Insights

Wall Street Wrap – The G20 puts Stocks and Commodities on Steroids

On Saturday in London, finance ministers and central bankers from the world’s 20 largest economies agreed to keep the current coordinated stimulus measures in place until global economic conditions recover.  Here in the U.S., this means The Fed keeps the Fed Funds rate at near zero… as if they planned on raising them anyway.  This ‘all clear’ on the interest rate front sparked a rally in the stock market with the Dow Jones Industrial Average gaining 203.52 points on the day (+2.03%, 10,226.94) and closing at a new 2009 high.  American Express Co. (NYSE: AXP) led the charge in the Dow 30, up $1.84 (+4.94%, $39.05).

Last week after The Fed kept interest rates at 0-0.25%, their comments that the recovery was expected to be too weak to raise rates anytime soon caused a rally.  Now, with basically all the central banks agreeing to this course of action for the ‘forseeable future’, the rally took hold across the board in stocks.  This worldwide interest rate ‘all clear’ also caused the ‘carry trade cowboys’ to jump in with both boots and hit the dollar, dropping the buck to its lowest level in 15 months.  This drop in the dollar juiced commodities and the next thing you know everything is going up.

The Nasdaq 100 put in a 2009 high close, gaining 37.64 points (+2.17%, 1,768.40) while of the three, the S&P 500 is the only index that did not make a new 2009 high close, but still rose 23.78 points (+2.22%, 1,093.08).  Finance led the sector race gaining 3.48% with the consumer cyclical companies up 2.82%.

The commercial real estate market has been scheduled for execution by many a commentator on TV lately.  Today was a strong day for commercial real estate, with the iShares FTSE NAREIT Industrial/Office Corp Index (NYSE: FIO) gaining 5.48% (+$1.14, $21.94).

Gold topped $1,100 overseas before most alarm clocks even went off in New York.  New York Spot Gold traded as high as $1,110.60 an ounce before trading off to $1,103.20 (+0.57%, +$6.30, 4:12 p.m.).  The Spdr Gold ETF (NYSE: GLD) opened trading above its recent trend channel but traded off to close right at the top uptrend line, otherwise known as the ‘reaction or return line‘.

Nymex crude traded up $2.00 (+2.59%, $79.27, 4:12 p.m.) on the weak dollar as well as news that Hurricane Ida (downgraded to a tropical storm) is making landfall on U.S. gulf states.  Memories of Katrina and the resulting jump in oil and gas prices have traders a little hair triggered as far as Mother Nature in the Gulf of Mexico is concerned.

Coal led the commodity rally with the coal ETF (NYSE: KOL) up 4.82%.  Steel followed on at 4.12% (NYSE: SLX) with the gold miners ETF (NYSE: GDX) in third up 3.48%.  The copper ETF (NYSE: JJC) lagged the pack (+0.85) but finished just ahead of the agricultural ETF (NYSE: DBA) up 0.78%.

Looking forward on the Dow Jones Industrial chart, only one minor bottom resistance level at 10,365 is seen.  After 10,365, it looks like clear sailing up to 11,000 and with the latest pullback retrenching the stochastics, which are now bullish and pointing higher, it looks good for a rally into year end.

Radio Shack caught an upgrade from Credit Suisse and gained 14.26% (+2.53, $20.27) while retail was strong in front of the all important Christmas shopping season.  The S&P Retail Index was up 1.95% and closed at a 2009 high.

This looks like good news across the board, but consider that this is all happening on the back of very cheap money as the world’s central banks leave the liquidity spigot on full blast.  Many experts are already saying this is the inflation of the next bubble, something everyone so adamantly declared was a past pattern not to be continued.  Everyone likes it when the stock market goes up, but is abandoning the dollar and inflating the stock market the way to go with a jobless recovery underway?