Stocks were flying high today with GDP coming in at 3% vs the 2.8% providing the catalyst for a further extension past 13,000 in the Dow. The good news was bad news though for anyone looking for further stimulus from the Bernanke Fed, at least in the immediate term. Also playing the familiar role of rally stopper were the U.S. dollar and the VIX, as both posted solid gains of 0.7% and 3%.
The action in oil recently foreshadowed today’s outcome for stocks. As we wrote yesterday in our @ the close commentary, “Oil extended its losses for the second day in a row and our research from this morning says that this could be a bearish signal for stocks in the days ahead.” Today oil caught a bid and closed slightly higher, and we believe the stock market would prefer to see oil stay above the $100 per barrel level.
Today was a good example of something we preach about all the time, it isn’t what the news is, it’s at which price level it is received. There was an abundance of “good” news today. GDP came in better than expected, Chicago ISM came in at its highest level since last April, and Bernanke didn’t mutter the phrase “QE3,” which suggests the Fed is becoming more comfortable with the recovery. These are all positives, so how does the market finish down on a day like today, you ask?
The answer is simple, have you seen the recent 25% rally in the stock market??? This positive news is being received at 3-4 year highs for many of the indexes. Remember, the market is forward looking and alot of this recent rally has likely been based on an expectation of positive news like todays coming out. So when the news hits and the market has already “priced it in” so to say, it struggles to move higher.
One quick note we find intriguing is the role of Ben Bernanke and the markets. Over the last few years once could argue that he has masterfully parlayed the market rally with his easy money policies and stimulus. So we couldn’t help but be amused by the fact that the sell-off today seemed to come about when Bernanke didn’t mention QE3.
One may recall it was his remarks in Jackson Hole in late August that helped establish a floor under the market and propel the Dow to a 400 point up day. Today however, the market seemed to give one of their first “thumbs down” to Mr. Bernanke, as if he went from friend to foe within a matter of hours.
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- Stockhaven @ the close 8/23/2011: Bad news? Who cares? Bernanke’s coming!
- Stockhaven @ the close 8/25/2011: Rally comes to a halt ahead of Bernanke
- Stockhaven @ the bell 8/9/2011: Will Bernanke provide relief?
- Stockhaven @ the bell 8/26/2011: All eyes on Bernanke… but GDP data looms large
- Stockhaven @ the bell 8/12/2011: Bernanke the string puller