,000. That 453,000 level indicates no improvement in the jobs market. Additionally, another 250,000 some-odd folks fell off the edge of the proverbial cliff, i.e., they exhausted their last batch of emergency claims and are now on their own. How many of them do you think found jobs? Add some bodies to the 99er wood pile.
Then there was the GDP report. This was the third estimate of 2Q GDP, which used to be called the “final” estimate, but the BEA changed the language on that recently; there is no final reading on GDP anymore. Anyhow, the latest is that GDP rose 1.7% in the second quarter, a tick higher than the second estimate of 1.6%. That is a negligible change. There wasn’t anything in those reports worth getting excited over.
But regardless, the stock market’s in full-on, heads we win, tails we win mode.
Premarket bias is slightly lower for stocks, European markets are down a little and Asian stocks were mostly lower overnight.
Euro’s still sturdy, recently at $1.364as the dollar continues to sell off. Economic data calendar begins to heat up, with weekly jobless claims and a third look at 2Q GDP both due at 8:30am ET. Chicago PMI set for 9:45am ET, and Bernanke scheduled for some testimony on Dodd-Frank around 10:00am. Kansas City Fed’s Sept manufacturing survey due at 11:00am.
Gold still pressing higher, oil also up. S&P futures down 2.60; 10-yr note higher, yield at 2.47%.
Should be interesting to see if stocks adhere to the bad-news-is-good-news mindset if we see more ugly data today. Considering comments yesterday from Philly Fed’s Plosser, it may be overly presumptuous to expect QE II on weak economic data alone. As a weapon, QE will only be effective on deflation.
Conversely, if the data today is better than expected, should we expect stocks to selloff on lower expectations for more QE?
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]
Not only did the highly anticipated September swoon never come to fruition, the stock market surged to historic proportions.
