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Market Update 070316
http://biz.yahoo.com/mu/update.html

4:20 pm : Stocks snapped a two-day winning streak Friday as diminished hopes of the Fed easing early this year prompted investors to take some money off the table going into the weekend.

Before the bell, February core CPI rose a less than feared 0.2%, matching economists' forecasts and initially offering some comfort to the financial markets. However, since inflationary pressures aren't the market's main concern right now, as economic demand simply isn't strong enough to support higher levels of inflation, an overly pessimistic market instead viewed a report that also included a surprise 0.8% rise in food prices (the most since April 2005) as another hurdle for policy makers to justify a rate cut anytime soon.

Volume on the NYSE during the first 30 minutes of trading set a record due largely to today's quarterly options expiration (quadruple witching). But it wasn't long before a lot of the open interest in key futures contracts that helped to lift stocks earlier in the day had all but disappeared, fueling a new wave of selling interest that pushed the major averages into negative territory never to recover.

From a sector standpoint, Energy turned in the day's worst performance in sympathy with falling oil prices. After tumbling more than 2% intraday to a six- week low below $57/bbl, oil prices also influenced the day's action. Crude for April delivery closed down 0.8% near $57.10/bbl which is certainly good news for consumers going into the weekend, especially after higher gas prices pushed sentiment to six-month lows, but diminishing demand for oil merely exacerbated the market's underlying concerns about global economic weakness.

The biggest thorn in the market's side was an early reversal in Financials that removed influential leadership. The sector rolled over around 11:15 ET as this week's relief rally among beaten-down mortgage lenders and brokerage stocks, amid reassurance that subprime mortgage missteps have not spilled over to the credit markets, came to an end. DJ30 -49.27 NASDAQ -6.04 SP500 -5.33 NASDAQ Dec/Adv/Vol 1832/1187/2.14 bln NYSE Dec/Adv/Vol 2033/1206/1.83 bln

3:30 pm : The indices are off their lows going into the close but sellers remain in complete control of the action. Telecom has recently inched into positive territory; but with only a 3.5% weighting on the S&P 500, it's easy to see why it's turnaround has had minimal impact on the broader market.

Currently, the Dow, S&P 500 and Nasdaq are down 1.4%, 1.2% and 0.8%, respectively, for the week. DJ30 -41.56 NASDAQ -7.32 SP500 -5.38 NASDAQ Dec/Adv/Vol 1918/1039/1.76 bln NYSE Dec/Adv/Vol 2142/1093/1.54 bln

3:00 pm : Sellers continue to show their resolve heading into the final hour of trading. All 10 sectors are in negative territory, not surprisingly led by Energy (-1.2%) in sympathy with the late-day reversal in oil prices.

Materials ranks a close second but a 0.9% decline in Financials now leaves the influential sector down 2.6% for the week and off 5.4% on the year as the worst performer in 2007. It's becoming increasingly apparent that investors feel this year's expected 6-7% earnings growth for Financials will be revised lower as concerns about subprime mortgage woes continue to linger. DJ30 -68.58 NASDAQ -10.03 SP500 -7.91 NASDAQ Dec/Adv/Vol 1870/1088/1.65 bln NYSE Dec/Adv/Vol 2075/1135/1.44 bln

2:30 pm : A renewed round of selling pressure just pushed the indices to their lowest levels of the day. Earlier, a 1% rise in April crude futures failing to give the Energy sector a boost doubled as a bearish excuse to pare early market gains.

This time around, oil prices tumbling more than 2% and below $57/bbl heading into the close of trading on the NYMEX has merely exacerbated concerns of a global economic slowdown instead of lending some comfort after higher gas prices pushed the latest sentiment reading to six-month lows. DJ30 -56.88 NASDAQ -8.89 SP500 -6.26 NASDAQ Dec/Adv/Vol 1849/1082/1.58 bln NYSE Dec/Adv/Vol 2034/1159/1.37 bln

2:00 pm : Efforts within the last 30 minutes to get back to unchanged have been short lived as the indices are now retracing prior lows. The Dow and S&P 500 have stalled near intraday resistance levels of 12140 and 1390, respectively.

Consumer Staples and Health Care had turned positive to provide some semblance of upside leadership for the first time in nearly two hours; but they've almost as quickly slipped back into the red and, as influential S&P 500 sectors, are bringing the broader market down with them. DJ30 -37.49 NASDAQ -4.16 SP500 -3.57 NASDAQ Dec/Adv/Vol 1680/1237/1.48 bln NYSE Dec/Adv/Vol 1821/1355/1.28 bln

1:30 pm : Stocks are bouncing off afternoon lows, but not nearly enough to make a significant change in the standings. Sure, all three indices have seen their recent losses basically cut in half; but the recovery has come on no news and very little volume, providing less conviction behind the bulls' latest attempt to get buying efforts back on track.

Coincidentally, day two of the NCAA Tournament kicked off about an hour ago, roughly the same time that volume began to dry up. DJ30 -19.23 NASDAQ -2.82 SP500 -1.27 NASDAQ Dec/Adv/Vol 1743/1147/1.38 bln NYSE Dec/Adv/Vol 1910/1253/1.19 bln

1:00 pm : More of the same for stocks as the bulk of industry leadership remains negative. All 10 sectors are still trading lower, led by a 0.6% decline in this year's best performing sector, Materials. Financials, the most influential of them all, ranks second with a 0.4% decline.

It is also worth noting that all three indices languishing in synch with each other and logging roughly the same percentage losses (-0.3%), during what is shaping up to be the biggest volume day this year no less, suggests that program trading is behind the broad-based move to the downside.

DJ30 -33.56 NASDAQ -6.07 SP500 -3.42 NASDAQ Dec/Adv/Vol 1713/1152/1.32 bln NYSE Dec/Adv/Vol 1873/1273/1.14 bln

12:30 pm : No real change in sentiment as the afternoon session gets underway. While the indices appear to be settling into a relatively narrow trading range, volatility is likely to return late in the day due to the quarterly rebalancing on the S&P 500.

Constituents Apple (AAPL 89.71 +0.14), Bristol-Myers (BMY 26.99 -0.13), and Google (GOOG 441.91 -4.28) are among some of the names whose weightings will be increased while weightings be lowered for the likes of Dow components Exxon Mobil (XOM 70.27 -0.42) and Pfizer (PFE 24.98 -0.01). DJ30 -40.85 NASDAQ -8.58 SP500 -3.72 NASDAQ Dec/Adv/Vol 1718/1130/1.23 bln NYSE Dec/Adv/Vol 1791/1301/1.06 bln

12:00 pm : Stocks are extending their reach to the downside midday as the nervousness that has accompanied an overly pessimistic market of late returns to question the sustainability of recent gains going into the weekend. After the Dow posted its second-biggest drop in nearly four years on Tuesday, stocks have been recouping some of those losses over the last two sessions.

It also appears that a lot of the open interest in key futures contracts that helped to lift stocks earlier this morning (today is quarterly options expiration) has all but disappeared, prompting a new wave of selling interest. Almost 630 mln shares exchanged hands on the NYSE during the first half of hour of trading, which is a record.

From a sector standpoint, Financials recent rolling over, as traders consolidate some of the relief rally recently enjoyed among beaten-down mortgage lenders, has been the biggest obstacle for the bulls to overcome since its reversal removes some notable leadership. All 10 sectors are trading lower midday.

On the economic front, investors have also sifted through a batch of economic data. Core CPI rose a less than feared 0.2% in February, matching economists' forecasts to keep inflation concerns in check; but further analysis of the headline CPI number, which included a surprise 0.8% rise in food prices (the most since April 2005), has underpinned an added sense of angst. Also, with investors more concerned about potential economic weakness, not even the largest rise in monthly industrial production since November 2005 has been able to sustain early follow-through buying efforts. DJ30 -40.01 NASDAQ -10.07 SP500 -3.54 NASDAQ Dec/Adv/Vol 1798/1028/1.15 bln NYSE Dec/Adv/Vol 1899/1147/990 mln

11:30 am : An hour ago, all 10 economic sectors were in positive territory. Now, Telecom and Utilities -- two of the three least influential sectors on the S&P 500 -- are the only ones posting gains, and that's due in part to their defensive characteristics.

The reversals in the Financials and Industrials sectors over the last 30 minutes, though, are the bigger reasons behind the market's recent struggles and deterioration in market internals. As reflected in the A/D line, decliners now outpace advancers on the Nasdaq by a 15-to-13 margin. DJ30 -32.53 NASDAQ -9.85 SP500 -2.87 NASDAQ Dec/Adv/Vol 1655/1122/1.02 bln NYSE Dec/Adv/Vol 1587/1390/886 mln

11:00 am : The indices are now trading in split fashion as stocks struggle to find their footing in the face of rising oil prices. Crude for April delivery is now up 1% at session highs near $58.20/bbl in sympathy with a surge in gas futures.

Even though oil prices are still down more than 3% this week and off nearly 9% from a year ago, the Energy sector's (+0.1%) inability to take notice whatsoever and act as an offset is exacerbating the inflationary potential of the commodity's recent uptick since higher gas prices contributed to today's sentiment reading falling to a six-month low. DJ30 -9.45 NASDAQ -2.72 SP500 +0.29 NASDAQ Dec/Adv/Vol 1316/1377/878 mln NYSE Dec/Adv/Vol 1207/1729/774 mln

10:30 am : The major averages continue to inch higher, even after a preliminary read on monthly sentiment checks in at its lowest level since September. At the top of the hour, a survey compiled by the University of Michigan fell to 88.8 in March from a prior read of 91.3, reflecting the first signs of consumer response to the recent market sell-off and increased concerns of a recession owed in part to subprime mortgage woes.

Be that as it may, the report has been overlooked since there isn't as strong a correlation between sentiment and consumer spending as some might think. DJ30 +20.78 NASDAQ +4.81 SP500 +4.17 NASDAQ Dec/Adv/Vol 1179/1404/758 mln NYSE Dec/Adv/Vol 1166/1671/668 mln

10:00 am : The indices have inched higher within the last 30 minutes, getting a lift from a couple of notable areas. The Industrials sector (+0.5%) is turning in the best performance after the Fed showed that manufacturing output rose 0.4% after a revised 0.5% decline in January. For a third straight session, the Financials sector (+0.4%) is also providing a floor of support.

An analyst upgrade on Moody's (MCO 64.98 +1.47) earmarks Specialized Financials as one of today's best performing S&P industry groups. Thrifts & Mortgages are again in focus following an upgrade on Countrywide Financial (CFC 36.36 +0.89) and amid more positive developments in the subprime lending space. Fremont General (FMT 8.92 +1.52) said Credit Suisse increased its credit line to $1 bln while Accredited Home Lenders (LEND 12.82 +3.39) plans to sell $2.7 bln of loans at a discount.DJ30 +10.96 NASDAQ +2.06 SP500 +3.90 NASDAQ Dec/Adv/Vol 1452/960/614 mln NYSE Dec/Adv/Vol 1508/1152/518 mln

09:40 am : As futures trade presaged, stocks open slightly lower as investors struggle to determine what impact recent economic data will have on Fed policy when central bankers meet next week. Core CPI rose a less than feared 0.2% in February, matching economists' forecasts to keep inflation fears in check.

However, with investors more concerned about potential economic weakness, not even the largest rise in monthly industrial production since November 2005 has so far been enough to fuel follow-through buying efforts. As a reminder, this morning's action is likely to be volatile as today is a quarterly options expiration. DJ30 -17.54 NASDAQ -5.24 SP500 -0.54 NASDAQ Vol 300 mln NYSE Vol 126 mln

09:15 am : S&P futures vs fair value: -0.6. Nasdaq futures vs fair value: -2.3. Stocks now look to open on a relatively flat note as investors sift through yet another piece of economic data. February Industrial Production rose a stronger than expected 1.0% (consensus 0.3%), the largest increase since November 2005, easing some of the concerns about economic weakness. Capacity Utilization rose to 82.0% (consensus 81.3%).

09:00 am : S&P futures vs fair value: -2.3. Nasdaq futures vs fair value: -3.5. Futures indications continue to improve upon further analysis of today's CPI report. The release has been comforting to the stock market since it will keep inflation fears in check as the trend remains fairly stable. Nonetheless, the stage remains set for stocks to open on a slightly downbeat note as a market more sensitive to signs of economic weakness than inflation awaits additional data and perhaps further proof that the subprime debacle is not spilling over into an economy that continues to show signs of slowing.