Daily Market Update – May 17, 2016 (Close)
Yesterday’s nearly 200 point gain in the DJIA was pretty unexpected, especially given that the futures were virtually unchanged as the opening bell began to ring.
What we are hearing from all of the Federal Reserve Governors who are speaking this week is that we shouldn’t be surprised if the FOMC still has the opportunity to raise interest rates another 2 or even 3 times in whatever is left in 2016.
That seems so counter to what retail earnings reports have been reflecting, but just as traders took bad news last week as actually being bad news, it is possible that the thought of an economy healthy enough to support two small interest rate increases, is an economy healthy enough to support stocks.
After all, where does economic growth go but to the top and bottom lines of companies?
Good theory, but like so many other good theories of the past couple of years, let’s just wait and see.
You didn’t have to wait very long to see, because today the market simply gave everything back on interest rate fears and news about some high profile investors.
This morning’s futures were at least holding onto yesterday’s gains, but to a large degree that was because of Home Depot’s strong showing.
That changed, too.
In addition to those shares hitting new highs came the news that they saw a 9% increase in revenues.
That meant people were spending their money somewhere. Maybe not at Macy’s for sweaters, but at Home Depot for faucets.
Ultimately, the latter is probably better for the economy as it deals in products that tend to retain value or add to net value better than a set of matching stemware.
But that’s just another theory.
The basic theories were all tested when also this morning came news of the changes in holdings of some of the big boys, like Buffett, Einhorn, Soros and others.
No surprise that gold was ubiquitous, but as many have learned, it’s usually not a good idea to try and ride the coat-tails of the big boys, whose actions are divulged long after they occurred.
Opportunity has a way of vanishing.
With all of the television commercials lately for gold and the news that Soros and others have piled in, that may be the proverbial shark making a jump.
It’s not too likely, for example, that any of those investors would jump in after a 20% increase in price, but the coat-tail riders do and they are often buying the same goods that the savvy guys have now decided to sell.
Funny how that works.
Icahn sold Apple, so did others and they drove the price even lower. Maybe just low enough to entice Buffett.
Fear begets greed in others.
With today’s decline and now talk of even a June 2016 interest rate hike getting some attention, I’m not greedy enough to give up the fear that keeps me from spending any money on what seem like cheap prices.
Maybe tomorrow, but you could have said that yesterday, as well.