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Market Update 070208
http://biz.yahoo.com/mu/update.html

4:20 pm : Stocks closed slightly lower Thursday as uncertainty about decelerating profit growth resurfaced to keep the market in a period of consolidation following last week's sizable market gains.

Even though the bulk of earnings season is now in the rearview mirror, the market's foreword thinking mentality couldn't help but weigh the ramifications of renewed concerns within the mortgage lending business, especially the potential impact on earnings for the S&P 500's most influential sector.

As a reminder, Q4 earnings may be up about 11%, but broader weakness is being masked by extremely strong profit growth from Financials. In fact, without its estimated 8% contribution in aggregate earnings growth, Q4 profit growth for the S&P 500 stands at an unimpressive 3%.

Last night, HSBC Holdings (HBC 89.78 -2.44), the world's third largest bank, warned that provisions for bad debt will be some 20% higher than previously thought. That news weighed heavily on mortgage lenders and, in turn, provided a reason to lock in gains throughout Financials, removing key leadership for the broader market.

Exacerbated worries about the sub-prime lending market aside, economic data have suggested that weakness in housing has yet to spill over into the general economy. Be that as it may, the fact that even luxury home builders are now running into trouble took an added toll on sentiment. Toll Brothers (TOL 33.39 -1.04) plunged 3% after following up a 33% drop in Q1 orders by saying full-year write-downs will "significantly exceed" forecasts. That news made matters even worse for last year's second worst performing S&P industry group. Homebuilders plunged 21% in 2006 while today's 2.7% decline provided an extra reason to consolidate gains from this year's second-best performing sector -- Consumer Discretionary.

Discretionary was also in focus today as a plethora of retailers announced same-stores sales results for January. The final tally showed that about two-thirds of retailers topped analysts' expectations, and some companies like Federated Departed Stores (FD 42.86 +1.54) and Gap Inc (GPS 19.75 +0.50) offered some encouraging news about Q4 earnings. However, disappointments from large retailers like Costco (COST 56.62 -0.51), which posted its slowest comps growth since November 2002, and Family Dollar (FDO 32.11 -1.14) left investors less than impressed about what was expected to be a strong month for almost every retailer.

Of the six sectors trading lower, though, Industrials turned in the day's worst performance. General Electric (GE 35.74 -0.36) fell nearly 1.0% amid reports that News Corp. (NWS 25.28 +0.58), a suggested holding in Briefing.com Active Portfolio, plans to launch a long-awaited business news channel in the fall that will compete directly with GE's CNBC.

Aerospace & Defense was also in focus after Northrop Grumman (NOC 74.39 +0.76) saying it will bid on a $40 bln Air Force contract no longer left rival Boeing (BA 89.52 -0.83) as the only bidder. Waste Management (WMI 35.35 -3.06), though, was the sector's worst performer (-8.0%) after posting a 15% drop in Q4 earnings.

While the market overall continues to show surprising resilience in the face of higher energy prices, economically-sensitive areas like transportation were not as fortunate, which also weighed on Industrials.

Crude for March delivery surged late in the day following reports of a fire at California's biggest gas field. The commodity closed up 3.6% near $59.70/bbl -- its highest level of the year, providing a lift to the Energy sector but not enough to act as an offset from a leadership standpoint. BTK +0.7% DJ30 -29.24 DJTA -0.6% DJUA +0.6% NASDAQ -1.83 SOX -0.5% SP500 -1.71 XOI +1.1% NASDAQ Dec/Adv/Vol 1544/1485/2.02 bln NYSE Dec/Adv/Vol 1738/1518/1.55 bln

10:00 am : Equities are still on the defensive as eight out of 10 sectors remains negative. The absence of leadership from the S&P 500's most influential sector -- Financials, which is also today's worst performer (-0.8%), is the most noticeable reason behind today's early struggles. HSBC exacerbating worries about the sub-prime lending market is taking a toll on Thrifts & Mortgage (-2.0%). Of the two sectors holding onto small gains, it is also worth noting that they -- Utilities and Telecom -- are two of the smallest weighted sectors on the S&P 500.DJ30 -35.81 NASDAQ -9.81 SP500 -4.15 NASDAQ Dec/Adv/Vol 1583/904/190 mln NYSE Dec/Adv/Vol 1684/961/98 mln

09:40 am : As expected, stocks open lower as uncertainty about decelerating profit growth resurface to keep the market in a period of consolidation. A mixed bag of monthly same-store sales figures provides an added sense of nervousness, especially with quarterly reports from retailers still to come.

With extremely strong earnings growth in the Financials sector so far masking what may still wind up to be an end to 13 straight quarters of double-digit profit growth, the world's third largest bank -- HSBC Holdings (HBC 89.65 -2.57) -- raising provisions for bad debt by 20% is weighing heavily on Financials. DJ30 -27.64 NASDAQ -7.52 SP500 -3.22 NASDAQ Vol 92 mln NYSE Vol 48 mln

09:15 am : S&P futures vs fair value: -2.7. Nasdaq futures vs fair value: -5.0.