To the casual observer, it was a good day on Wall Street Thursday. The Dow gained more than 215 points, the NASDAQ rallied +1.6 percent, and the Russell 2000 tacked on +1.8 percent. However, to those watching the action a bit more closely, Thursday was a case of the good, the bad, and the ugly.
Since most folks like to start their day with a smile whenever possible, let’s begin with the good stuff. And cutting to the chase, there was actually a fair amount of “good” happening before the market’s opening bell even rang on Thursday.
As was suggested in yesterday’s missive, no news out of Canada was a good thing. The bottom line here is that unless there was evidence suggesting that Wednesday’s shootings in Ottawa were part of an organized terrorist plot, stocks were likely to recover most, if not all, of Wednesday’s end-of-day shellacking in short order.
And since there wasn’t any headlines depicting more terror when the screens lit up yesterday morning, it wasn’t terribly surprising to see U.S. stock futures pointing higher in the wee hours of Thursday.
Next up was the data. Both China and Europe had reported “Flash” PMI readings that, for once, were not overtly negative. While it is hard to argue that the weak-ish readings seen in the second and third most important economies in the world were actually “good” it is important to remember that this game is all about expectations.
The key here is to recognize that traders have been fretting over the state of the economies in both China the Eurozone for some time now. Lest we forget, it was the fear of #GrowthSlowing that was at least partly to blame for the recent weakness seen in stock markets around the globe. So, when both Flash PMIs were reported to be in growth mode, well, a sigh of relief was certainly appropriate.
But there was also some “bad” and some very “ugly” action to review…
David Moenning is Mr. Moenning is President of Heritage Capital Research, a privately owned, investment research firm. Heritage focuses on active risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.