Business News

Wall Street makes history so expect the unexpected

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by Peter Switzer

The US stock market continues to make history with the Dow Jones index now registering four days in a row of 400-plus moves in either direction. It’s never happened before and so we have to expect the unexpected when it comes to volatility.

And if you aren’t keeping score, the index is still down over two per cent for the week and hold onto your hats because I suspect this rollercoaster ride has a few more ups and downs to go.

Wall Street overnight

Here’s the overnight scoreboard from Wall Street in a nutshell:

The Dow up 423.37 points to 11,143.31
The Nasdaq up 111.63 points to 2492.68
The S&P 500 up 51.88 points to 1172.64
The Oz dollar is now 103.25 US cents
Gold has actually fallen US$28 to US$1756 an ounce!

Why has this happened? Well, US jobless claims came in better than expected and this raised some doubts about the certainty of a US double-dip recession. This is something that I doubt but is a chance, especially if the stock market goes into plunge mode again.

Euro concerns

Over in Europe, the politicians are back from holidays! Yes, the leaders of Germany and France — the two countries whose GDP is 50 per cent or more of European GDP — thought it was time to meet and come up with a plan to deal with debt, question marks over their banks and irrational market volatility.

The impact of rumours on banks such as Societe Generale undoubtedly saw the banks' CEOs and others warn Sarkozy and Merkel that their fingers had to be pulled out or something really bad would be created by short-sellers and hedge funds.

Market outlook

By the way, the fear index is still high at 38 and so this tells me that volatility will be with us next week. What we need is a good news flow and that puts the pressure on politicians to come up with a positive play or two.

We also need to see some better US economic news, such as the better jobless claims today, to add momentum to the great company profits reporting we’re seeing in the States.

Remember, September and October are the worst months for investors and so we will be on market watch until then, I suspect, and that’s when I think US economic news will pick up. Let’s hope so!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, August 12, 2011

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