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Market Update 070322
http://biz.yahoo.com/mu/update.html

4:20 pm : The market took a breather Thursday as investors, looking a bit fatigued, lacked the data needed to support the best three-day percentage gain on the S&P 500 since April 2003. It also wasn't surprising to see the Nasdaq, fresh off its largest percentage gain (+2.0%) since last October, as becoming ripe for a pullback. The Dow finished to the upside, but its 0.22% gain was nothing to write home about and still left it shy of turning positive for the year.

Before the bulls could even find room to rationalize a rally fueled by a revised Fed policy statement that didn't indicate any imminent rate cut a day earlier, they were greeted with some negative news in a Tech sector whose earnings potential is already under the microscope. Last night, Motorola (MOT 17.52 -1.22) warned of a loss for this quarter and forecasted the company's first sales decline in four years. That news trumped a blowout quarter from Oracle (ORCL 18.51 +0.34) two days ago and questioned the sustainability of Technology's recent recovery.

The absence of leadership in a Financials sector that has been a significant driver behind gains on all three major averages in five of the prior six sessions acted as an even larger overhang on the market. Thrifts & Mortgage (-1.3%), already one of this year's biggest disappointments (-7.0%) amid overblown concerns about subprime mortgage woes spilling over into the broader economy, was the sector's weakest link today. As if a Fed official saying that some borrowers are clearly experiencing "significant financial and personal challenges" wasn't enough Countrywide Financial (CFC 36.36 -0.59) followed by saying its foreclosures on 2006 subprime mortgages may top 2000's 9.9%, becoming the worst year yet.

Also stalling follow-through momentum were soaring oil prices. Crude for May delivery surged 3.5% to $61.69/bbl, its biggest one-day gain in six weeks, amid growing concerns that gasoline supplies remain inadequate to meet upcoming summer driving demand. Fortunately for the bulls, the Energy sector tacking a 1.8% advance onto yesterday's strong 1.7% gain helped to offset some of the commodity's inflationary potential. Exxon Mobil (XOM 74.34 +1.11), the most heavily weighted constituent on the S&P 500, climbed 1.5% in response to oil's advance.

Fellow Dow component Procter & Gamble (PG 63.85 +0.89), the blue-chip index's second best performer, gained 1.4% after being upgraded at Bear Stearns on valuation. P&G's gain, along with General Mills (GIS 58.32 +0.44) topping expectations and raising its full-year outlook, helped the Consumer Staples garner added attention for its defensive characteristics. BTK +0.37% DJ30 +13.62 DJTA -0.04% DJUA +0.11% DOT -0.16% NASDAQ -4.18 NQ100 -0.37% R2K +0.03% SOX -1.26% SP400 +0.23% SP500 -0.50 XOI +1.59% NASDAQ Dec/Adv/Vol 1449/1578/1.89 bln NYSE Dec/Adv/Vol 1633/1619/1.50 bln

3:30 pm : Over just the first three days this week, the Dow, S&P 500 and Nasdaq were up a staggering 2.8%, 3.5% and 3.5%, respectively. However, since such outsized gains typically invite some profit-taking activity, it now looks like the major averages are at risk of having their recent streak snapped.

While yesterday's sentiment was unmistakably bullish and there was no sense fighting the tape, we still don't believe an adjusted Fed policy statement that was modestly positive news at best, since it doesn't indicate any imminent rate cut, should have been seen as a catalyst for a huge rally any more than the "Shanghai Surprise" was for a bear market. Therefore, we believe it is just as important not to get carried away by the upward move this week as the downward move three weeks ago. DJ30 -8.97 NASDAQ -7.07 SP500 -2.18 NASDAQ Dec/Adv/Vol 1541/1451/1.55 bln NYSE Dec/Adv/Vol 1645/1582/1.24 bln

3:00 pm : More of the same for stocks as split sector leadership continues to dictate today's uneventful trading session. The Energy sector (+2.2%), along with Telecom (+1.0%), continue to be the only sources of support for the market.

However, their combined weightings on the S&P 500 of 13.3% are no where near enough to offset consolidation throughout the Financials and Technology sectors, which account for more than the 37% of the influence on the broader market. DJ30 +15.26 NASDAQ -3.66 SP500 +0.73 NASDAQ Dec/Adv/Vol 1446/1531/1.42 bln NYSE Dec/Adv/Vol 1555/1665/1.13 bln

2:30 pm : Stocks continue to show signs of fatigue as both buyers and sellers stick to the sidelines. As reflected in the A/D line, it's almost not possible for advancers and decliners to mirror each other so evenly on both the NYSE and the Nasdaq.

The same can be said for the ratio of up to down volume, which paints a similarly neutral picture as stocks trade sideways after posting gains in five of the past six sessions.DJ30 +10.46 NASDAQ -4.30 SP500 +0.35 NASDAQ Dec/Adv/Vol 1485/1481/1.30 bln NYSE Dec/Adv/Vol 1590/1599/1.03 bln

2:00 pm : Not much has changed within the last hour, or all day for that matter, as the indices remain mired in relatively narrow trading ranges. The lack of follow-through momentum in the S&P 500's two most influential sectors -- Financials (-0.63%) and Technology (-0.67%), which also happen to be today's biggest disappointments, continue to weigh on market sentiment.

The fact that Energy is turning in the best performance (+1.9%), at the expense of oil's biggest one day advance this month (+2.7%) no less, further underscores the uphill battle the bulls have been trying to climb all day. DJ30 +3.72 NASDAQ -6.17 SP500 -0.68 NASDAQ Dec/Adv/Vol 1531/1418/1.22 bln NYSE Dec/Adv/Vol 1748/1445/960 mln

1:30 pm : Directionless trading still plagues the blue-chip investors, as the Dow and S&P 500 languish around the flat line. With the Nasdaq up 2.0% yesterday, and technology under pressure in the wake of warning from Motorola (MOT 17.54 -1.20), the temptation to consolidate gains still lingers throughout the tech-heavy Composite.

It is worth noting though that the Nasdaq's modest 0.3% pullback, coupled with the fact that decliners and advancers remain evenly matched, offer little conviction on the part of sellers. DJ30 +0.72 NASDAQ -6.27 SP500 -0.44 NASDAQ Dec/Adv/Vol 1491/1434/1.11 bln NYSE Dec/Adv/Vol 1642/1534/884 mln

1:00 pm : The renewed wave of buying interest within the last 30 minutes appears to have run out of steam. Investors may have been hoping that at least one of today's Fed speakers might shed some light on the revisions made to yesterday's policy statement.

However, Fed Governor Kroszner and Richmond Fed President Lacker recently saying they will not talk about the economy or monetary policy today have stalled the market's recent attempts to build on Wednesday's gains. This morning, Fed Chairman Bernanke gave opening remarks at a credit conference in Washington, D.C.; but he too did not make any economic or monetary remarks. DJ30 +10.75 NASDAQ -1.94 SP500 +0.68 NASDAQ Dec/Adv/Vol 1408/1484/1.01 bln NYSE Dec/Adv/Vol 1554/1606/806 mln

12:30 pm : The major averages are now trading in split fashion as buyers kick off the afternoon session with a renewed sense of enthusiasm. A turnaround in the Health Care sector, courtesy of strength in HMOs (+1.2%), has been the most noticeable catalyst behind the Dow and S&P 500's latest moves into positive territory.

Oil prices are off their highs but that hasn't stopped bargain hunters from aggressively jumping back into beaten down oil stocks. The Energy sector is now up 2.2% and positive for the year. DJ30 +25.30 NASDAQ -0.92 SP500 +2.62 XOI +2.1% NASDAQ Dec/Adv/Vol 1417/1447/904 mln NYSE Dec/Adv/Vol 1512/1606/700 mln

12:00 pm : Stocks are trading modestly lower midday, which isn't all that surprising given the sizable gains enjoyed a day earlier.

Motorola (MOT 17.61 -1.13) slashing its Q1 sales and earnings guidance last night was the initial catalyst prompting investors to reconsider the sustainability of a recent rally in the Tech sector predicated on improved earnings visibility following of a blowout quarter from Oracle (ORCL 18.24 +0.07).

The absence of leadership in a Financials sector that has been a significant driver behind gains on all three major averages in five of the past six sessions is also acting as an early overhang. Thrifts & Mortgage (-1.4%) ranks among the day's worst performing S&P industry groups after a Fed official said that some borrowers are clearly experiencing "significant financial and personal challenges." Countrywide Financial (CFC 36.23 -0.72) followed by saying its foreclosures on 2006 subprime mortgages may top 2000's 9.9%, becoming the worst year yet.

Also stalling follow-through momentum has been a surge in oil prices. Crude for May delivery is now up more than 3% at $61.43/bbl as U.S. refiners are expected to increase operating rates to prepare for the crucial summer driving season. Fortunately for the bulls, the Energy sector matching yesterday's strong 1.7% advance is acting as somewhat of an offsetting factor.

Exxon Mobil (XOM 74.47 +1.24), the most heavily weighted constituent on the S&P 500, is surging 1.7% in response to oil's advance. Fellow Dow component Procter & Gamble (PG 63.88 +0.92) surging 1.5% after being upgraded at Bear Stearns is also helping the blue-chip index try to extend its best three-day performance since November 2004. DJ30 -10.34 NASDAQ -7.21 SP500 -2.13 NASDAQ Dec/Adv/Vol 1495/1325/800 mln NYSE Dec/Adv/Vol 1651/1436/620 mln

11:30 am : The market continues to chalk up losses, but it is worth noting that declines on all three major averages are modest in scope considering the temptation to more aggressively lock in gains following such a huge run-up yesterday. As a reminder, the Dow, S&P 500 and Nasdaq surged 1.3%, 1.7% and 2.0%, respectively, on Wednesday.

Today, they are now down only 0.1%, 0.2% and 0.3% in the face of soaring oil prices, a profit warning in the tech sector and mixed news with regard to ongoing subprime mortgage woes.DJ30 -12.81 NASDAQ -7.79 SP500 -2.22 NASDAQ Dec/Adv/Vol 1578/1213/660 mln NYSE Dec/Adv/Vol 1776/1264/510 mln

11:00 am : Equities are still on the defensive as sellers remain in control of the action. One area catching a bid, though, is oil. However, the commodity's inflationary potential, especially after yesterday's policy statement noted there is still a risk that inflation will fail to moderate as expected, is acting as an offset to a 1.4% surge in the Energy sector.

Crude for May delivery is now up nearly 3% at $61.37/bbl as U.S. refiners are expected to increase operating rates to prepare for the crucial summer driving season. DJ30 -26.75 NASDAQ -12.22 SP500 -4.05 NASDAQ Dec/Adv/Vol 1558/1166/524 mln NYSE Dec/Adv/Vol 1610/1388/380 mln

10:30 am : Not much has changed as investors sift through some recent Fed commentary. Over the last 30 minutes, the Fed has affirmed that it is concerned about recent developments in mortgage markets and offered some reassurance saying it is not now seeing "spillover effects" from subprime market into general mortgage market.

The Fed has also said that housing credit deterioration is concentrated primarily in a relatively narrow subprime market, which represents fewer than one out of 10 outstanding mortgages. However, the Fed also said that some borrowers are clearly experiencing "significant financial and personal challenges" and that subprime sector consolidation "has likely not yet run its course."DJ30 -20.89 NASDAQ -9.04 SP500 -2.65 NASDAQ Dec/Adv/Vol 1342/1306/378 mln NYSE Dec/Adv/Vol 1395/1534/266 mln

10:00 am : The indices are extending their reach to the downside as seven out of 10 sectors are now trading lower. Technology pacing the way (-0.66%) and close to slipping back into negative territory for the year, due largely to Motorola's (MOT 17.84 -0.90) forecasted shortfall, remains the biggest obstacle for the bulls.

The absence of leadership in a Financials sector that has been a significant driver behind gains on all three major averages in five of the past six sessions is also acting as an early overhang. Industrials is another notable sector losing ground, as surging oil prices make transportation stocks less attractive. Analyst downgrades on Deere & Co (DE 113.66 -1.76) and Raytheon (RTN 53.11 -0.94) are also weighing on the sector. DJ30 -22.10 NASDAQ -9.02 SP500 -2.26 NASDAQ Dec/Adv/Vol 1130/1370/164 mln NYSE Dec/Adv/Vol 1007/1598/82 mln

09:40 am : Further analysis of a rally yesterday that we believe was overdone in response to an adjusted Fed policy statement that was modestly positive at best has stalled the momentum in a market that has been consistently overly confident about the possibility of a rate cut.

An earnings warning from Motorola (MOT 17.83 -0.91), coupled with crude oil prices surging 2.2% and flirting with $61/bbl, are also preventing the bulls from building on yesterday's sizable gains. DJ30 -6.68 NASDAQ -2.72 SP500 -0.19 NASDAQ Vol 86 mln NYSE Vol 42 mln

09:15 am : S&P futures vs fair value: +1.0. Nasdaq futures vs fair value: flat.