Stocks continued to stay where they have been for the past week, in anticipation of Election Day and Wednesday’s meeting of the Federal Open Market Committee. Despite the slight pop after Monday’s opening, by noon stocks were settling back down to Friday’s closing levels. The Dow Jones Industrial Average gained a mere 6 points on Monday to finish at 11,124 for a gain of 0.06 percent. The S&P 500 picked up only 9 basis points (0.09 percent) to close at 1,184. The Nasdaq Composite finished the day in the red, with a loss of 10 basis points (0.10 percent) to end the day at 2,504.
Miami-based corporations had a mixed day on Monday. Ryder System (R) made the best move, with a gain of 56 basis points (0.56%) to close at 43.98. Lennar (LEN) was next, with a gain of 34 basis points (0.34%) to finish at 14.56. Carnival Cruise Lines (CCL) picked up 21 basis points (0.21%) to close at 43.26. Burger King (BKC) finished flat on the day at 23.99. Royal Caribbean (RCL) was the only member of the group to finish in the red, dropping by 73 basis points (0.73%) to end the day at 39.25.
Our Thought for the Day is an important one, coming to us from Peter Brimelow of MarketWatch. In his most recent piece — entitled, “Don’t take the week off” Mr. Brimelow discusses the advice of fund manager Dennis Slothower. Here are some key passages:
But what really distinguishes Slothower is his ferocious, fundamentalist conviction that the stock market, and ultimately the economy, is being manipulated by the Federal Reserve in alliance with what he calls the “primary dealers.”
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Slothower wrote earlier this month: “When the Fed pumped up its POMO [permanent open market operations] in the first three months of the year, stocks rallied 5% for [the first quarter of 2010]. When the public became bullish in April, the Fed stopped its POMO and, over the next several months, stocks fell. The stock market saw its first “flash crash” in May 2010, falling close to 10% in less than 20 minutes. While everyone was trying to figure out what had happened, primary dealers made a fortune as they shorted the market. The stock market fell nearly 20% from the highs of April to the lows of August, when no POMO was provided.”
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“After the elections are over on Tuesday and the Fed declares their intents for quantitative easing on Wednesday, the die will likely be set for the direction of prices for the remainder of the year.”
Slothower thinks that, because of rising commodity prices, “once the midterm elections are past us, I believe the Fed will stop its POMO campaign, and when they do, expect another whipsaw back down to follow.”
There will be plenty of companies playing “beat the number” on Tuesday with their quarterly earnings reports. Heading the list will be the villainous British Petroleum (BP), which is actually expected to post earnings of $1.51 per share. Other companies playing “beat the number” on Tuesday include: MasterCard (MA), Viagra manufacturer Pfizer (PFE), Hartford Insurance (HIG) and Kellogg (K). Good luck!