Commentary

From the Executive Editor

By George Chamberlin

George Chamberlin's Money in the Morning

Much to the disappointment of the permabears, the stock markets staged a strong rally yesterday. The Dow industrials rose 619 points, snapping a six-session losing streak. The gain was 4 percent, the biggest one-day increase in four years. The rally was led by tech stocks including Apple (up 6 percent), Google (up 8 percent), and even Qualcomm (up 5 percent). It looks like the rally will be extended today thanks to an overnight rally in the Asian markets after a massive infusion of funds into the economy by the Chinese government.

George Chamberlin's Money in the Morning

Four in a row. The attempt by the stock market yesterday to rally out of the recent sharp declines fizzled in the final hour of trading yesterday and led to a fourth consecutive day to the downside. But it was not just any four days of declines. The loss of 205 points on the Dow industrials marked the fourth session in a row the index has been down 200 points or more. That has never happened before.

George Chamberlin's Money in the Morning

The end of the financial world as we know it has been delayed. Yes, things looked very bleak on Wall Street yesterday as the day began with a massive 1,000-point drop in the Dow industrials. If you follow most media reports you would have thought it was a one-day wonder. Consider the front page headline today in the Union-Tribune: Market Carnage. The fact is the stock market has been struggling for several weeks, if not most of 2015. If anything, yesterday may have been the climactic event rational investors have been looking for.

George Chamberlin's Money in the Morning

One-thousand points. That was the knee-jerk decline suffered by the Dow industrials this morning as investors returned from the weekend after reading all the headlines about doom and gloom. For all the people who dumped stocks at the open I can only say too bad. Within a half-hour, the loss was cut in half as brave investors went bargain shopping. Of course, there is no way of knowing how the markets will finish the day but the early decline had all the indications of climactic sell-off.

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The next meeting of the Federal Reserve’s Open Market Committee is about a month away, but the betting money still seems to lean toward the first hike in short-term rates in nearly a decade.

George Chamberlin's Money in the Morning

Crash, bloodletting, plummet, skid. Those are just a few of the adjectives I've heard being used to describe yesterday's 2 percent decline in the Dow industrials and other major market indexes. The 358-point drop in the Dow was the biggest one-day decline so far this year and extended the losses YTD to just 4.6 percent. In the official language of Wall Street, the first step in a decline is a correction, a 10 percent pullback from a previous peak. Obviously, we are still quite a ways from that level but it could, and some say should, happen.

George Chamberlin's Money in the Morning

Interest rate jitters have investors running for cover. It is hard to imagine there is anyone out there who is unaware the Fed is getting ready to raise short-term interest rates, if not next month, perhaps in December. Or maybe in 2016. Each of the last four years has begun with the guarantee that, indeed, this will be the year the Fed hikes rates. Perhaps it is a good idea to get all the selling of stocks out of the way now and not worry about what will happen until it finally happens. One of Wall Street's greatest pieces of advice is to sell on the rumor, buy on the fact. That is exactly what is going on now. Veteran investors realize when the Fed finally pulls the trigger it will quickly lead to a long relief rally.

George Chamberlin's Money in the Morning

The markets continue their volatile, trendless march through 2015. After falling for six sessions in a row, the Dow industrials recently changed course and rallied for three consecutive sessions. Today the Dow has opened with a triple-digit loss for no apparent reason. Quite simply, August and September are tough times for investors as trading is thin and markets can change direction on a whim. Hang in there.

George Chamberlin's Money in the Morning

Investors seem to see any sell-off as a buying opportunity. Yesterday's trading session began with a deep decline, the Dow industrials dropping 150 points in the first half-hour, only to do a complete reversal and finish with a gain of almost 70 points. As each day passes it seems less likely the Fed will actually start raising short-term interest rates at the September meeting a month from today. Yet despite the resilience in the market, websites such as MarketWatch.com, owned by the Wall Street Journal, still insist running stories saying an "ugly decline" will begin this Thursday.

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Stock market investing is a challenge. Some say it is not a stock market but, rather, a market of stocks.

George Chamberlin's Money in the Morning

Despite two days of near panic by investors over the economic situation in China, the stock market was able to eke out modest gains last week. The Dow industrials were up 70 points on Friday and managed a gain of 0.7 percent for the week. Have you noticed how quickly the financial China Syndrome situation has moved out of the headlines? On Monday and Tuesday last week the business media was fanning the flames of fear, saying China was going to drag the global economies into a massive recession. I guess it was just the latest effort by permabears to drive stocks lower and, like most other efforts, it failed.

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George Chamberlin

GEORGE CHAMBERLIN has been associated with The Daily Transcript at SDDT.com since 1998 and became Executive Editor in 2006. He is responsible for the development of editorial strategies for the newspaper ...

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