After last week's less than devastating 195-point drop, the markets bounced back on the first trading day of May to close up 143 points (1.3%). After last week's downgrades in Europe fueled fears of contagion and compelled investors to sell, Greece's acceptance of the EU austerity measures this weekend elicited a wave of buying in US equity markets to start the week.Commodity sectors were notably weak even after a late-day New York Times article claimed "BP Says Crews make Progress Stemming Oil Leaks" and helped the entire sector mount a rally off lows. The article said the first of three containment domes have been constructed and all domes should be put in place over the leaks this weekend. The domes should then allow oil to be pumped to the surface in a controlled manner. We'll see if it works, I remain skeptical. BP (NYSE:BP) recovered from over 9% losses early in the day to close down 3.8%. The Oil Service Holders (NYSE:OIH) bounced back from 4% early losses to close up on the day 0.7%. The sector was primed for a bounce after last week's drubbing. Investors should have caution though as David R. Kotok of Cumberland Advisors advised in a letter to his clients. Kotok urges us to realize that this oil spill is already far worse than many claim and could be terribly ugly taking a decade to clean up, possibly inducing a double-dip and effectively disarming any ammo in the offshore drilling camp.
Shares of Goldman Sachs (NYSE:GS) found buyers today after Warren Buffett expressed his support for the embattled firm this weekend fueling a 3% snapback. Gold rallied early on to highs of 1,188 before drifting back down to the low 1,180s by the New York equity close.
Barry Ritholtz ran a competition last week for who could come up with the best caption for a picture of Lloyd Blankfein during his Senate committee testimony. My personal favorite: "You fool! You fell victim to one of the classic blunders – The most famous of which is “never get involved in a land war in Asia” – but only slightly less well-known is this: “Never go against Goldman when money is on the line”!" LOL, The Princess Bride is awesome! This admission won in my book only slightly over an all-time Seinfeld classic: "Was that wrong? Should I not have done that? I tell you, I gotta plead ignorance on this thing, because if anyone had said anything to me at all when I first started here that that sort of thing is frowned upon… you know, cause I’ve worked in a lot of offices, and I tell you, people do that all the time."
The market was helped today after March new home sales data showed the largest jump in 47 years, a 27% surge. The data release launched equities to new highs for the ongoing rally. Don't get too excited though, the sales numbers are bouncing off the record lows in February. The market left behind Microsoft (MSFT) and Amazon (AMZN) which lost 1.3% and 4.3%, respectively, after their disappointing earnings reports. Goldman Sachs (GS) was also weak losing 1% on day. It didn't matter though, the Dow gained 70 points for the day and closed at new highs. So much for GS marking the top! It's clearly being thought of as an isolated incident even though investors suffer from a complete lack of knowledge as to how deeply systemic the GS practices were and still are.