The Dow fell a mere hundred points yesterday ' an amazing show of strength, considering the disturbing tenor of the news. For starters, it was reported that existing-home sales for March fell by 2%, pushing the median price down to $200,700, or 7.7% less than a year ago. On the energy front, the price of a barrel of crude set another record, closing at $119.37 a barrel. Airline stocks were in a state of collapse as a result, with the shares of UAL (shown in the chart below) and American Airlines in particular suffering devastating losses. Meanwhile, the Dollar Index was extending its losing streak, hitting a new all-time low versus the euro. Under the circumstances, we might have expected the Dow to fall by at least 500 points. Instead, it was off by just 100, and a few of the stocks at ground zero, such as Citigroup and Merrill Lynch, actually eked out small gains. This suggests that the bear rally begun in late January still has some life left in it. Whatever the case, cyclical forces that have been holding an avalanche at bay in recent weeks appeared to be a more powerful influence on investors yesterday than any bad news that may have crossed the tape. Wall Street's mellow attitude reminds us of the old saw, that if you can keep calm while all those around you are panicking, then you probably don't understand the situation. This would appear to be true in spades right now, given that the Dow is within 12 percent of record highs and continuing to hang tough against recession, a real estate collapse and a dollar headed toward oblivion. One further, disquieting item that got shoved off the front page yesterday concerned a leap in California foreclosures to their highest level in
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