The intra day volatility in the markets continues on the extreme side.  Near the end of the trading day, we’re roughly flat.  At one point, the markets were down between one and two percent and up as much as a percent.  These intra day swings feel orderly and not necessarily panicked.  By this, I mean that specific stocks are up and down as much as I would intuitively expect them to be given the market’s overall direction.  Nothing necessarily sticks out.  The increased use of exchange traded funds may have something to do with this, with massive buckets of stocks being bought and sold rather than the individual names.  I’m not sure if that’s really the reason, but some traders we talk to suggest that it might be.

The market swings clearly reflect shifting macroeconomic concerns more than anything else.  Intel did report last night and is now down about 12%.  While we don’t own the stock, we do follow it.  Their results really weren’t that bad and while their guidance was softer than is seasonally normal, I’m sure they are being conservative given the economic environment.  As we enter earnings season in earnest next week, I’d suspect many companies will take the same approach unless their businesses are just on fire.  And just to be clear, by saying on fire, I mean doing  well!

Of course, guidance based on an uncertain outlook tends to feed the flames of uncertainty.  Momentum can move stocks in both directions and the current direction has generally been down.  International stocks even took it on the chin yesterday as folks have begun to consider the real possibility that worldwide economies aren’t as decoupled from one another as emerging market bulls may lead one to believe.  (For the record, we’re not a part of the decoupling camp and have repeatedly held to the view that a slowdown here can and will affect growth abroad.)   

But in spite of the daily volatility, the S&P 500 continues to bounce off the 1370 level or thereabouts, suggesting that significant additional downside may be limited barring any major negative data points.  Given how far things have fallen, we suspect we’re due for a rally.