Courtesy of John Nyaradi
Financial earthquakes rattled global stock markets again today.
Is it 2008 or the “buy the dip” opportunity of the year?
Wall Street Sector Selector remains defensively positioned and we continue to expect lower prices ahead.
The euphoria of yesterday’s Federal Reserve statement was short lived as global stock markets were hammered by powerful tremors and plunging prices.
The bears mauled investors around the world as the realization set in that, as we discussed yesterday, things must be pretty serious for the Fed to take the unprecedented step of virtually guaranteeing zero interest rates for two more years.
The financial sector took a particular beating with Citi declining 10% and Bank of America shedding 11%, to the almost unbelievable level of $6.77. Let’s not forget that once upon a time in a land far, far away, the nation’s largest bank once traded in the $50/share range.
But that was then, and this is now, and now financial terrorists seem to be marauding around the world, hop scotching from Italy, through Spain, to the United States, and today, focusing on France, as the nation’s second largest bank, Societe Generale, took a steep plunge in response to market rumors regarding a possible downgrade of France’s AAA rating.
Closer to home, today’s reversal on the Dow was the ninth worst point loss ever and with a steep decline into the close, sets up an ugly outlook for Asia and Europe tomorrow.
Of course, all of these tremors has not been lost on ordinary investors like you and me or hedge funds and institutions, alike, who have headed for the door and taken net redemptions of $17 Billion for the week ended August 3rd, according to ICI, the biggest exodus since the bottom of the bear market in 2009.
As everyone knows, if there are more sellers than buyers, prices go down, and so they have.
However, as the well known saying goes, “there’s always a bull market somewhere, and today that was in gold and bonds.
Gold continued on its tear MarketWatch.com as clearly depicted in this chart of iShares Gold Trust (IAU)
Chart courtesy of http://www.stockcharts.com
And the bond market powered higher as investors fled for the now “AA+” rated safety of the U.S. Treasury and we can see its chart in the chart of iShares Barclays 7-10 Year Treasury Bond Fund (IEF)
Chart courtesy of http://www.stockcharts.com
In spite of all the ballyhoo surrounding the U.S. credit rating and debt ceiling and the new “super Congress” being formed, U.S. Treasuries still seem to be offering a safety blanket during these difficult days. MarketWatch.com
Global Market Summary:
Dow Jones Industrials (DIA): -520; -4.6%
S&P 500 (SPY): -52; -4.4%
NASDAQ (QQQ) -101; -4.1%
Russell 2000 (IWM): -36; -5.2%
Tomorrow’s Action:
Tomorrow brings the weekly unemployment news.
Bottom line: Fear rules.
I’m in Tokyo today where the markets have opened sharply lower. I wanted to visit the stock exchange which is just down the street from my hotel but the visitor’s gallery is closed to conserve electricity in the aftermath of the tsunami and earthquakes. Unfortunately, to add to the deadly events in Japan of last spring, we now have a financial earthquake rippling around the world.
Have a great evening,
John
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