So far–so far–this is a normal correction. Watch the GDP number on Thursday

I know this is painful.

Stocks, mine in the JubakPicks.com portfolios and in my own portfolios, are down. And it’s starting to feel serious. Stocks have dropped for four trading sessions in a row and for six of the last seven.

Since the decline began, small cap stocks have taken the worst of the beating with the Russell 2000 index down 9.2%.  The damage to the NASDAQ Composite and the Standard & Poor’s 500 indexes is less but still substantial at 5.2% and 4.5%, respectively.

But so far this looks like the kind of correction–a drop of 10% or so–that punctuates most rallies. We just haven’t had a correction like this in the rally from th March 9 bottom. One of the big criticisms of this rally has been that it’s been too far, too fast and that it needed a correction to put in a new base.

Well, your wishes have been granted. This looks like exactly the kind of correction that rally skeptics have been wait for.

So far, though, I don’t see any fundamental change in the conditions supporting this rally. Read more

Bad day at the bond auction drives interest rates higher; a sign of things to come?

What if they gave a Treasury bond auction and nobody came?

“Nobody” is highly unlikely but lower demand isn’t. That’s what happened at Thursday’s auction for $12 billion in 30-year Treasury bonds.

With demand lighter than expected yields climbed to 4.009%. Before the auction bond dealers were expecting the bonds to sell with a higher price and hence a lower yield of 3.9943%.

A few hundreds of a percentage point may not seem like much but it’s a huge shift for Treasuries, one of the world’s most liquid investments.

Demand, which had been 2.9 times supply in September’s auction, fell to just  2.3 times supply. The biggest drop in demand came from overseas investors including foreign central banks. In September’s auction overseas investors bought 46.5% of the auction compared with just 34.5% on Thursday.

Who can blame overseas investors for pulling back from the Treasury market? The U.S. dollar continues to drop. Each drop makes a U.S. Treasury worth a little bit less to investors who think and live in euros, renminbi, or won. 

The Dollar Index, which tracks the dollar against basket of currencies,  fell to the lowest level since August 2008 on Thursday.

And the U.S. economy continues to look like one of the world’s weakest with the recovery here lagging all of Asia, parts of Europe, and Brazil and Chile in South America.

I’d need a higher yield too before I bought Treasury bonds against trends like those.

How much is that house? At least 10% below the asking price

When sales of existing homes fell in August–for the first time since March–home sellers jumped into action, slashing the asking price on their properties.

The average discount from asking price to sale price was 10% as of October 1, according to Trulia, a provider of real estate pricing date. The total hit? A $28.4 billion price cut in an effort to attract buyers.

So where was the worst damage? And what does this discounting mean for future home prices? Read more

Job loss is slowing but not very quickly

Initial claims for unemployment–that’s the number of people filing claims for unemployment for the first time because they’ve just lost a job–fell by 33,000 from the previous week to just 521,000, according to data released this morning by the Department of Labor.

That’s the lowest number since January and below the 540,000 initial claims that economists had expected for the week.

The four-week moving average –which washes out some of the volatility in the weekly numbers–fell to 540,000 last week from 549,000 the week before.

So job loss is slowing. But progress is painfully slow. Read more

Earnings above low expectations? Probably. Revenue growth? Unlikely. Will that be enough for a rally?

Last June when this rally looked likely to falter, earnings bailed it out.

Not that earnings were so great. They were just better than expected. Analysts had reduced their predictions by so much, in fact, that some companies turned in quarters that were 20, 30, or even 40 cents a share better than expected.

On October 5 the market moved on on the hope that earnings season, which starts on October 7 when Alcoa (AA) reports, can repeat that magic. Read more