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Good morning. Without a headline, a story, an event, or even a rumor, it is often difficult to determine the real driver of a significant move in the markets. And in short, that's exactly what we had to deal with Wednesday afternoon. Stocks opened higher on well, come to think of it, the reasons for the early morning advance weren't really that clear. But with Finland voting Kyllä (that's yes in Finnish) to the EFSF vote and the end of the quarter growing near, traders didn't need much of reason to continue the 3-day joyride to the upside.

Upon further reflection, the three-day blast up and out of the abyss from Friday to Tuesday seemed to lack a raison d’être as well. Friday's move at least made some sense as the shorts were afraid that the G-20 might pull out the "coordinated response" bazooka and start blasting euros at the crisis. And when no such weaponry was brandished by the powers-that-be come Monday morning, one might have expected stocks to resume their southerly trek. But with confidence running high, the mere rumor that a new "grand solution" was in the works was all it took for traders to push the Euro/Stock buy buttons.

So yes, both Friday's and Monday's moves appeared to make sense. However, the relentless buying seen on Tuesday - even as the denials of any "grand solution" swirled from all points of the Eurozone map - did not. So, as confidence that a quick and easy solution could be found to Europe's problems began to fade, so did the rally.

Which brings us to Wednesday's action. Frankly, I was more than a little surprised to see the rally resume in the early going. Again, without even a hint that the European grand solution had a fighting chance of ever seeing the light of day, I would have expected to see some selling. But with confidence still elevated that Europe was on the cusp of fixing its problems once and for all, stocks simply powered higher.

Although what happened next was diametrically opposed to what had been occurring (what else would you expect from this stock market?) and was, at first blush, a bit illogical, the afternoon selling made sense - well, to me, anyway. From where I sit, it's a confidence thing. And while nobody expects Germany to produce a "TARP moment," there is a chance that it could happen. Remember, the Germans aren't exactly fired up about bailing out anybody. As such, it isn't beyond comprehension that the Bundestag (the lower house) might want to make a statement. Thus, anyone with a timeframe shorter than today's lunch break probably wanted to get out of the way - just in case.

The story is similar here at home. With the second revision of Q2 GDP due out before the bell today, traders may not have wanted to be long in the event of any unexpected downward revisions. Again, this market is about confidence. And when it comes right down to it, no one has a lot of confidence that everything is going to be peachy keen going forward.

Sure, it is easy to have enough confidence to justify putting on a long trade with the S&P (NYSEARCA:SPY) sitting down around 1120. After all, if the all-important line in the sand fails, one can stop out the trade without much damage. But after the market pops a quick 600 Dow (NYSEARCA:DIA) points in just three days, it appears that the confidence of traders grows thin (and, in short, this is what the term "resistance" is all about on the charts).

So, while this may be a perverse oversimplification, if you find yourself scratching your head about why the market is moving one direction or the other, just remember that it's a confidence thing.

Turning to this morning... The big news is the passage of a measure to expand the powers of the EFSF in Germany's lower house. The vote was considered a referendum on Angela Merkel's handling of the crisis. In other news, Citi has cut its global growth forecast for a second time this month. Here at home, we've got some big economic data to revew, so let's get to it...

On the Economic front... Initial Claims for Unemployment Insurance for the week ending 9/24 fell by 37,000 to 391K. The report was better than the consensus estimate for 419K and better than last week’s revised total of 428K. Continuing Claims for the week ending 9/17 came in at 3.729M vs. 3.715M and last week’s 3.727M.

Next, the government’s second revision to the nation’s second quarter GDP shows the economy grew at a rate of +1.3% during the April-June period, which was above the estimates for a growth rate of +1.2% and above the first quarter’s downwardly revised growth rate of +0.4%. On the inflation front, the Price Deflator came in at +2.6% vs. expectations for +2.4%. Final Sales came in at +1.6%, which was above the expectations for +1.2%. Stock futures have spiked higher on the news.

Thought for the day... Remember that you can choose a peaceful mode at any point of any day...

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell:

  • Major Foreign Markets:
    • Australia: -0.73%
    • Shanghai: -1.12%
    • Hong Kong: closed
    • Japan: +0.99%
    • France: +0.41%
    • Germany: +0.29%
    • Italy: +1.13%
    • Spain: +0.75%
    • London: +0.12%

  • Crude Oil Futures: +$1.18 to $82.38
  • Gold: -$2.70 to $1615.40
  • Dollar: lower against the Yen, Euro and Pound
  • 10-Year Bond Yield: Currently trading at 2.002%
  • Stock Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +11.66
    • Dow Jones Industrial Average: +111
    • NASDAQ Composite: +32.53

Wall Street Research Summary


  • ONEOK Partners (NYSE:OKE) - Credit Suisse, Wells Fargo
  • FMC Technologies (NYSE:FTI) - JPMorgan
  • Qiagen (NASDAQ:QGEN) - Leerink Swann
  • Layne Christensen (NASDAQ:LAYN) - UBS


  • Advanced Micro (NASDAQ:AMD) - BofA/Merrill, Longbow Research, ThinkEquity
  • DaVita (NYSE:DVA) - Citi
  • Goldman Sachs (NYSE:GS) - Estimates cut at Deutsche Bank
  • Morgan Stanley (NYSE:MS) - Estimates cut at Deutsche Bank
  • Dril-Quip (NYSE:DRQ) - JPMorgan

Disclosure: Long positions in stocks mentioned: none