There is no stopping this train!
The markets want to rally and we’ve seen this movie before so we’re just going to climb on board and hope we manage to get off before the crash.
Durable goods orders fell 1.7% last month, that was a pretty stunning miss from the 1.5% increase that was forecast and, imagine how bad it would have been had aircraft orders not gone up 18%. August was revised almost 10% further down, from -4.9% to -5.3%. Orders for motor vehicles and parts dropped 2.9% while computers and electronics fell 1.4% BUT orders for non-defense capital goods (a very narrow category) rose 4.4% and that’s the spin the market is going to go with.
The Shanghai Composite fell 5% last night and the Nikkei fell another 74 points, ending at the day’s low while the Hang Seng ignored it all and rose 500 points. China’s economy grew at 11.5%, slower than last quarter’s 11.9% and a bit slower than the 11.7% expected. The Shanghai sell-off seemed to be based on interest rate concerns as the government certainly can’t continue to have 11.5% annual growth. Hong Kong was led higher by financial and property companies pre-celebrating the Fed rate cut next Tuesday – I can’t even begin to tell you what a shocker it will be to people if we don’t get it (see picture above). Should the Fed not cut – we need to grab FXI puts right away.
I didn’t think much of the action in Asia but Europe seemed happy, bouncing back sharply and erasing the week’s losses as the markets there shook off a very bad report from GSK and a loss from Daimler as they write of the Chrysler debacle. RDS.a had a mixed report with refining margins off 24% from last year but record high oil prices more than making up for the fact that the company produced 3.5% less oil, helping to cause the shortage that drove the price of oil up 40% this year.
At home, we’re slapping sanction on Iran, always good for oil prices, and BAC is cutting 3,000 jobs that won’t be counted as a loss since MCD had a good quarter and will need more fry cooks so we’ll still be at "full employment"! Speaking of McJobs, the UAW is about to ratify their labor contract with Chrysler where 45,000 employees there will keep their jobs, only for a lot less security they had in the past as Chrysler makes a one-time payment of $8.8Bn to a health-care fund for retired workers, shaving Billions off the current obligation. The new contract also allows the company to pursue a two-tier wage system that will reduce future wages and benefits.
See, we will be able to keep jobs in this country now that American workers will be working for third-world wages – BUYBUYBUY!
Let’s continue to watch out levels today but, obviously, I’m not in much of a party mode. I’ve said my piece so let’s just go into the morning and go with the flow. We initiated a Dow strangle ahead of Tuesday’s Fed meeting as I’m pretty sure we’ll see a 300-point move one way or the other in the next 10 days – just a hunch…
We’re going to take the Nasdaq seriously if it pops from here and, of course, without the SOX and S&P coming back we could care less what the Dow does. Let’s keep an eye on gold at $775 and oil as it goes for $90 as the White House just gave them the perfect top-spin for it. We’re already in SLB from yesterday but let’s keep an eye on XOM and others who may be ready to fly. XOM $95s are always fun mo plays.
Be careful out there, we could fall today as quickly as we rose yesterday!
