Does it feel to you like it does to me that the stock market is beginning to come unglued? A flood of negative economic news seems to be finally taking its toll, even on the giddy Wall Street crowd. The S&P 500 Index lost 1.4% for the week, the VXO fear index rose about 18%, and the capitalization leader, Apple, declined 4.7%. With IBM bumping up against multi-decade highs, we can be assured that stocks have a very long way to fall.
For the quarter, stocks rose about 8% while fear (VXO) tumbled 28%. Interestingly, just 2% of that stock market rise happened in September. That’s somewhat remarkable given that the QE-infinity declaration occurred this month. Precious metals, on the other hand, did respond to the commitment to inflate, rising 19% for the quarter and about 10% for the month.
Weekly Review
Monday, stocks fell in Asia 0.5% and in Europe 0.3%. AAPL dropped over 2% to close below $700 again while FB dropped 7.5% in response to a negative article in Barron’s magazine. U.S. stocks edged down 0.2% on low volume. Reports came in that counterfeit gold bars have reached our shores, but ultrasonic scanners can easily detect fakes.
Tuesday, stocks in Asia followed the previous day U.S. decline, closing down 0.2%. In Europe, stocks advanced 0.4%, cheered by words from Draghi. The bloated U.S. stock market finally started to turn over, falling 1% on low moderate volume. VXO spiked nearly 12% to almost 14 (still very complacent). AAPL and FB each dropped 2.5%.
Wednesday, stocks in Asia declined sharply, falling 1.3% with the Nikkei 225 dropping more than 2% and nearly 100 points below the 9000 level. The Chinese stock market continued its woes, reaching levels not seen since 2009. Could it be that just as California routinely sets trends for the U.S., Japan and China (much farther west) are telling stock markets to take the present recession and decline seriously? Stock markets in Europe seemed to think so, declining nearly 1.7%. In the U.S., stocks fell a moderate 0.6%, but the VXO shot up over 10% to close at 15.36.
Thursday, stocks in Asia rose 0.9% as the PBOC injected $58 billion into markets via reverse repurchase agreements to provide temporary liquidity to banks. Note: repurchase agreements are temporary measures with a specified date for reversing them. Of course, repos can be rolled over indefinitely, in fact about a third of this current repo action is exactly that. The Asian rise was fueled by an over 3% surge in Chinese stocks. Stocks in Europe seemed to ignore the news in China, climbing 0.4% on news of Spain’s plan to slash spending. U.S. stocks rose 1% on low volume while the VXO retraced ground, dropping over 12%. AAPL recovered much of its recent loss, gaining nearly 2.5%.
Stocks in Asia rose 0.2% Friday. In Europe stocks turned sharply lower, down over 1%. In the U.S., stocks fell back about 0.6% but on stepped up volume compared to yesterday, as end-of-the-quarter trading likely raised trading activity. VXO jumped up over 8% to end the week/month/quarter at 14.57. APPL dropped over 2% while FB climbed over 6.5%. Despite some volatility, precious metals netted little change for the week.