Where’s that Correction?
Yesterday, both the U.S. dollar and stock prices moved lower. That’s pretty unusual. Also yesterday, Intel (Nasdaq:INTC) posted an absolutely blowout quarter. This morning, in pre-market, the stock is up just a nickel.
Now, Intel has sold off on positive earnings reports over the last few quarters. But this time, Intel beat all expectations. Earnings were up 48% over last year. And yet the stock appears unable to move higher. I will call that unusual, as well.
JP Morgan (NYSE:JPM) reported a 47% gain in profits. You’d think strong earnings growth would virtually guarantee that it will be paying a dividend soon. But it’s barely posting a gain in pre-market, too.
*****The Consumer Price Index (CPI) posted its biggest gain in 18 months – 0.5%. But anyone that puts gas in their car has seen what gas prices have done over the last two months. No surprise that much of the CPI gain is energy-related.
China has once again raised reserve requirements at banks to counter inflation. That’s weighing on commodities.
In case you’re wondering why I’m listing off the negatives for the stock market today, it’s not because I’m suddenly bearish. But there are certain realities…
Stocks have made an incredible run since late August. They need to take a breather, consolidate, correct, however you want to put it. We can almost feel the market looking for downside catalysts, any reason to start a little sell-off.
But frankly, there just isn’t much that counts as actual bad news out there.
(Please note, I am aware of the inflation issues in China, India and Europe. And yes, this has potential to be problematic. But let’s be clear that these countries are not going to be exporting inflation to the U.S. The issue will be slowing growth from China from higher interest rates and reserve requirement.)
The simple fact is that the U.S. economy is going through a growth spurt. And there’s not much standing in the way of the good vibes.
*****Stocks will correct at some point. The best way to manage it is either with stop losses to take you out of a position before it falls too far, or have a shopping list of stocks you want to buy on weakness. Trying to anticipate or time a short-term top is not a useful endeavor.
*****Yesterday, I erroneously reported that Bank of Ireland (NYSE:IRE) had received a $114 billion bailout. Wrong. The Irish government borrowed that amount from the EU emergency fund.
Daily Profit reader S. Lynch brought my error to my attention: As a shareholder in Bank of Ireland you will understand my surprise and annoyance when I read in your article that the Bank of Ireland required a bail out of $114 billion. As a professional stock / investment commentator I would have expected that you would a have at least got your facts correct.
The Bank of Ireland has received less than 10 Billion euro in bail out money. The bank that I can only assume you are referring to is Anglo Irish Bank which has received approximately 40Billion euro in bailout money - even this is a far cry from your $114 billion.
I’d like to point out that I recommended Bank of Ireland as a short-term trade after the Irish government accepted bailout money. And the stock has been up since then.
Also, I would like to point out that the Irish “bad bank”, an entity charged with removing toxic debt off of Irish banks’ balance sheet has added $94 billion in bad debt to its balance sheet and plans to add another $20 billion or so.
Reuter’s reports that Irish banks have received approximately 135 billion euro in special funding. I have yet to find a breakdown of which banks got what, but I suspect that between outright bailout funds and toxic debt purchases, Bank of Ireland has received well over $10 billion in assistance.
My apologies for my error yesterday.
