Stocks come off highs late in the day; Second Quarter GDP, due tomorrow, is now a significant risk-for bears.
Despite today's late day drop, this has been an ugly week for bears; last week and most of this week there were active efforts to short the market midday as traders noted that:
1) stocks were overbought, with the S&P 500 up 11 percent in 2 weeks
2) recent commentary has not been particularly bullish on second half earnings from big industrials and energy companies.
Regardless: the market refused to go down.
Not only did it not go down on bad or neutral news, it moves up--even if modestly--on the slightest hint of good news.
Today, start with China rallying back, add dollar weakness, commodity strength, initial jobless claims in line with expectations, then throw in the strong 7-year auction, and you had a powerful stew that not only intimidated shorts, it also encourage real money buyers.
My emails had comments like this from traders: "I was waiting for pullback and now having to play catch-up."
Finally, some traders attributed the late-day drop in the market to a report from CreditSights (quoted by Bloomberg) that GE Capital may need an additional $14.7 billion in capital "if market conditions were to deteriorate and our severe case were to come to fruition."
Please note that: 1) this report was released yesterday, and 2) CreditSights made it clear that "our estimate for potential capital need in 2010 is roughly in-line with the company's estimate of between $2 billion and $7 billion."
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