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After dropping more than 400 points on last Tuesday and more than 500 on Wednesday, the Dow Jones Industrial Average rallied to close the 9 July week with a 1.3-percent boost and set a new record high close at 34,870.
The S&P 500 added 48.73 to end the week at 4,369. The NASDAQ climbed 142 to 14,701. Both also notched record highs.
Buyers rushed to take advantage of Thursday’s price dip, lifting markets out of negative territory for the week and giving them their third consecutive week of gains.
Friday’s bounce after Thursday’s slide continues the pattern in which market jitters are quickly overwhelmed by investors’ confidence that share prices will continue to rise as long as the U.S. Federal Reserve holds to its policy of low interest rates.
Also on Friday, with The Street confident of a strong economic recovery, energy and financial stocks—which would do well in a growing economy—were leading gainers.
Tech stocks also bounced, with shares of Amazon and Apple reaching new record prices.
At the same time, yields on treasury bonds sagged (see related story).
Because yields fall when bond prices rise, the dip in yields indicates that bond prices are being bid up because more are being sold, perhaps to people seeking safety from stocks’ volatility and an expected market correction when, and if, the Fed raises interest rates.
However, as we have noted, stock and bond prices rising together sends mixed signals about the economic and equity market’s future. One part of the gambling gang sees a continuing market boom while others forecast slower economic growth and possible contraction.
Yesterday, stocks hit another record as the corporate earnings season that kicks off this week and expectations remain high for stronger corporate profits.
And today, despite the high inflation numbers, the Dow opened higher and S&P and Nasdaq had hit new highs. But by closing time, with the inflation fears growing and worries that the Fed may raise interest rates next year, the Dow fell 107 points, the S&P was down 0.35 percent and Nasdaq Composite dipped 0.38 percent.
GOLD/SILVER: Despite the government’s rising inflation report of consumer prices reaching a 13 year high which is bullish for gold and silver, both precious metals were basically flat because the dollar gained strength. Gold gained $1.70 to close at $1,807 per ounce while silver slipped 0.68 percent to close at $26.05 per ounce.
Indeed, with global government debt hitting the highest level since World War II, surpassing the world’s annual economic output, and governments pouring borrowed money to prop up failing economies… The U.S. dollar is faring better than the more deeply indebted nations.
According to the Institute of International Finance, before the COVID War was launched, world-wide government debt to GDP was 88 percent. But with all the money pumping schemes, it increased to 105% of GDP in 2020. The IIF now forecasts that total government debt could spike to $92 trillion, with most of the increase coming from developed nations.
For example, Japan, which poured some $800 billion in economic stimulus to jack up its economy, has debt of nearly $10 trillion and debt-to-GDP ratio of 250 percent.
Thus, the strong dollar is not because of exceptional U.S. economic growth, but because other debt-to-GDP ratios are much higher.
OIL: Despite the rising tensions of COVID War 2.0 as we have detailed in this and previous Trends Journals which will reverse a worldwide economic recovery, oil prices rose today on expectations of further declines in U.S. crude inventories.
Brent Crude and West Texas Intermediate inched back to their recent highs closing at 76.40 and 75.16 per barrel respectively.
While the deal pitting Saudi Arabia against the United Arab Emirates on whether or not to increase oil output has stalled, we forecast that with Delta variant hysteria spreading and more nations taking lockdown measures—as detailed in this Trends Journal—the OPEC+ Gang will reach a deal that will keep oil prices from deeply sliding.
BITCOIN: As reported by CryptoCompare, Coinbase, Kraken, Binance and Bitstamp, among the largest crypto exchanges, saw trading volumes plunge over 40 percent in June. As we have been reporting, a combination of the measures governments have been taking to bring down the crypto market and negative reports by former big investors such as Tesla’s Elon Musk, have deflated the once soaring cryptocurrency sector.
However, Clara Medalie, research lead at crypto market data provider Kaiko told CNBC that despite the dramatic drop in trading volume, it’s still much higher than it was last year. “Volumes plunged in June on pretty much every exchange, however, overall volumes are still magnitudes greater than they were one year ago today,” she said.
And according to CryptoCompare, bitcoin which had spiked to $64,000 per coin this year hit a monthly low of $28,908, in June. It should be noted that our breakout point for bitcoin to deeply plunge is around $25,000 per coin.
As we go to press, bitcoin is trading at around $32,737 per coin.