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Market up – how come?
by Peter Switzer
It was only a half-day trading on Wall Street on Friday, but stocks shot up as if the fiscal cliff will not be a problem. But it begs the question — how come?
For the record, the Dow was up 172.79 points or 1.35 per cent to end at 13,009.68 while the S&P 500 index spiked 18.12 points or 1.3 per cent higher to 1409.15.
This was huge given the fact that there has been little real news that the Yanks have fenced off the fiscal cliff that could drive the US economy into recession!
Black Friday
Driving the positivity was a great Black Friday, which is the day after Thanksgiving — the fourth Thursday in November. This is when Americans go shopping for deals and so retailers go into the black with store-crazy consumers keen to open their wallets.
Reports were very positive about the sales, and this is a nice plus for the economy, provided the fiscal cliff doesn’t cause problems.
Over in Europe
Helping market confidence was news that Greece looked set to receive continued funding from its EU masters, and German business confidence came in better than expected.
But none of this explains why Wall Street has shot up with the Dow Jones index over 13,000 for the first time since early November, after which stocks had been sliding.
In simple terms, the market believes a deal will be struck and they are “buying on the rumour”, but the other side to that is that markets then can “sell on the fact”.
Dip-buyers
My feelings are that we should see some argy-bargy from the Congress and the President, which could spook the markets, but it won’t last long because there are a lot of dip-buyers out there happy to pick up quality stocks at lower prices.
I always thought we would get about two weeks of Congress controversy that would hit share prices, but then we’d see a nice Santa Claus rally. I could be wrong about the first bit, though it will surprise me if that’s the case, but I still expect a nice rally that rolls into January.
Published on: Monday, November 26, 2012
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