Wednesday was another difficult session, although it did not start out that way; stocks galloped out the gate on the coattails of Apple and industrials, Boeing and U.S. Steel. However, the rally tripped over a sizeable speed bump that might actually represent a speed bump for the entire nation. Commercial crude oil inventory surged, coming in at almost 9 million barrels or 100% higher than anticipated. How much longer can we call this a story of supply, and not a hint at a flagging demand from a flaccid economy?
| +8.9 million406,700,000 Barrels |
After the Federal Reserve finished its Federal Open Market Committee (FOMC) gathering and issued its typical release, stocks slowly began to slide. That slide mirrored the proverbial snow-into-boulder scenario as selling intensified and beget even more selling. Buyers made a stand at the plus/minus line a couple of times before giving up the ghost. The result was a serious two-day drubbing.
The reason for the slide was bond yields, which tripped hard and in many respects, inexplicably. The bond rally has been defiant and it continues to confound the experts. I must admit that I am surprised. On the one hand, yields are down; on the other hand, it is not unusual for selling to trigger selling. However, once key technical marks are eclipsed, a certain bias is established- in this case, due south.
Between that horrible durable goods report, the cascade of corporate warnings, and the mounting crude inventories, it is hard to be convinced that this is a robust recovery.
Thus, I think in general that stocks got ahead of themselves on a short-term basis, so this cleaning process serves a purpose. Remember, you are investing in individual stocks, so an oversold market can only act as an anchor for so long.
Moreover, there are unresolved questions about the economy and the market. I have never allowed the hours after the FOMC announcement to factor into my decision-making; the day after is the one that counts.