This is The Wall Street Digest Hotline Update for Tuesday, July 8, 2008, at 6:00 p.m. EST.
Oil prices fell and stock prices rallied today, led by the financial stocks. At the closing bell, the Dow jumped 152 points, closing at 11,384, while the Nasdaq gained 51 points, closing at 2,294. The S&P 500 closed 21 points higher at 1,273. Oil closed $5.33 lower at $136.04 per barrel, and gold closed $5.50 lower at $923.30 an ounce.
Pending U.S. home re-sales fell more than expected, indicating that prices have yet to touch bottom.
Oil prices fell by about $11.00 on Monday and Tuesday. However, we are still producing 85 million barrels per day and consuming 86 million. Consumption of oil will accelerate in the two fastest growing economies: India and China. The average American consumes 25 barrels of oil annually, India 2 barrels annually and China 1 barrel annually. Demand for oil is still growing 1.4 percent annually.
A commodities correction is underway but the shortage of food and raw materials has not been solved.
The financial stocks rallied today, but more write-downs (big ones) are coming. Let's continue to avoid the banking, financial, and housing sectors. I don’t see a housing bottom until at least late 2009.
This is a two-sector bull market. If you remove energy, oil, coal, natural gas, commodities, agriculture, and food, the U.S. stock market is down 30 percent over the past 12 months.
Chilling debt levels have destroyed the banking and the financial industries. The housing sector is still deflating. Rising oil prices will destroy this great nation, while Congress does nothing. The approved rating for congress just fell to 9 percent. Americans still blame Congress for $4.00 a gallon gasoline.
I will continue to trim positions from our portfolio of recommendations. You should stay focused on our energy, oil, coal, natural gas, and commodities, agriculture, and food recommendations.
Stay close to our Tuesday/Friday Hotline Updates.
The next Hotline Update will be on Friday, July 11, 2008, at 6:00 p.m. EST.