Could This Be The Change We’ve Been Looking For In Government Action

Amidst welcome analysis from Bank of America that claims “the next big thing” in stimulus is going to be “massive” infrastructure investment, as well as other positive signs operating, markets tried to turn higher in slow trading today.

The Columbus Day semi-holiday siphons off plenty of Wall Streeters from their desks, (Italian Americans make up a large proportion of workers on all levels), allowed us a chance to reconnoiter and understand more deeply the volatility that’s been troubling markets.

The only market that seemed not to appreciate the almost day off was crude oil. Wily profit takers took the opportunity to strike and drove down West Texas Intermediate about 4.5% as oil neared the settlement hour. Brent North Sea fell precipitously, as well. It was down more than 4.00%.

The fall in oil was made more dramatic by a limp U.S. dollar, which fell to three-week lows against the euro. We’ve not seen any action in the 10-year bond yield because Columbus Day is a federal holiday and bond trading is suspended.

The ancillary effect of oil weakness was to dent the S&P 500, and the Dow Jones to some lesser extent. Movement was light across the three major indices.

The story in Asia was upbeat early in the day after China said that the Shanghai stock market correction is almost over. The main Shanghai index rallied over 3.00%, while Hong Kong and the Nikkei rose a more sober one to one and a half percent.

Adding to stock trading woes in New York and London (the FTSE was down not quite 1.00%), Eli Lilly stopped late-stage trials of a keenly watched cholesterol treatment drug after it proved ineffective, sending its stock down more than 9% and casting greater skepticism over the potentially lucrative class of medicines.

That sent the pharma sector down in general and Merck specifically down 2.00%.

On what amounted to a risk off day, gold, partially due to the dollar droop, rose about $6.00 by midafternoon. Some point to the diminishing likelihood that the Federal Reserve will raise rates this year.

We’re of the mind that gold has long been oversold and is busy making up some of that ground.

Wishing you as always, good trading,