The Market opened up strongly today but quickly gave back those gains as the bears worked to close the gap on an intra-day basis (gaps are created from the market opening higher then the high of the previous day, and vice versa for when the market opens lower; these gaps typically are closed – meaning they retrace back to the previous days high/low). After that the bulls were in complete control. The market finished strongly as it seemed to try and move beyond the concerns in the credit market. For once it was nice to see Citigoup not making any news of note. There were also some descent earnings reports that reminded investors that to this point the credit concerns have been mainly limited to the financials and homebuilders. Tech stocks like GOOG, AAPL, CSCO, INTC, RIMM and others hit new 52-week highs adding to the thought that the market can rally without the complete support of the financials (historically that usually doesn’t happen).
The more and more the market withstands the constant barrage of bad news in the financials the more likely it seems, the major indexes will at least holds its value or increase from current levels. With articles like the one in The Independent, how much worse can it get? This article states that there is a possible one trillion in bad loans (i.e. subprime), which could result in at least a quarter of that becoming defaults. The more resiliency that the market shows in the face of news like this, the better.
Though not reported to any great extent, the worsening credit market might be renewing optimism that the Fed may lower interest rates again in the near future even as soon as the December Fed meeting.