Was it Barton Biggs’ comments or just the end of a day of panic? Whatever, the Dow recovers more than 190 points in the last two hours. Disney shares up on bullish outlook.
As today’s big market sell-off rolled on, a few old hands harrumphed that all was not lost. The stock market was wildly oversold, they said, and should bounce back, once traders get comfortable with a higher-interest-rate environment.
“It’s just a summer storm,” insisted analyst Barton Biggs of Traxis Partners on CNBC’s “Street Talk." “The market is as oversold now as it’s been at anytime in the last 20 years.” Then, he added, “I think there’s going to be a violent oversold rally out of this thing in the next couple of days.”
Biggs, one of Wall Street’s more respected strategists, was off by a couple of days. Right after his appearance, the averages came roaring back, wiping all of a 165-point loss on the Dow Jones industrials and nearly all of 52-point loss on the Nasdaq Composite. The Dow finished with a 25-point gain.
It’s called a double-bounce. The stock market hit a low on Monday, rallied a bit yesterday and was testing the Monday lows again today. Support emerged, and the indexes went up.
The rally completely turned the internals around. At about 3:30 p.m., decliners out-numbered gainers 2 to 1 on the New York Stock Exchange and just under 3 to 1 on the Nasdaq. By the close, they were even in both markets.
Crude oil prices weighed heavily on the markets for much of the day. The spot price for light sweet crude moved to $40.73 a barrel, another 13-year high. Truckers around the country were protesting high fuel prices, and one radio commentator in Seattle said the reason for high oil prices wasn’t the Organization of Petroleum Exporting Countries but, rather, oil company greed.
Having gotten this double-bounce, the question is low long will it last? Barton Biggs will tell you the rally should last a while because capital spending is increasing, and the economy is growing.
A little more skepticism came from Terry Bedford, a stock trader from Hamilton, Ontario. The rally will run out of gas in a few days as terrorism fears re-emerge.
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