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Business/Finance See other Business/Finance Articles Title: So Much for ‘Santa Janet’ — Stocks, Gold, Yields Plunge So Much for ‘Santa Janet’ — Stocks, Gold, Yields Plunge Mike Larson | Thursday, December 17, 2015 at 4:30 pm Santa Janet gave the markets a big pile of loot yesterday. Today, the Grinch stole it all! After rallying 224 points on the Dow Industrials yesterday afternoon, stocks gave up the ghost into the close, finishing down 253. That clearly raises the risk the Yellen rally will prove to be just like the Draghi rally we had several days ago — a one-hit wonder followed by lower prices. But that’s only the most obvious warning sign. There are plenty of less-obvious things going on that you shouldn’t ignore. Start with China. The country’s currency dropped overnight for the 10th day in a row, the longest devaluation streak in eight years. The yuan is now the cheapest since June 2011, a sign of ongoing capital outflows and worries about the domestic economy. Since it was China’s initial devaluation in August that set off a stock market panic here, the fact the yuan is undercutting those panic lows is worth mentioning. And how about the commodities market? You don’t need me to tell you that stocks have generally been paying close attention to what’s happening in oil. So it’s worth noting that crude barely bounced yesterday along with stocks, then fell to as little as $34.63 a barrel today. What the Fed giveth, the Fed taketh away; the rally fails on day two. Gold also gave back every penny and then some of its post-Fed gains, while silver and copper pulled back noticeably. If commodity traders were as optimistic about growth post-Fed as stock traders supposedly are, you wouldn’t see that happen. Finally, let’s talk bonds. No market on the planet should be as sensitive to a Fed rate hike as the interest-rate market. But it’s behaving exactly the OPPOSITE as a lot of mainstream commentators might have expected. Long-term yields are actually falling, even as very short-term yields are holding steady. The 2-year was basically unchanged, while the 10-year dropped five basis points and the 30-year fell seven points. That means the yield curve is continuing to flatten like a pancake here. And that’s a sign bond traders are nowhere near as optimistic about growth or future inflation as Yellen says she is. Bottom line: The Fed optimism that was so evident yesterday evaporated today. But going forward, what do you expect will happen? Are we set up for a run into year-end and beyond? Or are investors whistling past the graveyard? Which stocks should be bought in the wake of the Fed move, and which should be sold? And do you have any thoughts on the bond market’s reaction to the Fed? You know where I stand. Now, let me know your answers to these questions below. Poster Comment: Stocks and bonds are getting ready to implode. Post Comment Private Reply Ignore Thread
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