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Market Update 070227
http://biz.yahoo.com/mu/update.html

4:20 pm : With earnings growth expected to slow to near 5% for Q1, and perhaps check in at just 7% for Q2 and Q3, there were already concerns the market was getting ahead of itself, especially since stocks have run virtually unabated since bottoming in July.

Add to that concerns the Chinese government may step up its efforts to curb speculative buying interest, as evidenced by the biggest one-day decline on Shanghai Composite Index in 10 years, and stock markets across the globe that were primed for a correction witnessed one of the worst days in recent memory.

Throw in renewed geopolitical tensions (i.e. a failed assassination attempt on Vice President Dick Cheney), a weak durable goods report, and underlying sub-prime lending concerns, and a market long overdue for some sort of corrective activity sold off.

The Dow was down as much as 546 points (-4.3%), before bouncing back to close down 416 points. That was still the biggest one-day point decline since the markets reopened on September 17, 2001 (-7.1%), leaving the Dow in negative territory for the year; all 30 components suffered losses.

The S&P 500, where only one of its 147 industry groups closed in positive territory, finished lower for a fifth consecutive session - its longest losing streak in three years. The broader market, with all 10 economic sectors averaging losses of 3.5%, posted its first decline of more than 2% since May 2003.

The VIX (CBOE Volatility Index) and the VXN (CBOE Nasdaq Volatility Index) soaring 59% and 39%, respectively, further underscored the heightened anxiety witnessed in today's session. Known as "investor fear gauges," the spikes higher on both indexes suggested investors were actively buying put options in anticipation that too much money floating around will lead to more market declines, with things likely getting worse before they get better. BTK -3.69% DJ30 -416.02 DJTA -3.43% DJUA -2.88% DOT -3.96% NASDAQ -96.66 NQ100 -4.06% R2K -3.74% SOX -3.06% SP400 -3.08% SP500 -50.33 XOI -3.50% NASDAQ Dec/Adv/Vol 2834/285/3.05 bln NYSE Dec/Adv/Vol 2904/469/2.27 bln

3:30 pm : The major averages are bouncing off recent lows, but only after a recent spike lower knocked the Dow down another 250 points in a matter of minutes. At the top of the hour, today's trading curbs were released only to queue up a series of program trades that sent stocks tumbling even further.

The Dow was down as much as 546 points, the biggest one-day point decline since the markets reopened on September 17, 2001. That day, the price-weighted index plunged 684.81 points, or 7.1%. All three major indices were down more than 4.0% and are now off about 3.2% on average. DJ30 -362.75 NASDAQ -79.12 SP500 -42.19 NASDAQ Dec/Adv/Vol 2828/252/2.26 bln NYSE Dec/Adv/Vol 2872/469/1.84 bln

3:00 pm : No real change in sentiment as a bearish bias remains firmly intact with traders entering the final stretch of what is shaping up to be one of the worst days for stocks in recent memory.

The sell-off in China continues to have a profound effect on stocks across the board, since the largest unwinding in the Shanghai Composite Index since 1997 leaves investors questioning the sustainability of stock gains everywhere. The FTSE 100 Index, the DAX Index and CAC 40 Index plunged 2.3%, 3.0%, and 3.0%, respectively, while the three major U.S. averages are on pace for even worse performances.
DJ30 -278.95 NASDAQ -84.22 SP500 -44.01 NASDAQ Dec/Adv/Vol 2805/258/2.13 bln NYSE Dec/Adv/Vol 2818/490/1.54 bln

2:30 pm : As presaged in the last comment, the S&P 500 is now down more than 2.0%. In fact, the mass exodus in equities now leaves the broader market down 2.4% on the session and only one of its 147 industry groups in positive territory -- Gas Utilities (+2.6%).

Further underscoring the bearish tone has been a 29% gain on the VIX (CBOE Volatility Index), surging it to its highest level since August. Known as the "investor fear gauge," the spike higher suggests investors were actively buying put options in anticipation that the market correction so many have been concerned about with so many indices hitting record levels of late is finally here. DJ30 -222.37 NASDAQ -75.08 SP500 -35.15 NASDAQ Dec/Adv/Vol 2759/274/1.91 bln NYSE Dec/Adv/Vol 2803/496/1.37 bln

2:00 pm : Sellers remain in complete control of the action as the major averages slip to their worst levels of the session. The Fed reportedly saying that real-estate loan delinquencies have reached four-year highs appears to be underpinning an added sense of nervousness.

The S&P 500 is down for a fifth consecutive session, its longest losing streak in three years. The broader market hasn't experienced a decline of 2% since May 2003, but it's intraday decline of 1.97% leaves it well within reach. Its streak of eight straight months of gains is also in jeopardy as the S&P 500 is now in negative territory for the month and there's one more trading day left in February. DJ30 -211.08 NASDAQ -66.16 SP500 -28.00 NASDAQ Dec/Adv/Vol 2699/315/1.68 bln NYSE Dec/Adv/Vol 2771/509/1.21 bln

1:30 pm : More of the same for stocks as the Nasdaq continues to outpace its blue-chip counterparts to the downside. The tech-heavy Composite is now down 2.3%, erasing two-thirds of its year-to-date advance so far; decliners now outpace advancers by an 8-to-1 margin.

With regard to the NYSE, where trading collars have now been triggered due to the widespread bloodletting, declining issues hold a 5-to-1 edge over advancing issues. Down volume significantly overshadowing up volume further underscores the conviction on the part of sellers to take some money off the table amid so much lingering uncertainty. DJ30 -190.42 NASDAQ -57.84 SP500 -24.20 NASDAQ Dec/Adv/Vol 2662/332/1.54 bln NYSE Dec/Adv/Vol 2751/513/1.10 bln

1:00 pm : The indices bounce off recent lows but selling remains widespread across most areas. Treasuries, however, continue to catch a flight-to-quality bid as emerging-market woes, weak economic data, geopolitical tensions, and sub-prime lending concerns exacerbate the widespread panic out of stocks and into safe haven investments like bonds.

10:00 am : Selling remains the name of the game as all three major averages are now down at least 1.0%. Based on its outperformance this year, it's not surprising to see the Nasdaq taking the brunt of the early selling pressure. The tech-heavy Composite, which was off as much as 2.1%, is now down 1.6%, led by a 1.4% sell-off in Technology.

Materials (-2.2%), though, is the worst performer of all 10 sectors trading lower; but that too can be expected since it has been the best performing S&P 500 sector this year (+10.7%). Financials, Consumer Discretionary, Industrials and Energy are averaging intraday declines of 1.2%. DJ30 -131.94 NASDAQ -41.58 SP500 -16.07 NASDAQ Dec/Adv/Vol 2367/253/270 mln NYSE Dec/Adv/Vol 1941/234/100 mln

09:40 am : As expected, stocks open sharply lower as the knee-jerk reaction to the meltdown in China overnight makes it clear that the bullish sentiment behind a seven-month rally is losing steam. The Shanghai Composite Index, which surged an astonishing 127% in 2006 and is up 13% over the last six sessions, plunged 8.8% -- the biggest one-day decline in 10 years. Worries the Chinese government may step up its efforts to curb speculative buying interest have been attributed to the consolidation that has aggravated ongoing concerns about overbought conditions and talks of a correction.

With geopolitical concerns returning to the forefront in recent days, an assassination attempt on U.S. Vice President Dick Cheney which reportedly killing up to 23 people near the main U.S. military base in Afghanistan has exacerbated such tensions while a disappointing read on durable orders earlier has increased underlying anxiety about the economic outlook. DJ30 -120.36 NASDAQ -50.04 SP500 -17.62 NASDAQ Vol 112 mln NYSE Vol 60 mln

09:15 am : S&P futures vs fair value: -13.0. Nasdaq futures vs fair value: -28.0.

09:00 am : S&P futures vs fair value: -12.5. Nasdaq futures vs fair value: -27.0. Both the S&P 500 and Nasdaq 100 futures continue to languish at morning lows, setting the stage for the cash market to endure hefty losses at the onset of trading. The sell-off in the Chinese stock market overnight continues to exacerbate an already growing sense of worry that the easy money has been made and that the U.S. market is primed for a correction. Renewed geopolitical tensions and weak durable goods data supporting former Fed Chairman Greenspan's recent comments regarding the possibility of a recession this year certainly also aren't helping the bulls' argument that valuations remain attractive.