Today we end one of the best stock market quarters since the first dead cat bounce of the Great Depression. The problem is the economy is hooked up to a life support system so while it looks like a recovery is sustainable the heart is beating only because it has a FED pacemaker and an IV from the Treasury Department. We expect a sharp drop when reality sets in. China just dropped 30% from its recent high, bounced 10% and then fell back and is now again 30% below its July high.
Today, payroll-services firm ADP is expected to report that employers in the private sector cut 200,000 jobs from their payrolls in August after cutting 298,000 in July. Also outplacement services firm Challenger, Gray & Christmas will report on the number of announced job cuts in August.
The final reading on second-quarter gross domestic product (GDP) growth is expected to have shrunk at a 1.2% annualized rate, versus the previously reported 1% rate. That means the recession has continued. Analysts have been incorrect in using leading indicators to say the recession is over. Typically leading indicators are six months early but they are much worse than usual because they include the stock market as an indicator and that makes the indicator incestuous.
Market forces September 30
The stock marker yesterday could not sustain a rally yesterday after starting with futures higher again. The volume of trading yesterday rose 29% from when the market advanced on Monday.
Kraft Foods Inc. was told to put up or shut up. Britain’s mergers and acquisitions regulator has given Kraft six weeks to either submit a formal offer for the U.K. candy maker, Cadbury Plc, or end its interest.
CIT Group Inc., the commercial lender, has said it may be forced to file for bankruptcy.
Market Outlook
Asian markets were flat last night; Hong Kong down -0.3%, Japan up 0.3%, S. Korea down -1%, and Jakarta up 1%.
European markets are flat, up about +0.2% this morning about half way through their day.
US market futures are up about 0.3% at 8:00 AM EST yesterday's decline.
Investors have an opportunity to do better than the market averages by buying into deflated sectors and selling out of bloated sectors. Individual investors can do that just like the hedge funds but it requires a trading mentality.
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