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Change Is the New Constant: Stocks Rally After Wild Ride
Posted Nov 02, 2009 04:20pm EST by Aaron Task in InvestingPicking up where the end of October left off, November started with a session that epitomizes volatility. After rallying early Monday to as high as 9,858.59, the Dow subsequently sold off and hit negative territory in the early afternoon before rebounding again to close up 0.8% to 9789.
Other major averages followed a similar path with the S&P closing up 0.6% at 1043 after trading as high as 1052 and as low as 1,029, while the Nasdaq gained 0.2% to 2049 after trading in a range between 2024 and 2069.5.
All of this noise is signifying something, according to Diane Garnick, investment strategist at Invesco, which has over $400 billion of assets under management.
"What we're seeing now is a lot of people have become much more concerned in the short-term about the market," Garnick said, citing the following:
- After a 60% rally off the March lows, the market has priced in a lot of the good news that's currently hitting the tape, be it earnings or macroeconomic data, Garnick says. Now, the focus is turning to uncertainty about the outlook for the second half of 2010.
- The economy's apparent recovery is feeding concerns about inflation. Garnick doesn't expect any dramatic statements or change of bias from the Fed at this week's policy meeting but anticipation of the confab is creating anxiety in some circles.
- Despite the positive headline numbers -- including Monday's reports on ISM Manufacturing, pending home sales and construction spending -- the U.S. consumer remains in a fragile state, says Garnick, who expects the unemployment rate to hit the psychologically important 10% level when October's figures are reported Friday.
In addition, concerns about the financial sector have resurfaced after the recent bankruptcy fillings by small-business lender CIT and commercial real estate developer CapMark.
CIT shares tumbled Monday, as expected following its Chapter 11 filing, while banking giants such as Citigroup suffered after Jon Greenlee, associate director of the Fed's Division of Banking Supervision and Regulation, warned against potential fallout from commercial real estate weakness. "The condition of the banking system is far from robust," Greenlee said in testimony to a House Oversight subcommittee hearing, Bloomberg reports.
YRC Worldwide was another notable loser, plummeting 65% after the trucking firm announced it would swap $536.8 million of debt for a combination of common stock and new preferred shares.
On the flipside, Ford shares jumped after the automaker posted its first operating profits since 2008 and gave an upbeat forecast, while Motorola benefited from a Citigroup upgrade and positive buzz surrounding its new Android phone, the CLIQ.
The good news, Garnick says, is the market is moving from being driven by macro-events to company-specific developments. "Fundamentals matter" again.
The bad news, for those who crave consistency, is the volatility is likely here to stay, Garnick says, suggesting traders will be repeatedly putting on and taking off their "Dow 10,000" hats this winter.
108 Comments
Skinny - Monday November 02, 2009 04:34PM EST
sounds like the 70's again... might be a good time to revisit Lichello
meme - Monday November 02, 2009 04:36PM EST
weird girl... drugs can do lots... but she's right on whatever she commented on.
Yahoo! Finance User - Monday November 02, 2009 04:39PM EST
She says things what everybody else is saying, nothing insightful.
ezshooter - Monday November 02, 2009 04:47PM EST
So far, Obama has spent less than 20% of the stimulus money. What will be spent in 2010 and 2011 will impact technology and energy startups. Military spending will focus on lowering energy prices for military and new technologies to improve military communications. We are beginning an exciting era of new jobs, new ideas for the country. The instant-gratification people need to chill-out, it will take a few years to fix the messes. Some corporations will say goodbye and relatively new ones will dominate. Google=$22 billion in cash and growing. Not everyone is in debt
sidneyleejohnson - Monday November 02, 2009 04:47PM EST
I've been a fan of Diane Garnick for a few years... unfortunately I think that was one of her worst performances. She didn't commit to a solid answer to "are we rolling over" just another "square root" type answer that seems popular these days. Better off heading the warnings of GMO's Jeremy Grantham this time than trying to decipher what Diane said. Anyway If you can pick the quality names and perhaps buy them with leaps and leave a good chuck of your money in the HKD(pegged to the US$ but pops if it floats) in the short term to deploy to frontier/emerging markets after the correction unfolds
Yahoo! Finance User - Monday November 02, 2009 04:51PM EST
how can this be? the market is V shaped and skyrocketing .. buy buy buy. remember March lows.... it's obama's world now.. no need for jobs, the market is up.. mmm mmm mmm here you go.. INFLATION.. see see.. the worse is over. remember obama told us today .. HE ALONE BROUGHT US BACK FROM THE BRINK... ahhhh, its GOLF TIME now.. mmm mmm mmm... oh, screw the lib gov candidate in VA.. lolololol.. obama thru his butt under the bus.. lolololol it's beginning the obama decline.... LOOK OUT BELOW, mmm mmm mmm
Maloogie - Monday November 02, 2009 04:52PM EST
Boy who lit Garnick's bubble button? The choppiness isn't volitility, it's the beginning of the rollover that will culminate this summer if Bernanke drops the bomb and begins to raise interest rates and crushes the recovery. Just a 1/4 point will start everyone anticipating 4.5% and the market will trash and crash. In the meantime, think of the market as a stock--it is getting peaky, it is getting getting toppy and this froth is very reminiscent of a toppy stock about to roll over. The Fed will say nothing this week but the stretch will be whether XMAS is as dismal as it portends to be, and when unemployment hits the fan again this week, 1/2M more deep. We ARE starting to roll over, so time for protection since it has become a stockpicker's market if the whole market doesn't tank. I expect it to test the 850 S and P. Count on it.
Yahoo! Finance User - Monday November 02, 2009 04:54PM EST
weeeeeeee we are sooooooooo perky.. the 'SPIRIT' and all.. how about jobs? hmmm ? I'm so perky and upbeat weeee you losers don't have jobs... too bad.. here comes inflation... AND MASSIVE MASSIVE TAX INCREASES.. oh ya, they are coming... mmm mmm mmm
Yahoo! Finance User - Monday November 02, 2009 04:56PM EST
Perhaps, I am just out of the old school where we were taught to do the math, but no matter how many times I run the formulas the market just doesn't add up. Did I miss something by being too old for "New Math" or is this creative writing instead of journalism?
Yahoo! Finance User - Monday November 02, 2009 04:57PM EST
Perhaps, I am just out of the old school where we were taught to do the math, but no matter how many times I run the formulas the market just doesn't add up. Did I miss something by being too old for "New Math" or is this creative writing instead of journalism?
frankmargel.com - Monday November 02, 2009 04:58PM EST
ezshooter - Monday November 02, 2009 04:47PM EST Hard to disagree with the notion that patience is truly a virtue, right? Right on!
Melia Sese - Monday November 02, 2009 04:58PM EST
uh oh ... looks like Melia may have some compo here ... a pretty girl bats her eyelashes and you boys just turn to mush... (LOLOL) She really doesn't need to say anything, right? But what Ms Diane did say was "what we're seeing now is a lot of people have become much more concerned in the short-term about the market" to which Melia can only respond: yeah, well, what-evah.
BringBackCapitalism - Monday November 02, 2009 05:02PM EST
Fundamentals? Like GM, BAC, C, AIG, etc. She does look good though.
SANTA SEZ.... - Monday November 02, 2009 05:08PM EST
HAVE A VERY MERRY CHRISTMAS AND PLEASE DON'T BUY ANYTHING!
Yahoo! Finance User - Monday November 02, 2009 05:10PM EST
I'm so giddy.. really REALLY happy.... I'm so thrilled and excited.. I'm not changing my dow 10,000 hat... I'm so happy... halloween was great... weee weee.. look at me...what am I saying, I don't know, but i'm soooo happy.... lalalalala.. I'm so happy now.. let's all hold hands and sing.. barack hussein obama mmm mmm MMM....
Stock - Monday November 02, 2009 05:10PM EST
Whatever I'm buying as low as I can and selling for more. I woould not hold anything these days but I will trade as much and as often as possible.
Yahoo! Finance User - Monday November 02, 2009 05:11PM EST
U guys think this chick is hot? wow your wives / girlfriends must be butt ugly
Stock - Monday November 02, 2009 05:13PM EST
Hey MMM dude. You are a big f-ing asswipe and I know you want any responce possible no matter what cause you are dying for recognition but seriously. you are mental.
Yahoo! Finance User - Monday November 02, 2009 05:13PM EST
She has more make up then a Circus clown.
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frankmargel.com - Monday November 02, 2009 04:33PM EST
Diane Garnick, she is my favorite pillow talking TT guest/analyst! Nice to have her back! I was wrong to ever doubt her...she is great!