The S&P 500 stock index finished 0.5% higher after dipping slightly below the 1240 level I said yesterday was key support. Nasdaq and small stocks were up more. Bonds had another good day. Gold and other commodities were down slightly.
Fear has gotten fairly high. When clients start asking if they should sell that’s actually a good sign because it often marks turning points. Volume was about the same or a little better than on recent selling days and that is a good sign too.
Will this mini-rally last or be a one-day wonder? I don’t know, but this 10% correction in reaction to slower economic growth seems reasonable. As I wrote earlier, the Italy contagion fears seem overblown. Greece may not need another bailout for a couple years.
On the other hand, the worldwide economy is slowing, US debt talks will be with us for another 17 months and the European debt issues continue. For now, I don’t see an imminent crisis, just the continuation of a crummy backdrop overall but one in which corporations continue to beat estimates and make record profits.