WEDNESDAY 10/8/14; Selloff Cascades Around the Globe; COST; 10-Year Note Auction; FOMC Minutes Create US Stock and Bond Market Rally; Q3 Earnings Season Kicks off with AA

The global selloff cascades around the world with Asia next in line receiving a smack in the face. China’s SSEC gains +0.8% a lone bright spot but this is the first day of trading for China after the Golden Week holiday. Chinese property stocks are well bid after Beijing announced further stimulus last week. China manufacturing data is weaker than expected. Yesterday’s weak German data and somber IMF global growth forecasts create a pall. The dollar/yen drops to 108.16 after p



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pults 275 points, +1.6%, to16994, also printing a bullish key reversal pattern. The Dow printed above 17K but was unable to close above.

The COMPQ leaps 83 points, +1.9%, to 4469. The 100-day MA is 4422 and the 50-day MA is 4496. The RUT jumps 21 points, +1.9%, to 1097, above the 1093 level identifying the -10% correction off the July top. The NYA overtakes the critical 40-week MA at 10638 which places the broad indexes back in the cyclical bull market pattern. The NYA 10638 is a major market signal going forward with bulls winning big above and bears winning big below.

Financials leap higher with XLF gaining +1.9% yesterday’s bank weakness long forgotten. The semiconductors have been crushed lately but SOX is up +2.3% today. Even the sick energy sector caught a bid with XLE up +1%. Gold and silver each gain +1.1% from the lower dollar.

Surprisingly, copper finishes the day lower. Stock prices are running higher but Dr Copper, the main bellwether for the global economy, trades negatively. Curiously, CTB drops -2.4% and rubber is another key economic indicator. The drop off in machinery stocks will hurt Cooper Tire and Rubber earnings (large earth-moving equipment requires large tires).

WTIC crude oil continues lower despite the lower dollar after the Fed announcement. The lower oil prices create further relief at the gasoline pump for consumers which will lead to increased holiday spending. The average price for unleaded gas in the US is $3.26 per gallon. Other countries, such as European nations, would celebrate such low prices considering that the UK average gasoline price is $7.80 per gallon over double the US price. The UK price is higher due to additional taxes.

After the bell, Alcoa kicks off the Q3 earnings season, as is customary each quarter, with a strong earnings beat of 31 cents versus a 23 cents expectation. Top line revenue is $6.24 billion versus $5.85 billion expected. AA will benefit from the aluminum demand for the new F truck design. Alcoa CEO Klaus Kleinfeld says the company is “running on all cylinders.” AA stock has doubled from 8 to over 16 during the last year after it was ironically kicked out of the Dow Industrials Average. AA leaps +2% higher in AH trading and enthusiasm increases over a robust earnings season ahead. RT leaps +20% after reporting robust sales at the Ruby Tuesday restaurants.

The joy is dampened by chip-maker AMD dropping -9% after reporting a loss of market share and CEO Rory Read resigning to be replaced by Lisa Su. GPS ‘falls into the gap’ selling off -8% after CEO Glenn Murphy resigns to be replaced by Art Peck. ARWR collapses -44% on weak results for its Hep B drug. Comically, well-known Silicon Valley investor Marc Andreessen, voicing his displeasure over activist investors meddling in tech companies, refers to Carl Icahn as the “evil Captain Kirk.”