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Market Update 070309
http://biz.yahoo.com/mu/update.html

4:20 pm : The market finished mixed and relatively flat Friday as investors weighed an encouraging jobs report and plunging oil prices against more discouraging developments in the housing sector, with particular interest again on sub-prime mortgages.

Before the bell, February nonfarm payrolls rose a healthy 97,000, which was better than many on Wall Street had feared. Payrolls for the prior two months were upwardly revised to account for an additional 55,000 new jobs and the unemployment rate unexpectedly fell to 4.5%, near a five-year low, helping to ease the worst of recession fears.

The rise in hourly earnings was initially viewed as a supportive factor for consumer spending; but as a closely-watched Fed gauge, the component's inflationary potential was not overlooked as the report also diminished hopes for a Fed easing anytime soon. As a result, some of the nervousness that has accompanied an overly pessimistic market of late going into the weekend crept in earlier than anticipated and, within an hour of the opening bell, the market erased all of its early gains and traded sideways throughout the rest of the day.

Some Fed speak also weighed on investors' minds. Fed Governor Susan Bies saying the sub-prime problem may just be starting exacerbated earlier concerns about mortgage delinquencies spilling over into the broader economy. New Century Financial (NEW 3.21 -0.66) said last night it stopped accepting loan applications, which left some analysts believing that bankruptcy is now imminent.

Homebuilder Hovnanian Enterprises (HOV 29.28 -1.32) swinging to a wider than expected Q1 loss, cutting its full-year guidance and saying it is not yet confident that the housing slowdown has bottomed yet also stalled the opening-bell momentum fueled by the healthy jobs report.

Not even oil prices closing near session lows was enough of an incentive to fully motivate the bulls. Crude for April delivery plunged 2.5% to $60.10/bbl as warm weather forecasts for next week are expected to curb demand for heating oil. However, with the commodity flying under the radar of late, taking a back seat to issues like sub-prime lending and recession fears, its sell-off was largely ignored. DJ30 +15.62 NASDAQ -0.18 SP500 +0.96 NASDAQ Dec/Adv/Vol 1333/1645/1.93 bln NYSE Dec/Adv/Vol 1353/1883/1.36 bln

3:30 pm : A renewed wave of buying interest going into the close now has the Dow back in positive territory and briefly lifted the S&P 500 above the flat line as well. Be that as it may, the relatively narrow range between advancing and declining issues and mixed market breadth amid below average volume further underscores the lack of conviction behind the buyers' latest push.

It is worth noting, though, that the all three indices, should they finish relatively flat, will still close out the week on an upbeat note. Unfortunately, average gains for the Dow, S&P 500 and Nasdaq this week barely make a dent in the 4.8% drubbing all three endure last week.DJ30 +3.66 NASDAQ -3.21 SP500 -0.09 NASDAQ Dec/Adv/Vol 1539/1405/1.60 bln NYSE Dec/Adv/Vol 1512/1698/1.13 bln

3:00 pm : The indices are still languishing in negative territory as not even oil prices recently closing near session lows have been enough of an incentive to motivate the bulls. Crude for April delivery plunged 2.5% to $60.10/bbl as warm weather forecasts for next week are expected to demand for heating oil.

However, with the commodity flying under the radar of late, taking a back seat to issues like sub-prime lending and recession fears, its sell-off has been largely ignored.

DJ30 -8.81 NASDAQ -6.63 SP500 -1.74 NASDAQ Dec/Adv/Vol 1515/1412/1.48 bln NYSE Dec/Adv/Vol 1490/1706/1.03 bln

2:30 pm : Stocks are extending their reach to the downside and, to make matters even worse for the bulls, market internals now carry a negative slant. As reflected in the A/D line, decliners on the NYSE have recently edged pass advancers for the first time today and now hold a slight 16-to-15 edge.

Those on the Nasdaq hold a 15-to-13 advantage while the ratio of down to up volumes paints even more of a bearish picture at the Big Board and the Composite. DJ30 -25.01 NASDAQ -9.75 SP500 -3.44 NASDAQ Dec/Adv/Vol 1556/1361/1.35 bln NYSE Dec/Adv/Vol 1626/1577/930 mln

2:00 pm : The Dow and S&P 500 are now sitting alongside the Nasdaq in negative territory as reluctance on the part of buyers continues to leave the door open for sellers. Profit taking in almost every area of Technology, today's worst performing sector (-0.5%), continues to be the biggest obstacle preventing the bulls from ending the week on an upbeat note.

Another round of hawkish Fed speak is contributing to the market's recent pullback. Vice Chairman Kohn said he's unsure about the accuracy of expectation measures and the roles they play in wage and price shifts. Richmond Fed President Lacker said expectations are less stable than surveys suggest and that inflation expectations are not "anchored close enough to the price stability shore." DJ30 -10.76 NASDAQ -7.01 SOX +0.4% SP500 -2.19 NASDAQ Dec/Adv/Vol 1356/1534/1.28 bln NYSE Dec/Adv/Vol 1282/1891/850 mln

1:30 pm : The major averages are now trading in split fashion as Consumer Discretionary and Financials become the latest sectors to turn negative. The latter sector is now weighing comments from Fed Governor Susan Bies, who recently said the sub-prime problem may be just starting and that regulators are concerned about "payment shock."

Further deterioration in Treasuries, with the spread between the 2-year and 10-year note slipping deeper into inversion, is also diminishing the desire to own rate-sensitive banks and brokers. The 10-year note is now down 21 ticks at session lows to yield 4.59%. Homebuilders extending their year-to-date decline to 11% and retailers (e.g. JWN -2.6%, FD -1.1%, TJX -1.1%, and LTD -1.1%) consolidating some of yesterday's gains are weighing on the Discretionary sector. DJ30 +13.22 NASDAQ -1.18 SP500 +0.35 NASDAQ Dec/Adv/Vol 1282/1595/1.14 bln NYSE Dec/Adv/Vol 1136/2017/774 mln

1:00 pm : The indices break out of their recent trading range, but to the dismay of the bulls, its to the downside. Technology, which was a notable source of support early on due to a rally in semiconductors, has recently slipped into negative territory, removing influential leadership and briefly pushing the Nasdaq below the flat line. Chip stocks are still getting some support from National Semiconductor (NSM 26.26 +0.98), which lent some reassurance about the sector's growth prospects after issuing an optimistic outlook. Anticipation of a positive mid-quarter update prompting a couple of analysts to upgrade Texas Instruments (TXN 32.46 +0.76) is also noteworthy.

However, a 5.3% sell-off in Yahoo! (YHOO 29.08 -1.63), following reports it may lose up $200-250 mln from its DSL pact with AT&T (T 36.62 +0.11), now earmarks Internet Software & Services as today's second worst performing S&P industry group (-1.4%).DJ30 +10.34 NASDAQ +0.40 SOX +0.5% SP500 +1.13 NASDAQ Dec/Adv/Vol 1183/1687/1.03 bln NYSE Dec/Adv/Vol 1053/2088/700 mln

12:30 pm : No real change in the proceedings as the afternoon session gets underway. All 10 economic sectors remain positive, but the day's largest gains are still coming from the least influential areas, like Materials, Utilities and Telecom.

The latter is getting an added lift from Alltel (AT 63.91 +3.74), which has spiked to a new 52-week high amid rumors that it pulled out of a conference, leading to speculation that the "strategic alternatives" announced on February 20 might lead to a takeover deal earlier than anticipated. DJ30 +29.80 NASDAQ +4.81 SP500 +3.49 NASDAQ Dec/Adv/Vol 1187/1667/962 mln NYSE Dec/Adv/Vol 1109/2010/636 mln

12:00 pm : With the market looking for some assertion that the economy isn't headed for recession, investors have found some comfort in today's employment report.

Before the bell, February nonfarm payrolls rose a healthy 97,000, which was better than many on Wall Street had feared. Payrolls for the prior two months were upwardly revised to account for a net gain of 55,000 new jobs, the unemployment rate unexpectedly fell to 4.5% and wage gains remain supportive for consumer spending.

The report has helped ease the worst of recession fears and initially paved the way for market bulls to keep silencing the bears' argument about overbought conditions. However, with the data also diminishing hopes for a Fed easing anytime soon, with fed funds futures now pricing in a 32% chance of a rate cut in late June, versus 66% chance yesterday, some skepticism has resurfaced intraday to pare some of the market's early advance.

More negative developments in sub-prime mortgage lending and commentary in the homebuilding space saying that the housing slowdown may not have bottomed yet are also stalling the bulls' efforts to more aggressively make their case that last week's sell-off was overdone. DJ30 +23.07 NASDAQ +4.07 SP500 +3.16 NASDAQ Dec/Adv/Vol 1127/1690/866 mln NYSE Dec/Adv/Vol 1078/1998/552 mln

11:30 am : Equities are still on the offensive, but barely, as the recent wave of renewed skepticism about the pace of economic growth continues to act as an overhang. New Century Financial (NEW 3.16 -0.71) saying it has failed to obtain relief from several lenders, which leaves analysts believing bankruptcy is now imminent, is exacerbating the nervousness about sub-prime mortgage delinquencies spilling over into the broader economy.

Homebuilder Hovnanian Enterprises (HOV 28.66 -1.94) swinging to a wider than expected loss in Q1, cutting its full-year guidance and saying it is not yet confident that the housing slowdown has bottomed is also stalling the opening-bell momentum fueled by a healthy jobs report. DJ30 +17.98 NASDAQ +3.43 SP500 +1.97 NASDAQ Dec/Adv/Vol 1168/1607/742 mln NYSE Dec/Adv/Vol 1216/1821/450 mln

11:00 am : After turning negative within the last 30 minutes, the influential Financials, Technology, and Consumer Discretionary sectors have clawed their way back into the green.

However, while those turnarounds have helped the indices bounce off their worst levels, key sector gains remain modest at best and offer little conviction behind the rebound. In fact, the day's best performance is still coming from the sector with the smallest weighting on the S&P 500 -- Materials (+0.6%), which further underscores the day's lackluster performance so far. DJ30 +15.33 NASDAQ +3.30 SP500 +1.77 NASDAQ Dec/Adv/Vol 1182/1550/610 mln NYSE Dec/Adv/Vol 1234/1748/360 mln

10:30 am : The major averages now trade in split fashion as the nervousness that has accompanied an overly pessimistic market of late going into the weekend creeps in earlier than anticipated.

While investors initially breathed a sigh of relief following a better than feared employment report, participants are also dealing with the data diminishing hopes for a Fed easing anytime soon. Fed funds futures are now pricing in only a 32% chance of an interest rate cut in late June, versus 66% likelihood yesterday.DJ30 +6.04 NASDAQ -2.10 SP500 -0.65 NASDAQ Dec/Adv/Vol 1184/1452/460 mln NYSE Dec/Adv/Vol 1235/1673/236 mln

10:00 am : The indices are off their opening highs but the bulk of industry leadership remains positive. Of the 10 sectors trading higher, Materials is pacing the way but leadership from Financials and Technology are acting as the biggest sources of support.

Tech is getting its biggest lift from strength in chip stocks after National Semiconductor (NSM 26.80 +1.52), which is surging 6%, issued an optimistic outlook. Texas Instruments (TXN 32.55 +0.85) is up nearly 3% after being upgraded by two analysts and is another reason behind the PHLX Semiconductor Sector Index building on gains that yesterday inched back into positive territory for the year. DJ30 +40.71 NASDAQ +6.83 SOX +1.2% SP500 +4.11 NASDAQ Vol 242 mln NYSE Dec/Adv/Vol 621/2023/82 mln

09:40 am : Stocks open on a high note as investors rally around employers providing more evidence that the U.S. economy continues to weather weakness in housing and manufacturing, and that wage gains remain supportive for consumer spending.

February nonfarm payrolls rose a healthy 97,000 (consensus 100,000) while payrolls for the prior two months were upwardly revised to account for a net gain of 55,000 new jobs. Since that is consistent with underlying real GDP growth near 3%, given the long-term trend of 2% productivity growth, the worst of recession fears have been mitigated, giving the bulls a green light to keep silencing the bears' argument about overbought conditions. DJ30 +59.45 NASDAQ +15.19 SP500 +7.18 NASDAQ Vol 86 mln NYSE Vol 48 mln

09:15 am : S&P futures vs fair value: +8.4. Nasdaq futures vs fair value: +14.4.

09:00 am : S&P futures vs fair value: +9.3. Nasdaq futures vs fair value: +16.3. Early sentiment continues to improve as today's jobs data silencing concerns of a recession clears the way for investors to build on the foundation it established Tuesday. While the stage appears set for stocks to finish the week on a strong note, it is highly unlikely the market will recoup all that was lost last week. As of yesterday’s close, the Dow, S&P 500 and Nasdaq are up 1.2%, 1.1% and 0.8%, respectively, over the last four sessions; but those gains pale in comparison to sharp declines of 4.2%, 4.4% and 5.8% last week.