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Market Update 070308
http://biz.yahoo.com/mu/update.html

4:20 pm : With the bears failing to more convincingly consolidate gains yesterday, after the major indices turned in their best performances of the year a day earlier, evidence that a market bottom has been put in place, at least for now, helped pave the way for bulls to pick up more bargains.

Investors also took some comfort from a rebound in overseas markets, which again showed signs of stabilization fueled in part by further deterioration in the yen. If you'll recall, the yen rally last week exacerbated concerns about the potential unwinding of carry trades leading to a global liquidity crunch.

While we didn't attach a great deal of credence to the Asian market rally overnight as the driving catalyst behind today's broad-based rebound, knowing the tail doesn't wag the dog, there was no denying that the market's tone of late has shifted from overly pessimistic to, let's say, cautiously optimistic.

Further underscoring the improved tone was the market's resilience in the face of weak February same-store sales. According to RetailMetrics, nearly two-thirds of retailers missed forecasts while the International Council of Shopping Centers-UBS sales tally rose a modest 2.4%, the smallest gain since last March and below the projected range of 2.5-3.0%. The coldest February since 1979 sidelined shoppers searching for spring fashions.

Wal-Mart (WMT 47.84 -0.09) was down more than 1% at one point after the Dow component said monthly same-store sales rose just 0.9%, below its projected 1-2% range. Costco Wholesale (COST 54.27 -1.85), which was already under some pressure following weak Feb. comps as well, plunged an additional 3.0% midday after management guided Q3 earnings below consensus.

The impact of the poor weather conditions weren't a huge surprise; moreover, February ranks as the second slowest month of the year, and March is widely expected to be a strong month as retailers are expected to capitalize on Spring Break and an early Easter.

Among the 10 sectors trading higher, Telecom turned in the best performance due in large part to an analyst upgrade on Dow component AT&T (T 36.48 +1.05). Materials was also up more than 1%, led by today's best performing S&P industry group -- Steel (+4.2%). Nucor (NUE 63.53 +3.58) soared 6% following an upbeat Q1 outlook.

Although closing well of its best levels of the session, Financials still provided the bulk of today's leadership. Beaten-down brokerage and bank stocks were big attractions among bargain hunters. However, renewed worries within the sub-prime mortgage space late in the day prompted some sector consolidation. Speculation surfaced around 2:00 ET that New Century Financial (NEW 3.87 -1.29) may seek Chapter 11 bankruptcy protection; the stock tumbled more than 30%.

Health Care was also in focus after Express Scripts (ESRX 76.00 +1.23) sweetened its bid for Caremark Rx (CMX 62.16 +0.86) and raised its fiscal 2007 earnings outlook. Not to be outdone, CVS Corp (CVS 32.35 +1.03) later in the day provided a "best and final" offer for Caremark.

Separately, investors did sift through one economic report Thursday. Initial claims fell 10,000 to 328,000 (consensus 335K). However, the jobless claims data had no impact on trading as the market turned its focus to Friday's more influential February employment report to get a clearer picture of labor conditions, especially given the data's influence on the market's outlook for the economy and Fed policy.DJ30 +68.25 NASDAQ +13.09 SP500 +9.92 NASDAQ Dec/Adv/Vol 1287/1721/1.87 bln NYSE Dec/Adv/Vol 856/2438/1.51 bln

3:30 pm : After initially bouncing off their worst levels of the day, the indices now appear to be settling into a narrow range near afternoon lows but still sporting respectable gains. Aside from the Financials sector still weighing the possibility of more negative developments in the sub-prime mortgage space, Technology failing to recoup much of what was lost within the hour is another reason the major averages are trading relatively sideways going into the close.

One area that has continued to climb, though, is Drug Retail (+3.0%). It now ranks among today's top five performing S&P industry groups as CVS Corp (CVS 33.02 +1.70) spikes to two-week highs (+5.4%) after sweetening its bid for Caremark Rx (CMX 61.80 +0.50) with a "best and final" offer. DJ30 +67.37 NASDAQ +13.59 SP500 +10.38 NASDAQ Dec/Adv/Vol 1189/1772/1.61 bln NYSE Dec/Adv/Vol 829/2450/2467

3:00 pm : Within the last 30 minutes, the market has spiked to session lows due to what looks to be renewed worries within the sub-prime mortgage space. As if things couldn't get any worse for New Century Financial (NEW 4.04 -1.12), speculation that it will seek Chapter 11 bankruptcy protection has sent shares tumbling more than 20%.

At one point, the Financials sector saw its intraday gains more than halved, removing much of the support that has helped the S&P 500 outpace the Dow and Nasdaq to the upside today. DJ30 +64.85 NASDAQ +13.65 SP500 +9.87 NASDAQ Dec/Adv/Vol 1252/1710/1.44 bln NYSE Dec/Adv/Vol 863/2388/1.13 bln

2:30 pm : The bears are taking another shot the bulls, but the negative sentiment that has weighed on investors' minds since last week's meltdown remains absent today.

As reflected in the A/D line, advancers outpace decliners on the NYSE by a 4-to-1 margin while those on the Nasdaq hold a 2-to-1 advantage. Up volume outpacing down volume by a healthy margin at the NYSE and Nasdaq further underscores today's upbeat disposition. DJ30 +70.83 NASDAQ +15.92 SP500 +10.55 NASDAQ Dec/Adv/Vol 938/2017/1.27 bln NYSE Dec/Adv/Vol 614/2654/1.00 bln

2:00 pm : Stocks continue to hold their own and sport substantial gains for the day. Of all 10 sectors trading higher, Telecom still leads the way with a 2.3% advance due in large part to an analyst upgrade on Dow component AT&T (T 36.64 +1.21). Materials ranks second with a 1.8% gain, led by today's second best performing S&P industry group -- Steel (+4.5%). Nucor (NUE 63.53 +3.58) is soaring 6% following an upbeat Q1 outlook.

Financials is still the engine driving today's rally though. Merrill Lynch upgrading ProLogis (PLD 65.19 +2.18) to Buy from Neutral has vaulted Industrial REITs into today's top ten. while the Consumer Discretionary turning in a similar 1.3% gain is also noteworthy, especially in the face of such disappointing monthly retail sales data. DJ30 +106.39 NASDAQ +26.31 SP500 +15.16 NASDAQ Dec/Adv/Vol 857/2076/1.15 bln NYSE Dec/Adv/Vol 572/2674/910 mln

1:30 pm : After a lackluster attempt yesterday to convincingly revisit the argument that stocks are still overbought since bottoming in July, sellers' latest efforts to question the sustainability of today's rebound have stalled. With the major averages up more than 2% over the last three sessions, it's evident that sentiment has shifted from overly pessimistic to, let's say, cautiously optimistic.

After all, there is still an underlying sense of uncertainty with respect to tomorrow morning's influential jobs report and the implications it can have on Fed policy. DJ30 +95.09 NASDAQ +24.75 SP500 +14.31 NASDAQ Dec/Adv/Vol 866/2063/1.06 bln NYSE Dec/Adv/Vol 591/2640/840 mln

1:00 pm : The indices have pulled back slightly since the last update, but not nearly enough to make a significant change in the standings. A reversal in International Business Machines (IBM 93.30 -0.64) within the hour has taken some steam out of the Dow.

With regard to the tech-heavy Nasdaq, weakness in a notable retailer is actually responsible for its modest re-tracement. Costco Wholesale (COST 54.13 -1.99), which was already under some pressure following weak Feb. comps, is now down 3.6% after management guided Q3 earnings below consensus.DJ30 +82.36 NASDAQ +22.64 SP500 +12.98 NASDAQ Dec/Adv/Vol 859/2033/982 mln NYSE Dec/Adv/Vol 565/2656/778 mln

12:30 pm : Sellers still remain decisively absent as the afternoon session gets underway. Among the handful of areas losing ground, it's not surprising to see Forest Products and Wireless Services, two of last week's best performers, turning in today's worst performances.

Similarly, last week's biggest disappointments, like Steel (+4.6%), Autos (+2.9%), Investment Banks (+2.7%), and Human Resources (+2.7%), rank among today's top ten performers as bargain hunters continue to jump into beaten-down names. DJ30 +95.41 NASDAQ +23.68 SP500 +14.07 NASDAQ Dec/Adv/Vol 840/2028/872 mln NYSE Dec/Adv/Vol 564/2633/682 mln

12:00 pm : With so much uncertainty being priced into the markets last week, as evidenced by investor fear gauges spiking to nine-month highs amid aggressive put buying, a growing sense that stocks have formed a bottom is unwinding some of that anxiety, especially since the recent sell-off simply had little to no bearing on the fundamental picture.

Stocks are rallying across the board midday, with all three major indices near session highs and up 1.0% on average. Of the 147 S&P industry groups, 143 are in positive territory; all 10 economic sectors are trading higher.

Financials is providing the bulk of today's leadership with a 1.4% advance as oversold brokerage and bank stocks attract bargain hunters. Technology is also acting as a notable source of market support, as semiconductors get a boost after Applied Materials (AMAT 18.53 +0.33) and KLA-Tencor (KLAC 52.92 +1.87) were upgraded. Health Care has gotten a lift after Express Scripts (ESRX 77.09 +2.32) sweetened its bid for Caremark Rx (CMX 62.56 +1.26) and raised its fiscal 2007 earnings outlook.

While we're not attaching a great deal of credence to the Asian market rally overnight as the driving catalyst behind today's bullish disposition, there is no denying that the market's overly pessimistic tone of late has improved amid signs of more stabilization in overseas markets following last week's meltdown. A sell-off in the yen further alleviates liquidity concerns tied to a potential unwinding of the carry trade, which were recent heightened after the yen's recent rally. Japan's Nikkei index surged 1.94% while Hong Kong's Hang Seng index rose 1.36%.

Further underscoring the improved sentiment has been the market's resilience in the face of weak February same-store sales. According to RetailMetrics, nearly two-thirds of retailers missed forecasts as the coldest February since 1979 sidelined shoppers searching for spring fashions. The International Council of Shopping Centers-UBS sales tally rose a modest 2.4%, the smallest gain since last March and below the projected range of 2.5-3.0%.

Fortunately for the bulls, the poor weather conditions weren't a huge surprise, February ranks as the second smallest month of the year, and March is widely expected to be a strong month as retailers are expected to capitalize on Spring Break and an early Easter. BTK +0.5% DJ30 +101.58 DJTA +0.8% DJUA +0.5% DOT +1.1% NASDAQ +25.48 NQ100 +1.2% R2K +1.2% SOX +2.0% SP400 +1.1% SP500 +14.56 XOI +0.6% NASDAQ Dec/Adv/Vol 818/2034/764 mln NYSE Dec/Adv/Vol 562/2585/594 mln

11:30 am : More of the same for stocks as the bulk of industry leadership remains positive. The Energy sector recently slipping into negative territory, though, has removed some leadership.

However, in doing so at the expense of oil prices spiking to session lows, Energy's reversal is barely making a dent in the standings as an overwhelmingly positive market embraces the diminishing inflationary potential of falling oil prices. As yesterday's only sector catching a bid, it's not much of a surprise to see some money rotate out of Energy and into areas like Technology (+1.0%) and Telecom (+1.4%), which are expected to be this year's two biggest contributors to overall profit growth on the S&P 500. DJ30 +90.01 NASDAQ +23.76 SP500 +13.16 NASDAQ Dec/Adv/Vol 779/2030/626 mln NYSE Dec/Adv/Vol 531/2577/486 mln

11:00 am : Not much has changed since the last update as the major averages settle into a relatively narrow range and market breadth remains decidedly bullish. Further underscoring the improved sentiment, following yesterday's lackluster attempts to consolidate Tuesday's rally, has been a 10% decline on the VIX (CBOE Volatility Index).

The closely-watched "investor fear gauge," which hit nine-month highs on Monday, has now erased about one third of that move, providing more proof investors are growing more cognizant of the fact that last week's global sell-off simply had little to no bearing on the fundamental picture. DJ30 +96.01 NASDAQ +25.20 SP500 +14.00 NASDAQ Dec/Adv/Vol 679/2048/510 mln NYSE Dec/Adv/Vol 463/2575/384 mln

10:30 am : Onward and upward remains the driving mantra for stocks this morning as buyers remain in complete control. The Dow is now up more than 100 points, with 28 of its 30 components posting gains. The S&P 500 is now up 1.1%, led by five of its 10 sectors surging more than 1.0%.

The Nasdaq is also retracing its best levels of the session, fueled by noticeable bottom fishing across the board in the beaten-down Technology sector. DJ30 +103.29 NASDAQ +25.45 SOX +1.9% SP500 +14.90 NASDAQ Dec/Adv/Vol 670/1988/330 mln NYSE Dec/Adv/Vol 483/2428/240 mln

10:00 am : The indices are off their opening highs, but buying remains widespread across most areas. Of the 147 S&P industry groups, Hyper & Super Centers (-0.9%) is the only one in negative territory. That's because Wal-Mart's (WMT 47.51 -0.42) Feb. same-store sales rose just 0.9%, below its projected 1-2% range.

Of the 10 sectors trading, Financials is providing the bulk of early leadership with a 1.2% advance as oversold brokerage (XBD +1.8%) and bank stocks attract bargain hunters. As evidenced by Semiconductor Equipment (+2.4%) ranking as today's second-best performing group, amid analyst upgrades on Applied Materials (AMAT 18.58 +0.38) and KLA-Tencor (KLAC 52.41 +1.36), Technology is also acting as a notable source of market support. DJ30 +73.46 NASDAQ +18.01 SOX +1.7% SP500 +10.51 NASDAQ Dec/Adv/Vol 416/2043/156 mln NYSE Dec/Adv/Vol 303/2114/84 mln

09:40 am : With the bears failing to more convincingly take money off the table yesterday, after the major indices turned in their best performances of the year the day before, it is becoming evident that a market bottom may have been put in place, for now. It also appears the market is taking some comfort in overseas markets again showing signs of stabilization fueled in part by further deterioration in the yen. The yen rally last week exacerbated concerns about the potential unwinding of carry trades leading to a global liquidity crunch.

While we're not attaching a great deal of credence to the Asian market rally overnight as the driving catalyst behind today's positive disposition, knowing the tail doesn't wag the dog, there is no denying that the market's overly pessimistic tone of late is improving; but one must not overlook the reality that sentiment is likely to keep swinging in sympathy with market volatility. DJ30 +82.91 NASDAQ +25.35 SP500 +11.34 NASDAQ Vol 84 mln NYSE Vol 56 mln

09:15 am : S&P futures vs fair value: +10.3. Nasdaq futures vs fair value: +17.5.

09:00 am : S&P futures vs fair value: +10.5. Nasdaq futures vs fair value: +17.2. The futures market is off its best levels but still suggests stocks will open on a higher note. Aside from today's mood swing being influenced by underlying shifts in sentiment overseas, investors are also finding comfort in the fact that yesterday's consolidation effort, on the heels of the major average's best one-day performances this year, was modest in scope.