If you’re long, you’re breathing a huge sigh of relief right now, despite the fact that most of your stocks fell today.
But first, the scoreboard:
S&P 500: -3
And now, the top stories of the day:
- The tone-setter for the day came last night, when the #1 Federal Reserve reporter Jon Hilsenrath at the WSJ revealed that there would be no mega-QE next week. Instead, it will be small and incremental. The dollar, which has already been rallying, shot up on the news, moving decisively against the yen.
- Equity-wise, the overnight scene set the tone for the day. With the dollar up, stocks in Asia and Europe were generally down, though not wildly so. Not surprisingly, Japan was actually up, as its investors got a little currency breathing room.
- Heading into the pre-market, equities were lower, but actually Treasuries were getting hit a lot harder, continuing another trend, which is the hissing of the bond mini-bubble. Gold also got trashed. And we noted early on that if equities didn’t fall off a cliff today it would signal that it was gold and bonds, not equities, that had the most to lose if QE didn’t come in as big as expected.
- Then at 8:30 we got durable goods which were great on the headline, but pretty mediocre ex-transport. New Home Sales at 10:00 were basically in line and a non-event. The more interesting action was actually at the micro level, as several companies, like Whirlpool gave cautious comments about weak demand, and the effect of high input costs in slashing their margins.
- Also, there were two huge letters everyone was reading. Jeremy Grantham’s “Night of the Living Fed” letter got tongues wagging yesterday evening and into today, and Bill Gross came out with a monster about how the Fed was a Ponzi, and how the 30-year rally was coming to an end (though later he would say that he did in fact support more QE).
- Early on it seemed that stocks would indeed fall off a cliff, contrary to what it looked like pre-market and in the initial trading day. BUT after falling by over 100 points, the selling abated on the Dow eventually, and stocks made something of a comeback, ending in the split decision you saw above. For our explanation of why everyone is coming out with these huge letters, see here.
- The bottom line: Stocks had a lot thrown at them today: Bill Gross, Jeremy Grantham, Jon Hilsenrath, weak durable goods, signs of inflation, the end of momentum, and they held up OK. Win. For. The. Bulls.