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Market Update 070123
http://biz.yahoo.com/mu/update.html

4:20 pm : Buyers returned Tuesday following Monday's broad-based decline amid some renewed optimism about the overall earnings picture for Q4. However, market gains were modest as a late-day surge in oil prices took some steam out of intraday recovery efforts, especially on the tech-heavy Nasdaq.

With earnings season in full swing and this week marking the biggest batch of reports thus far, Tuesday was no exception. Of the three Dow components reporting today, United Technologies (UTX 66.14 +2.05) was the best performer on the blue chip index (+3.2%) after it posted a 38% jump in Q4 profits.

The Industrials sector got an additional boost from Railroads (+3.7%), even in the face of the 4.7% surge in oil. Burlington Northern Santa Fe (BNI 80.15 +3.02) and CSX Corp (CSX 36.70 +1.60) soared 3.9% and 4.6%, respectively, after posting solid quarterly results and providing optimistic outlooks.

With regard to oil prices, crude for March delivery closed just above $55/bbl, recording its largest one-day increase since September 2005 following reports that President Bush will propose doubling the size of the Strategic Petroleum Reserve. While oil's surge helped Energy more than halve its year-to-date 4.6% decline, the sector's 2.4% advance was also attributed to the commodity's potential to crimp spending, exacerbating the continued rotation out of Technology.

Of the other five sectors closing in positive territory, Materials was also up more than 1.0% as weakness in the greenback made dollar-denominated commodity stocks more attractive.

However, even though only three sectors closed lower, the losing trio of Financials, Health Care and Technology are also the most influential of the 10 economic sectors. Since they collectively account for nearly 50% of the total weighting of the S&P 500, the absence of their leadership kept market gains at a minimum.

Health Care was in focus after Johnson & Johnson (JNJ 66.50 -0.68) beat expectations on record revenues; but management saying the acquisition of Pfizer's (PFE 26.34 -0.61) consumer health care group won't add to its bottom line until 2009 weighed on the stock all day. Fellow Dow component Pfizer was and even bigger drag on the sector, droppng 2.3% after being downgraded.

Turning in the day's second worst performance was Tech, as some more evidence (i.e. warnings and higher energy prices) feeding slowdown concerns acted as an overhang. Alcatel-Lucent (ALU 13.14 -1.05) warned that it won't make a profit in Q4 while Tellabs (TLAB 9.95 -0.07) guiding Q1 revenues below consensus estimates also took a toll on Communications Equipment (-1.4%). The latter was one of today's worst performing S&P industry groups.

However, not all was lost. With most of the bad news still priced into shares of Texas Instruments (TXN 29.60 +1.01), a better than expected Q4 earnings report last night prompting Merrill Lynch to upgrade the stock earmarked TXN as one of the sector's few bright spots. BTK -1.0% DJ30 +56.64 DJTA +0.3% DJUA 0.5% DOT -0.1% NASDAQ +0.34 NQ100 -0.3% R2K +1.0% SOX 0.1% SP400 +0.8% SP500 +5.04 XOI +2.4% NASDAQ Dec/Adv/Vol 1192/1824/2.04 bln NYSE Dec/Adv/Vol 1126/2153/1.66 bln

3:30 pm : Stocks bounce off afternoon lows but not nearly enough to make a significant change in the standings, especially on the Nasdaq. Before oil's late-day surge took the wind out of tech's sails, the S&P 500 was on track to recoup Monday's entire decline. However, Technology still languishing in negative territory, coupled with weakness in Health Care and Financials, removes some key leadership. The three sectors combined account for nearly 50% of the total weighting on the S&P 500.DJ30 +50.61 NASDAQ +1.37 SP500 +4.57 NASDAQ Dec/Adv/Vol 1211/1803/1.62 bln NYSE Dec/Adv/Vol 1093/2163/1.31 bln

3:00 pm : Sellers continue to show their resolve, so much so that the Nasdaq has recently slipped into the red for the first time since the opening bell. Still holing onto the bulk of their intraday gains, though, are mid-cap stocks. Among the biggest movers that still leave the S&P 400 MidCap within reach of closing at a new historic high are homebuilders (e.g. BZH +2.2%, HOV +4.7%, RYL +3.0%, and TOL +4.7%) after Goldman Sachs upgraded the group to Neutral from Sell. The PHLX Housing Sector Index is up 2.7% near eight-month highs. DJ30 +41.38 NASDAQ -0.03 SP400 +0.8% SP500 +3.55 NASDAQ Dec/Adv/Vol 1187/1802/1.47 bln NYSE Dec/Adv/Vol 1091/2155/1.19 bln

2:30 pm : The major averages slide to afternoon lows as oil prices spiking to session highs into the close of trading on the NYMEX send buyers to the sidelines. Crude for March delivery is currently up nearly 5% and above $55/bbl following reports that President Bush will propose doubling the capacity of the Strategic Petroleum Reserve to 1.5 bln barrels by 2027. While the news has lifted the Energy sector to its best levels of the day (+2.9%), renewed concerns about the commodity's potential to crimp spending has taken much of the steam of today's recovery efforts in Technology. In fact, the tech-heavy Composite has seen more than two-thirds of its recent advance completely erased.DJ30 +40.00 NASDAQ +3.02 SP500 +4.91 XOI +2.7% NASDAQ Dec/Adv/Vol 1045/1947/1.32 bln NYSE Dec/Adv/Vol 940/2275/1.07 bln

2:00 pm : The market continues to put together a solid recovery efforts following yesterday's broad-based decline. While Energy remains the day’s best performer, the recent upturn in Industrials, which now erases yesterday’s leading 1.07% pullback, is also noteworthy. The sector now accounts for four of today's top ten S&P industry groups. Construction & Engineering (+4.6%) leads the charge while an analyst upgrade on Robert Half International (RHI 40.58 +2.42) leaves Human Resources (+3.8%) in the No. 3 position.

More notably, though, is the surge in Railroads (+3.7%), which currently ranks fourth despite a 2.0% surge in oil prices. Burlington Northern Santa Fe (BNI 81.10 +3.97) and CSX Corp (CSX 36.87 +1.77) are both up more than 5.0% after posting solid quarterly results and providing optimistic outlooks.
DJ30 +67.10 DJTA +0.8% NASDAQ +12.96 SP500 +7.53 NASDAQ Dec/Adv/Vol 996/1989/1.21 bln NYSE Dec/Adv/Vol 922/2301/986 mln

1:30 pm : More of the same for the indices as stocks and bonds continue to trade in opposing directions. Albeit not aggressively selling off, Treasuries have relinquished all of yesterday's flight-to-quality rebound and surprisingly weakened following an $8 bln 20-year TIPS auction that attracted a solid 58.7% indirect bid. The 10-year note is now down 9 ticks, lifting the yield to a session high of 4.79%. Thus, with the spread between the 2-year and 10-year notes slipping deeper into inversion (15 bps), the rate-sensitive Financials sector still finds itself struggling to find its footing.DJ30 +70.11 NASDAQ +14.46 SP500 +7.97 NASDAQ Dec/Adv/Vol 969/1980/1.11 bln NYSE Dec/Adv/Vol 898/2300/904 mln

1:00 pm : A renewed wave of buying interest within the last 15 minutes now leaves all major averages at fresh session highs. Crude oil futures recently hitting their best levels of the day and closing in on $54/bbl (+2.3%) now leaves the Energy sector nearly halving its 4.6% year-to-date decline. The ability by the S&P 500 to break through a key resistance level of 1429 is also exacerbating the latest move to the upside.DJ30 +72.02 NASDAQ +13.61 SP500 +7.74 XOI +2.1% NASDAQ Dec/Adv/Vol 1035/1895/1.00 bln NYSE Dec/Adv/Vol 991/2192/808 mln

12:30 pm : No real change in sentiment as traders make their way through the New York lunch hour. Eight out of 10 sectors are still in positive territory, led by a 2.0% advance in Energy. Telecom, though, is now at session highs, but as one of the least influential sectors on the S&P 500, its 1.0% gain is more than offset by even a 0.5% decline in the more influential Health Care sector. DJ30 +42.38 NASDAQ +10.21 SP500 +4.79 NASDAQ Dec/Adv/Vol 1041/1857/894 mln NYSE Dec/Adv/Vol 989/2166/720 mln

12:00 pm : The market is holding onto the bulk of its modest gains midday as investors finally begin to embrace what is actually shaping up to be a decent overall earnings season.

Among the three Dow components out with results this morning, United Technologies (UTX 66.15 +2.06) is garnering the bulk of buying interest (+3.2%) after it posted a 38% jump in Q4 profits and reaffirmed its FY07 EPS outlook. Bargain hunters believing yesterday's 3.5% sell-off in Boeing (BA 87.54 +1.94) and 2.0% decline in Caterpillar (CAT 58.98 +0.81) to a new 52-week low were exaggerated are also helping to renew enthusiasm about valuations throughout the sector as virtually every component (even transports in the face of surging oil prices) is trading higher.

With regard to crude more than erasing all of Monday's 1.7% pullback, a subsequent surge in the Energy sector (+1.9%) is providing even more influential leadership to the upside. The only other sector posting a gain of at least 1.0% is Materials. Albeit getting no assistance from DuPont (DD 49.00 -1.10), the sector's only laggard, the greenback retreating after being up six straight days against the yen is making dollar-denominated commodity stocks more attractive. DuPont is down 2.2% after matching analysts' forecasts but on revenues that were lighter than expected.

Although sector gains remain modest, the growing belief that Tech stocks are oversold on a short-term basis has helped to restore some enthusiasm throughout the beaten-down Tech sector. Among the biggest names helping to restore confidence is Texas Instruments (TXN 29.85 +1.26) which, after posting better than expected Q4 earnings last night, was upgraded at Merrill Lynch.

Unfortunately for the bulls, the absence of leadership from other influential areas like Financials and Health Care is minimizing market gains. The latter is under pressure primarily in response to an analyst downgrade-induced sell-off (-2.5%) in shares of Dow component Pfizer (PFE 26.29 -0.66). Bank of America (BAC 53.25 -0.40) topping Wall Street expectations but posting results that were the weakest of the big money-center banks is acting as an overhang for Financials. BTK -0.7% DJ30 +41.26 DJTA +0.2% DOT +0.3% NASDAQ +10.93 NQ100 +0.4% R2K 1.0% SOX +1.0% SP400 +0.8% SP500 +4.83 XOI +1.9% NASDAQ Dec/Adv/Vol 1003/1870/784 mln NYSE Dec/Adv/Vol 986/2149/636 mln

11:30 am : The indices spike higher within the last 30 minutes and are at their best levels of the morning, spearheaded by a growing sense that the recent sell-off in Tech may be overdone. With most of the bad news already priced into shares of Texas Instruments (TXN 29.87 +1.28), a Q4 earnings surprise last night prompted Merrill Lynch to upgrade the stock. It's 4.5% advance paces the way among the 14 (out of 18) components in the PHLX Semiconductor Sector Index trading higher. Tellabs (TLAB 10.03 +0.01) recently turning the corner further underscores that a bottom may be forming in tech. The stock was down as much as 2.7% earlier but is now flat amid further analysis of initially disappointing Q1 revenue guidance.DJ30 +45.46 NASDAQ +12.10 SOX +1.3% SP500 +5.14 NASDAQ Dec/Adv/Vol 1049/1785/626 mln NYSE Dec/Adv/Vol 1000/2069/520 mln

11:00 am : Buyers remain in control of the early action but the major averages are merely clinging to small gains. Energy (+1.4%) continues to lead the way as oil prices hover near session highs (+1.8%) while Industrials is also helping to provide a floor of key market support. United Technologies (UTX 66.03 +1.94) is today's best performing Dow component, surging 3.0% after posting a 38% jump in Q4 profits and reaffirming its FY07 EPS outlook. Boeing (BA 87.01 +1.41) recouping nearly half of yesterday's downgrade-induced sell-off (-3.5%) is also contributing to upside momentum in the sector. DJ30 +12.39 NASDAQ +3.84 SP500 +1.48 NASDAQ Dec/Adv/Vol 1144/1625/482 mln NYSE Dec/Adv/Vol 1083/1929/390 mln

10:30 am : Not much has changed since the last update as the indices continue to vacillate around the unchanged mark. Technology, though, has inched into positive territory and, as evidenced by advancers on the tech-heavy Nasdaq now outnumbering decliners, its turnaround appears to be restoring some confidence in beaten-down areas like semiconductor and software.

Be that as it may, Tech's modest 0.1% gain is not nearly enough to offset a 0.6% decline in Health Care. An analyst downgrade on Pfizer (PFE 26.13 -0.82) is acting as the sector's biggest constraint while questionable guidance from fellow Dow component Johnson & Johnson (JNJ 66.86 -0.32) overshadows a solid Q4 report on record revenues. DJ30 +11.43 NASDAQ +1.21 SOX +1.1% SP500 +0.66 NASDAQ Dec/Adv/Vol 1114/1542/378 mln NYSE Dec/Adv/Vol 1038/1862/290 mln

10:00 am : All three indices are now trading above the flat line, but split sector leadership merely underscores the lack of conviction on the part of buyers. Of the five sectors trading higher, Energy is by far and away this morning's leader. However, Energy's 1.3% advance in sympathy with a 1.5% surge in oil prices ($53.40/bbl) is merely accompanied by modest 0.3% gains from Materials and Telecom, which have the smallest weightings on the S&P 500. Technology is paring early losses; but its weakness, coupled with the absence of leadership from other influential areas like Financials and Health Care, continue to act as offsetting factors.DJ30 +8.26 NASDAQ +2.87 SP500 +0.82 NASDAQ Dec/Adv/Vol 1289/1145/158 mln NYSE Dec/Adv/Vol 928/1344/96 mln

09:40 am : With earnings season in full swing and this week marking the biggest batch of reports thus far, today has been no exception. In fact, the overall picture for Q4 still looks decent, with several large-cap names (e.g. JNJ, UTX, BAC, BNI, COH, DHI, EMC, WB and XRX) this morning surpassing Wall Street expectations. However, since the earnings news hasn't been convincing enough to dispel concerns about expectations for decelerating profit growth as the year progresses, as evidenced by tepid guidance and/or notable warnings -- especially in tech (e.g. ALU, TLAB and TXN), investors are finding it difficult to get buying efforts back on track. DJ30 -2.46 NASDAQ -2.80 SP500 +0.20 NASDAQ Vol 92 mln NYSE Vol 56 mln

09:15 am : S&P futures vs fair value: -0.3. Nasdaq futures vs fair value: -3.2.

09:00 am : S&P futures vs fair value: -0.5. Nasdaq futures vs fair value: -3.5. Futures trade has improved since the last update but still points to a lower start for stocks. The lack of notable economic data to provide further evidence that the Fed has successfully managed a soft landing appears to be placing more emphasis on guidance that so far is a mixed bag at best. A 1.8% surge in oil prices to $53.50/bbl, albeit still at a manageable level, is also contributing to some hesitation on the part of buyers. But investors still rotating out of seasonally weak tech names may in turn find beaten-down areas like Energy, with leadership potential, more attractive.

08:30 am : S&P futures vs fair value: -1.1. Nasdaq futures vs fair value: -4.2. Still shaping up to be a weak start for stocks as both the S&P 500 and Nasdaq 100 futures languish below fair value. Meanwhile, Johnson & Johnson (JNJ) has been the latest blue chip to top Wall Street estimates; but looming uncertainty tied to the growth prospects within Technology continue to leave valuations in question. As a reminder, Tech was this year's best performing S&P 500 sector (+3.9%) one week ago today but underlying nervousness contributed to pushing it into negative territory for the year yesterday.

08:00 am : S&P futures vs fair value: -1.2. Nasdaq futures vs fair value: -4.2. Early indications suggest Monday's weakness may carry over into this morning's open. Dow components DuPont (DD) and United Technologies (UTX) are just a couple of the large-cap names that either met or exceeded consensus earnings estimates today. Be that as it may, with such a dark cloud still hanging over the influential sector that is Technology, some more evidence feeding slowdown concerns is acting as an overhang.

Texas Instruments (TXN) topped expectations but guided Q1 revenues below street expectations, Alcatel-Lucent (ALU) warned it won't make a profit in Q4 and Tellabs (TLAB) guided Q1 revenues below consensus estimates.