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Market Update 070220
http://biz.yahoo.com/mu/update.html


4:20 pm : What was initially shaping up to be a logical pullback, given last week's sizable market gains and the growing realization that earnings growth is decelerating, ended up turning into another victory for the bulls.

While there wasn't overwhelming evidence Tuesday to justify follow-through buying efforts, especially with the Dow fresh off its 30th record close since October and turning in its best weekly performance (+1.5%) in three months, investors eventually rallied around some M&A news, another decline in oil, and an upbeat outlook from Wal-Mart (WMT 50.16 +1.68).

The Dow component surged 3.5% after posting record Q4 sales and earnings and then forecasting Q1 profits at the high end of expectations. Wal-Mart's gain helped to offset a less than stellar year-end earnings report from Home Depot (HD 41.29 -0.15).

Also helping the blue-chip index close at a historic high for the fourth straight session was a new all-time high on McDonald's (MCD 45.84 +0.52) and a 1% advance from Hewlett-Packard (HPQ 43.21 +0.44) heading into its Q1 report after the close.

Among the eight sectors finishing in positive territory, Consumer Discretionary (+0.7%) turned in the best performance. Retailers (RLX +1.0%), benefiting from Wal-Mart's upbeat outlook as well as Target (TGT 64.30 +1.39) surging 2.2% after backing February comps growth of 4-6%, also got a boost from lower oil prices.

Crude for March delivery, which expired today, fell 2.2% to $58.07/bbl amid speculation warm weather forecasts will curb demand for heating oil. Crude for April delivery, the new front-month contract, fell 1.7% to $58.85/bbl.

As evidenced by the AMEX Securities Broker / Dealer Index closing sharply higher and near record levels, some M&A news also made the rounds Wednesday. Sirius Satellite Radio (SIRI 3.92 +0.22) and XM Satellite Radio (XMSR 15.41 +1.43) hooking up in an $11.4 bln "merger of equals" was the biggest announcement. Even though such a deal faces significant regulatory hurdles, the two companies soared on the news and combined to account for roughly one sixth of the total volume on the Nasdaq. DJ30 +19.07 DJTA +0.8% DJUA 0.5% DOT +0.6% NASDAQ +16.73 NQ100 +0.7% R2K +1.0% SOX +0.3% SP400 +0.7% SP500 +4.14 XOI -0.8% NASDAQ Dec/Adv/Vol 1075/2011/2.15 bln NYSE Dec/Adv/Vol 1296/2012/1.24 bln

11:00 am : The major averages are bouncing off their worst levels but not nearly enough to make a significant change in the standings. Turnarounds in the Financials, Discretionary and Staples sectors, coupled with Technology halving its early losses, are contributing to the market's improved stance.

Oil prices hitting fresh session lows near $57/bbl are finally garnering some attention; but that's due in large part to the Energy sector not subsequently sacrificing much more in the way of leadership. Crude for March delivery, which expires today, is down 3.3% after the D.O.E. recently said the Strategic Petroleum Reserve fill could go to 100,000 barrels/day at a later date through royalty-in-kind deals.DJ30 -34.80 NASDAQ -4.52 SOX -0.7% SP500 -2.93 NASDAQ Dec/Adv/Vol 1650/1202/744 mln NYSE Dec/Adv/Vol 1909/1141/338 mln

10:30 am : The indices are still languishing near morning lows as sellers remain an active bunch. On the Dow, 23 out of 30 components are trading lower, led by a 1.4% in General Motors (GM 35.83 -0.51). GM shareholders continue to show their displeasure about continued talk of DaimlerChrysler (DCX 72.62 -0.71) unloading its Chrysler unit.

Intel (INTC 20.94 -0.29) is turning in a similarly dismal performance while Home Depot (HD 41.04 -0.40) posting a 28% drop in Q4 profits also offsets Wal-Mart's (WMT 49.56 +1.08) record quarter and encouraging outlook for Q1. DJ30 -43.18 NASDAQ -10.48 SP500 -4.68 NASDAQ Dec/Adv/Vol 1767/1006/578 mln NYSE Dec/Adv/Vol 1968/1008/242 mln

10:00 am : The market is extending its reach to the downside as nine out of 10 sectors are now in negative territory. Energy (-1.1%) is pacing the way as plunging oil prices exacerbate concerns about the sector's earnings potential.

Materials, this year's best performing sector (+8.7%), is also succumbing to some early profit taking. Construction Materials (-1.6%) ranks among today’s biggest laggards as investors question Vulcan Materials' (VMC 110.00 -1.81) $4.6 bln bid for Florida Rock Industries (FRK 66.43 +19.47). Technology is also trading sharply lower as an analyst downgrade on Semiconductor Equipment -- today's worst performing S&P industry group (-1.7%) -- removes some notable leadership. DJ30 -37.81 NASDAQ -11.27 SOX -1.0% SP500 -5.27 NASDAQ Dec/Adv/Vol 1613/1003/312 mln NYSE Dec/Adv/Vol 1670/1007/86 mln

09:40 am : Stocks limp into the holiday-shortened week exhibiting a cautious tone. That's not all that surprising, though, since the Dow is fresh off of its 30th record close since October and turning in its best weekly performance (+1.5%) in three months.

The lack of overwhelming evidence to support recent gains that have the S&P 500 already up 2.6% just six weeks into 2007 is also leaving the door open for investors to question valuations. There are no economic data scheduled to potentially play into Bernanke's dovish remarks, reports on the earnings front are mixed and M&A news involving a proposed $11.4 bln merger of equals may not win regulatory approval. DJ30 -17.61 NASDAQ -8.00 SP500 -2.54 NASDAQ Vol 82 mln NYSE Vol 38 mln

09:15 am : S&P futures vs fair value: -2.1. Nasdaq futures vs fair value: -5.0.

09:00 am : S&P futures vs fair value: -2.0. Nasdaq futures vs fair value: -3.3. With the major indices up 1.4% on average last week, an underlying sense that stocks are overbought on a short-term basis continues to give sellers a slight edge heading into the opening bell. Meanwhile, oil prices are plunging 2.5% and below $58/bbl, which further supports Fed Chairman Bernanke's more dovish stance.

However, the likelihood of subsequent consolidation throughout what has been a large contributor to the S&P 500's overall earnings picture for several quarters (Energy), on top of lingering concerns about decelerating earnings growth, merely serves as a reminder that 13 straight quarters of double-digit profit growth is likely to come to an end.

08:30 am : S&P futures vs fair value: -0.8. Nasdaq futures vs fair value: -2.8. Still shaping up to be a slightly lower start for stocks as futures indications languish below fair value.

Even though there are no potentially troubling economic reports scheduled for this morning, the specter of tomorrow's closely-watched CPI report as the next inflation read is also contributing to the market's bearish disposition.

08:00 am : S&P futures vs fair value: -1.0. Nasdaq futures vs fair value: -3.0. Early indications suggest the cash market will kick off a holiday-shortened week in sluggish fashion as last week's sizable leave some thinking the market is getting ahead of itself. There is some M&A news keeping selling efforts in check. Sirius Satellite Radio (SIRI) has agreed to buy rival XM Satellite Radio (XMSR) in an $11.4 bln stock swap while Vulcan Materials (VMC) is paying $4.6 bln for Florida Rock Industries (FRK).

However, a 28% drop in Q4 profits and sales shortfall from Home Depot (HD) is currently overshadowing better than feared guidance from fellow Dow component Wal-Mart (WMT) and also contributing to some early profit-taking proclivities.

07:40 am : FTSE...6424.60...-19.80...-0.3%. DAX...6967.65...-19.43...-0.3%.