It has been a good news, bad news kind of day for trading in world markets. The good news is that the Dow broke through 22,000 to a new all-time high. The bad news is that despite a number of positive earnings reports from companies including Apple, Garmin and Allstate which send their shares up 5%, 4% and 3% respectively, the S&P and Nasdaq were unable to confirm the Dow and instead traded flat to lower through much of the day. 

This action suggests that the bull market which started back in November, plus the recent advance that has seen the Dow rally for 8 straight day, may be near exhaustion as we head toward the weakest time of the year for stocks. After the close we could see the bulls last stand as Tesla Motors, the last of the big momentum stocks to report earnings, reports its results. Comments on sales and the big planned ramp up of Model 3 production may capture particular attention with traditional automakers down in the dumps this week following a weak July for auto sales.  

WTI crude oil bounced back today as some fears subsided. DOE oil inventories fell 1.5 mmbbls, not as good as the 3.0 mmbbl decline the street had been hoping for, but not as bad as the 1.5 mmbbl increase in API inventories reported yesterday either. The rebound in oil was not enough, however, to shore up resource dollars as CAD, AUD and NZD all continued to give back some of their recent big gains. 

Meanwhile, EUR and GBP continue to trend upward ahead of tomorrow’s Bank of England meeting. The Bank is not expected to raise interest rates this time and a change in the composition of the MPC means that we may not get as many dissenters as last time. 3 or more dissenters would be seen as hawkish, 2 dissenters as neutral and 1 or less as dovish. The accompanying inflation report may be particularly important as it could indicate how much pressure Governor Carney is under to start raising rates this year. 

SF Fed President Williams’ comments on wanting to start running down the balance sheet this fall didn’t have any impact, indicating that this is in line with what the street is expecting. 

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