Thursday, October 23, 2008

Sweden Joins The Rate Cut Party

The market is hovering in positive territory, despite more declines overnight in Asian markets. This morning, Sweden cut its key interest rate for the second time in as many weeks, to 3.75%. We are also hearing that the IMF may be ready to make loans to some emerging markets facing troubles, and there are plenty of them.

Remember the 'decoupling' thesis that so many were spouting a couple of years ago? The notion was that even if the US and Europe slowed, the emerging markets would continue to grow. That theory just seems silly now.

The dollar is flat today, and oil is bouncing a bit, near $68. The 10-year yield is also steady at 3.61%. The VIX is back near its record highs above 70, which means traders still expect continued volatility. We really need to see this indicator move lower to signal some stability.

The energy sector is leading the way so far, +4.47%. Housing stocks are the biggest laggards (-4.29%), followed by retail stocks.

There were more solid earnings reports last night and this morning, from stocks like MO, BMY, UPS, UNP, AMGN, and DOW. Amazon, like eBay last week, offered conservative guidance given the uncertain economic environment, and that has the stock trading lower.

The Dow just touched +200 as I am typing. Let's hope this rally sticks.


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