Another week passed and another affirmation came that the stock market loves dependence. The Scottish electorate reportedly voted to remain tied to Great Britain. The FOMC, after over five years of grotesque meddling in the economy, indicated its continued commitment to do all that is necessary to prop up the illusion of a recovery. The result: stocks soared to record highs. Despite their rhetoric, here’s an interesting article with an argument for why the Federal Reserve will raise rates.
In Asia Monday, stocks rose 0.7% but in Europe and the U.S. they moved little on low volume. The Dow Jones Industrial Average managed to climb above the 17,000 level though as the broader indices fell. Tuesday, stocks fell in Asia 0.4% and in Europe just slightly. In the U.S. though, they roared upward 0.7% on low volume — perhaps in reaction to a statement by Jon Hilsenrath related to likely dovish wording of the statement from the FOMC Wednesday afternoon. The VXO plummeted nearly 11% to close at 11.19 while the Dow Jones Industrial Average managed to register another all-time closing high.
Wednesday, stocks in Asia and the U.S. changed little on low volume, but in Europe they gained 0.4%.
The FOMC statement did turn out as dovish as could be expected as predicted the previous day. Precious metals lost about 1% while their miners declined about twice that amount. Despite the lack of movement of stocks, the Dow Jones Industrial Average logged another all-time closing high and the S&P 500 Index bumped up to close above the 2000 level again.
Thursday, stocks fell in Asia 0.6% but rose 0.9% in Europe. In the U.S. stocks rose 0.5% for no particular reason. For good measure, the Dow Jones Industrial Average and the S&P 500 Index both closed at record highs again.
Friday, stocks in Asia rose 0.6% and in Europe 0.3% as the voters in Scotland chose to remain under the thumb of Great Britian rather than be an independent country. This sad result was considered a positive for the stock markets since change breeds uncertainty. The other news of the day was that Alibaba’s IPO was a smashing success. While volume was three times normal, considering it was a quadruple witching day and the Alibaba IPO, this volume was rather anemic. Despite the positive news, stocks fell in the U.S. 0.3%.
Precious metals and their miners declined nearly 3% as silver in particular was hammered hard. With gold nearing the $1200/oz level and silver well below $20/oz, precious metals and the stocks associated with them should be back on the radar screen. Keep in mind though that the 2008 crash took these metals and their stocks far below even current levels. If they were to fall another 30%, they would be to me a screaming buy.
For the week, we saw quite a bit of divergence as the Dow Jones Industrial Average set multiple all-time closing highs. The S&P 500 Index rose 1.3%, but stocks in general rose about half that amount. Fear fled the scene with the VXO falling 15% to close at 10.19.