Home About Archives RSS Feed

@theMarket: Is September's Rally Stalling or Pausing?

Bill Schmick

After opening the month with a 5 percent market melt-up, investors were expecting a follow-through this week that would take the averages higher. There was even talk of a possible break through the ceiling of this almost six-month trading range. Instead we only managed a couple point gain over last week's close on the S&P 500.

That was despite some "good" economic news on the unemployment front. Initial unemployment claims were down by 27,000 and continuing claims fell 2,000, the best in two months... The bears argue that not all states submitted employment numbers so optimistic estimates were used instead, in some cases.  They also point out that once a person's unemployment runs out they are no longer officially counted as unemployed. The advance guard of this group (those who were left go early in the recession and still have not found a job) exhausted their extended benefits beginning in June. Unfortunately, as time goes bye, more and more unemployed Americans will fall into this category well into the middle of next year.

Over in euro land things were a bit dicier with increased concerns over European debt levels, problems with Anglo Irish Bank and the "news" that Europe's bank stress test understated lender's holdings of risky government debt. Readers may recall that I had grave reservations over this very same issue when the results were first announced weeks ago.

Most of the market's attention has turned to the Obama administration's non-stimulus, stimulus plan. That some Wall Street players got an advanced look at the administration's thinking was, in my opinion, the source of last week's rally. Now that we have the details, the markets seem to be decidedly unimpressed.

As readers recall, I explained that a good portion of the money from the first stimulus plan was deliberately held back until this summer in order to help the incumbent party get re-elected. That may have been a miscalculation on the part of the Democrats, who could have been overly confident of the economic impact of Stimulus One. To date, 77 percent of the $288 billion that was earmarked for tax benefits have been spent, only 53 percent of the $275 billion available for contracts, grants and loans has been distributed and only 64 percent of entitlements, or $144 billion out of $224 billion  was doled out to the country. Obviously those levels of spending weren't enough to jump-start the economy or reduce unemployment and people (voters) are angry.

The Obama administration can read the polls as well as you or I. Since offense is always better than defense when running for re-election, the general consensus among Democrats is "we need more spending." The president's new initiatives could cost as much as $250 billion or $300 billion or slightly less than half the first stimulus plan. His agenda includes tax cuts for new business investments and R&D, $50 billion more spending on infrastructure and extending the Bush tax cuts for those Americans who make $200,000 or less ($250,000 if married).

It is not being called another stimulus plan because that might be seen as an admission that the first plan has failed. However on Friday, while addressing the nation on the economy and unemployment, the president did concede that "progress has been painfully slow." Wall Street is already discounting the package as too little, too late and they may be right. They are putting the blame squarely on the president and his party. And this country loves to find a scapegoat.

In the meantime, the markets continue to vacillate on low volume. I'm still expecting stocks to move a bit higher into the 1,130 level on the S&P 500. Only then will there be another opportunity to break out of this trading range decisively and re-take the higher ground. If stocks do succeed in breaking out, I am prepared to change my mind about my 950 S&P target level. But I'm not holding my breath.

Tags: euro, jobs, stimulus      

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Massachusetts Early Voting Runs Through Oct. 29
DIRE Committee Concerned About 'Enough Is Enough' Messaging in Williamstown
East-West Passenger Rail Study Public Meeting
Flavours of Malaysia Announces Closing In December
Mount Greylock Superintendent Succession Topic in Exec Session
Letter: MGRS Needs More Responsible Approach to Field
Great Barrington Women's Rally Attracts 200 Participants
RMV Further Extends Designated Hours for Older Customers
All Saints Episcopal Church Resumes Meal Deliveries
Pittsfield Historical Commission OKs Demos in Morningside Area
 


Categories:
@theMarket (346)
Independent Investor (450)
Retired Investor (17)
Archives:
October 2020 (5)
October 2019 (3)
September 2020 (6)
August 2020 (6)
July 2020 (10)
June 2020 (7)
May 2020 (9)
April 2020 (9)
March 2020 (5)
February 2020 (7)
January 2020 (10)
December 2019 (7)
November 2019 (8)
Tags:
Rally Pullback Metals Stocks Deficit Federal Reserve Recession Economy Interest Rates Japan Retirement Stimulus Greece Euro Wall Street Debt Ceiling Taxes Fiscal Cliff Energy Europe Commodities Currency Oil Debt Markets Crisis Bailout Jobs Stock Market Housing Election Banks Selloff Congress Europe
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Investors Reduce Risk as Stimulus Talks Fail
The Retired Investor: China Leads Global Economic Recovery
@theMarket: One way or Another, Markets Expect More Stimulus
The Retired Investor: U.S. Moves to Nail Down Strategic Metals
The Retired Investor: Halloween Could Be the Holiday Test Case
@theMarket: Markets Feel the Heat
The Retired Investor: Back to the Future in America's kitchens
@theMarket: Investors Face a Rollercoaster Ride
The Retired Investor: Bicycles Sales Are Booming
The Retired Investor: CSAs & Local Farms Make a Comeback