Friends
Stocks continued their October surprise as the Dow Jones Industrial Average was up 105 points for the day. The S&P 500 was up about 16 points to close at 1254. We will be watching close to see if the S&P can get through the 1257 to 1260 area which is major resistance. This has been an impressive move against a backdrop of difficult global macro news. It looks like the need to get invested is outweighing the concerns over the circus in Europe. At the least, it looks like those who came into the month leaning heavily short, have been covering to stop the pain. Either way, it will be interesting to see if developments out of Europe (we should get some “clarity” on Wednesday) can break the back of this impressive move or will the upward momentum continue.
Oil is exploding to the upside with WTI crude prices up $3.92 to the $91.32 area. This is quite a bit higher than the mid $70 level we saw just weeks ago. Well, there goes that lower gasoline benefit we were feeling good about just as the holidays approach. Oil going up has been good for stocks, but we would rather not see the average American take the pain at the pump. Occupy the energy corridor could be the next battle cry. Gold was up about $16 and has been somewhat quiet as it has settled around the $1650 area.
On the earnings front, Caterpillar set the tone this morning with a huge beat that sent the industrial stocks soaring higher. This had been a beaten down area in the past 3 months as the expectations of a global economic slowdown had become the common view. The interesting thing has been that the earnings of these industrial companies have continued to shine even though many expected them to fall rapidly. The economy could still turn negative in the next 6 to 12 months, but business in U. S. large industrial companies has not shown any signs of falling off a cliff. Perhaps these companies are telling us something that we were not expecting (driven by the press, we always focus on the negative).
There are a lot of earnings coming out this week and a lot of anticipation from Europe. We’ll buckle up and keep you informed.
