Bear Market Rally in Stocks Alive and Well

bear market rallyThere’s plenty for the stock market to be happy about this morning.

After the market closed yesterday, the reported third-quarter profit for search engine giant Google Inc. (NASDAQ/GOOG) jumped 32% to $2.17 billion, as businesses are spending more on online advertising. Google’s profit beat the Street by a wide margin. Google stock jumped the most in two years overnight on foreign markets. The stock will pop this morning when it opens on the NASDAQ.

Intel Corporation (NASDAQ/INTC) said earlier this week that its third-quarter net income jumped 59% to $2.96 billion. More importantly, the world’s largest computer chipmaker forecast that fourth-quarter rising demand from its customers in emerging economies would lead to higher fourth-quarter sales than analysts had been expecting.

JPMorgan Chase & Co. (NYSE/JPM) said that it made $4.42 billion in its third quarter, up 23% from the same period of 2009. The bank sees its own shares as a deal and spent $2.6 billion so far this year buying them. JPMorgan’s CEO said that he hopes to raise the bank’s dividend in the first quarter of next year.


So there you have it. Three companies that, in a matter of days, added $9.55 billion to the coffers of investors in public companies. But it’s not just the earnings that are strong; it’s what going on with other companies and positive profit projections for the fourth quarter that the stock market looks forward to.

Yahoo! Inc. (NASDAQ/YHOO) is rumored to have hired Goldman Sachs to deal with possible takeover advances. If you remember, Microsoft Corporation (NASDAQ/MSFT) had offered to buy the company for about $50.0 billion only two years ago.

Wal-Mart Stores, Inc. (NYSE/WMT) said yesterday that it is positive going into the fourth quarter and expects same-store sales to rise during the typically busy fourth quarter Christmas season. And, this morning, a news report says that giant Sony Corporation (NYSE/SNE) sees a very strong fourth quarter as well. The profits on Wall Street keep rolling in. The takeovers are slowly starting back up again as well.

In spite of market obituaries written by stock market analysts and economists to the contrary, as I have been writing for months, the bear market rally in stocks that began on March 9, 2009, is alive and well. The stock market has risen an unbelievable 72.3% since its March 2009 low. I say “unbelievable” because most retail stock market investors can’t believe they missed a 72.3% return on stocks in less than two years.

I’ve written many times: if it weren’t for the pathetic U.S. housing market, the stock market would be on a real tear. I expected third-quarter profits for big American companies to be strong, and they were. I also recently wrote an article saying it will be a “Very Merry Christmas Season for U.S. Retailers” this year and I’m sticking with that forecast.

Immediate term, I see stock prices continuing to ride the wall of worry higher. I’m less optimistic going into 2011 because of my concerns over the final blowout of U.S. home foreclosures (now apparently on hold by at least Bank of America), rising national debt, and the threat of higher interest rates should the greenback continue its free fall against other world currencies.

Enjoy the market rally while it lasts.

Michael’s Personal Notes:

The housing market just can’t get a break.

Interest rates on U.S. home mortgages have now fallen three weeks in a row and sit at their lowest level on record: 4.19%. Yes, you can buy a home with a standard 30-year fixed-rate mortgage at the ridiculously low 4.19% interest rate. Problem is that people are not buying homes, because they continue to be scared to do so.

RealtyTrac Inc. reported Thursday that lenders foreclosed on 102,134 U.S. homes in September 2010 — a new record. About one-third of all houses sold in the U.S. last month were homes that had been previously foreclosed on.

Foreclosures will ease this quarter, as major banks are under pressure to review their foreclosure process. But this will just delay the inevitable…millions more homes eventually coming onto an oversupplied market.

Where the Market Stands

The Dow Jones Industrial Average opens this morning up 6.4% for the year. I continue to be immediate term bullish on the stock market, believing that the bear market rally that started in March 2009 remains alive and well.

What He Said:

“As a reader, you’re aware I’m not a Greenspan fan. In the years that lie ahead, I believe we (and our children) may pay dearly for the debt bubble Greenspan created during his tenure as head of the U.S. Federal Reserve.” Michael Lombardi in PROFIT CONFIDENTIAL, March 20, 2006. “A low savings rate was eventually blamed for the length of the Great Depression. Consumers just didn’t have enough money to spend their way of the Depression. With today’s savings rate being so low, a recession could have a profoundly negative effect on over-extended consumers.” Michael Lombardi in PROFIT CONFIDENTIAL, March 26, 2006. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.