Market Commentary

Stocks advanced again yesterday as Alcoa
July 14, 2010

Stocks advanced again yesterday as Alcoa posted stronger than expected earnings and issued a positive forward looking statement stating global demand should rise for the remainder of the year.  Moreover Greece was able to sell debt at a lower interest rate than May’s EU/IMF/ECB orchestrated bailout.

Unless one was living in a cave, the accepted reason for the 16%-20% plunge in equity prices since April was fears over a slowing global economy and concerns of sovereign debt contagion. 

In my view the two of the major headwinds have at least subsided temporarily.

I also ask is a potential change in Washington impacting equities?  As widely telegraphed Press Secretary Gibbs stated Sunday there is a good chance there will be a large power shift in Congress even suggesting a possible change in House leadership.  Wow! 

There is also talk in Washington that the Bush era tax cuts might be extended for another year.  I cannot emphasize the bullishness of such action.  The private sector not Washington is the best steward of one’s money.

As written many times Washington is perhaps a greater risk to the market than the economy.  Is this risk beginning to wane?  In my view the electorate is angry.  Congress approval rating is at 15%.  President Obama’s ratings are at 45%, the lowest level for any President at this stage in any administration.

We are Americans, a self reliant society that believes the private sector not Washington knows the best course of action.  Either Washington must change or the electorate will change Washington. 

After yesterday’s close Intel reported profits.  Earnings were the “strongest ever” with this technology bellwether stating this “recovery has legs.”

Many times I have written life is indeed stranger than fiction; expect the unexpected with  change occurring at a frightening pace.

I ask will bullishness become as rampant as bearishness was as little as 7 days ago?  I reiterate Monday’s comments that there is a 50% chance of a market “melt up.”  If one is keeping score and if a market melt up is defined as a 1000 points, we are 30% there in two days.

Last night the foreign markets were mixed. London was down 0.85%, Paris down 0.78% and Frankfurt down 0.33%.  Japan was up 2.71%and Hang Sang up 0.64%.

The Dow should open nominally higher. The 10-year is up 6/32 to yield 3.10%.