Going into this week, the SPX was down 25% since the end of September and was making history in terms of percent drops. However, the Four Sisters were able to shake off terrible economic data and rally this week. The SPX saw a 10%+ rally alone as the bears retreated for the time being. In our work, several indicators were signaling a bear market bounce was near and we outlined these indicators in the latest Morning Cup of ‘Jo this past Wednesday. It is important to realize that we are far from being “out of the woods” as risk levels remain exceedingly high. However, we feel this latest advance could tag the 50dma on the SPX which lies above roughly at 1100.
Oil prices continue to face downward pressure, slipping below $64 / barrel on Friday as recent economic data points to a prolonged economic slowdown in the United States. (10.31)
The Federal Reserve cut its target rate by half-percentage point this week to 1% as the Fed continues to try and be proactive in regards to the ongoing credit crisis. The Bank of Japan also cut its key interest rate for the first time in more than seven years. Japan’s uncollateralized overnight call rate was cut from 0.5% to 0.3%, slightly less than the quarter point the markets were expecting. (10.31)
Consumer staple Procter & Gamble (PG) reported a 9% rise in quarterly profit. However, the company forecasted that full-year sales growth will be below expectations. Shares dipped on the outlook. (10.29)
Under considerable economic strain, American consumers cut back sharply on their spending in September. The cutback was the largest in four years. In a separate report, workers’ wages increased by a modest 0.7% for the third quarter, the same increase as the prior two quarters. This latest data is evidence that the economic recession is keeping wage inflation in check. (10.31)
The Chicago PMI plummeted to 37.8 in October much faster than what many analysts were expecting. A number below 50 indicates contraction. (10.31)