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Market Update 080204
http://biz.yahoo.com/mu/update.html
4:45 pm : After the huge gains recorded last week, the stock market was expected to take a breather. On Monday it lived up to those expectations, as each of the major indices recorded a loss.

The selling activity was fairly broad-based and was led by the financial and retail groups-- two of the best-performing areas last week.

UBS helped ignite the selling activity when it slapped a Sell rating on consumer finance companies Discover Financial Services (DFS 16.34, -1.62), Capital One (COF 52.65, -4.32) and American Express (AXP 47.66, -1.94) on concerns about a consumer-led recession. In a related move, Merrill Lynch also cut Wells Fargo (WFC 31.39, -2.26) and Wachovia (WB 35.53, -3.23) to Sell, which added to the negative action in the financial stocks.

Continued weakness in big-cap technology issues also weighed heavily on the broader market. Google (GOOG 495.43, -20.47), which kissed $700 in December, fell below $500 on Monday amid continued concerns about its recent earnings disappointment and the competitive threat posed by a Microsoft-Yahoo! alliance. Goldman Sachs also took the stock off its Conviction Buy List.

The Wall Street Journal, incidentally, reported Monday that Google offered Yahoo! its help in fending off Microsoft if it so desired.

Another notable laggard in the tech sector was Cisco (CSCO 23.82, -1.12), which got hit on cautious analyst commentary regarding its near-term earnings prospects.

The Factory Orders report for December was the lone economic release on Monday. Although the reported 2.3% increase was a bit shy of the consensus estimate of 2.5%, it marked an acceleration from the 1.7% growth rate reported for November. Moreover, it provided an indication that there still isn't much evidence of a recession in manufacturing.

Despite the decent economic news, buyers simply didn't show much conviction in Monday's action. The indices closed near their lows for the session on lighter volume at the NYSE than has been seen recently. That point speaks to the idea that the losses Monday were indeed driven more by a profit-taking inclination than anything else. DJ30 -108.03 NASDAQ -30.51 SP500 -14.60 NASDAQ Dec/Adv/Vol 1607/1205/2.15 bln NYSE Dec/Adv/Vol 1872/1276/1.31 bln

2:55 pm : The major indices hit fresh session lows. There is not a specific catalyst, and there is relative weakness in financials (-2.8%). Within the sector, the main laggards are diversified banks with a 6.6% loss and consumer finance with a 5% loss. The only group posting a gain is specialized finance, although it is basically flat.

The Wall Street Journal reports that Moody's is considering a change in the way it rates mortgage related bonds and other vehicles hit hard in the credit crunch. The company is looking to overhaul its rating system to differentiate between structured finance vehicles and traditional offerings such as corporate bonds and Treasuries.DJ30 -116.49 NASDAQ -29.19 SP500 -15.30 NASDAQ Dec/Adv/Vol 1626/1266/1.50 bln NYSE Dec/Adv/Vol 1828/1293/887 mln

2:30 pm : The major indices are trading in a range bound fashion near their session lows. The utilities sector (+2.3%) has managed to buck the negative trend and extend its gains.

161 stocks in the S&P 500 are posting a gain. Merck (MRK 47.48, +1.50) and Schlumberger Limited (SLB 79.67, +1.39) are providing leadership. The main laggards are Wells Fargo (WFC 31.25, -2.40) and General Electric (GE 35.41, -0.75)DJ30 -90.55 NASDAQ -23.20 SP500 -12.23 NASDAQ Dec/Adv/Vol 1818/1304/1.40 bln NYSE Dec/Adv/Vol 1818/1304/826 mln

2:00 pm : The major indices are trading modestly above their worst levels, and remain in the red. Market moving news remains light.

The Amex Airline Index is posting a sizeable loss of 3.9%. A bit of a pullback is to be expected as the sector has had a good run this year on hopes of consolidation among the major airlines. It has handily outperformed the broader market with an 11.5% advance at Friday's close.DJ30 -71.05 NASDAQ -19.51 SP500 -9.65 NASDAQ Dec/Adv/Vol 1527/1339/1.28 bln NYSE Dec/Adv/Vol 1827/1261/744 mln

1:30 pm : In the last half-hour, the major indices hit fresh session lows. The stock market has recovered a bit, but remains near its lows.

There was not a specific catalyst for the recent selling pressure. Traders are likely taking some money off the table as financials (-2.3%) and consumer discretionary (-2.0%) continue to be laggards.DJ30 -95.92 NASDAQ -23.96 SP500 -12.48 NASDAQ Dec/Adv/Vol 1559/1267/1.18 bln NYSE Dec/Adv/Vol 1828/1257/654 mln

1:00 pm : The major indices continue to trade in the red, near their worst levels of the session. The energy sector extends its gains as crude oil climbs higher (+1.9% to $90.66).

Decliners outpace advancers by 3-to-2 on the NYSE and by 6-to-5 on the Nasdaq. New 52-week highs outpace new lows by 5-to1 on the NYSE and new 52-week lows outpace new highs by 23-to-18 on the Nasdaq.DJ30 -65.88 NASDAQ -19.17 SP500 -9.49 NASDAQ Dec/Adv/Vol 1524/1289/1.05 bln NYSE Dec/Adv/Vol 1787/1268/602 mln

12:30 pm : The major indices are heading back near their session lows. The pullback is concentrated within this session's weakest areas, which are financials (-2.1%), retailing (-2.9%) and consumer discretionary (-1.9%)

A CNBC commentator said he's hearing there will be only be a municipal bond bailout of Ambac (ABK 12.38, -0.82). He said banks will back up muni bonds only, not collateral debt obligations.DJ30 -82.18 NASDAQ -21.28 SP500 -11.25 NASDAQ Dec/Adv/Vol 1535/1254/950 mln NYSE Dec/Adv/Vol 1769/1293/548 mln

11:55 am : The major indices opened on a lackluster note and have spent the entire session in negative territory. There is little corporate news and this session's modest decline is likely due to investors taking some profits after the S&P 500 posted its largest weekly gain in roughly five years.

There were some notable brokerage downgrades regarding financial stocks. UBS downgraded credit card companies American Express (AXP 48.05, -1.55), Capital One (COF 53.17, -3.80) and Discover Financial (DFS 16.82, -1.14) to Sell. Merrill Lynch downgraded Wachovia (WB 36.25, -2.51) and Wells Fargo (WFC 31.90, -1.75) to Sell.

The financial sector (-1.6%) is the main laggard due to the downgrades, compounded with some profit taking after the sector's 8.5% surge last week.

On a similar note, consumer discretionary (-1.5%) and retailers (-2.2%) are laggards due to some profit taking after gaining 6.7% and 7.5% respectively, in the prior week.

The December factory orders report is the sole economic release this session, and had a limited effect on the stock market due to its dated nature. Factory orders were up 2.3%, modestly less than the 2.5% rise economists expected. This is the sixth straight increase in seven months for total factory orders. There is little evidence that the manufacturing sector is entering recessionary mode.

Four of the ten economic sectors are in positive territory, led by utilities (+1.5%) and health care (+0.7%).

Treasuries are facing some selling pressure. The 10-year note is down 16 ticks, sending its yield up to 3.65%. DJ30 -44.95 NASDAQ -12.43 SP500 -6.50 NASDAQ Dec/Adv/Vol 1420/1324/816 NYSE Dec/Adv/Vol 1643/1363/460 mln

11:30 am : Stocks pare some losses as financials (-1.4%) regain some ground. The energy sector is also playing a role in the recovery as the sector makes it to the unchanged mark. The sector has pared its losses as crude oil extends its gains, now up 1.2% to $90.03 per barrel.DJ30 -54.22 NASDAQ -14.72 SP500 -7.62 NASDAQ Dec/Adv/Vol 1497/1232/709 mln NYSE Dec/Adv/Vol 1758/1231/374 mln

11:00 am : The major indices have regained some ground but continue to post a loss. This session's modest pullback comes after the strongest weekly performance in roughly five years.

Meanwhile, telecom (+0.2%) is showing some relative strength as it crosses into positive territory.

Treasuries are under some selling pressure this morning. The 10-year note is down 11 ticks, sending its yield up to 3.64%.DJ30 -61.62 NASDAQ -16.42 SP500 -8.87 NASDAQ Dec/Adv/Vol 1560/1103/536 mln NYSE Dec/Adv/Vol 1855/1082/292 mln

10:30 am : Selling pressure eases as the major indices hold slightly above their worst levels. Eight of the ten sectors are in the red. Financials (-1.7%) and consumer discretionary (-1.3%), which saw hefty gains last week, are the main laggards as investors take some profits.

Defensive sectors health care (+0.5%) and utilities (+0.7%) are providing leadership.DJ30 -64.38 NASDAQ -17.46 SP500 -9.54 NASDAQ Dec/Adv/Vol 1571/993/336 mln NYSE Dec/Adv/Vol 1751/994/122 mln

10:00 am : Stocks extended their losses as financials (-1.8%) show weakness. The sector is garnering some attention this morning after several brokerage downgrades and upgrades.

UBS downgraded American Express (AXP 48.20, -1.40), Capital One (COF 52.83, -4.14) and Discover Financial (DFS 17.01, -0.95) to Sell. Merrill Lynch downgraded Wachovia (WB 37.04, -1.72) and Wells Fargo (WFC 32.05, -1.60) to Sell.

There were also some upgrades, although they do not seem to be having much of a positive effect on the stocks. Merrill Lynch (MER 57.78, -0.62), Goldman Sachs (GS 205.53, -2.25) and Bear Stearns (BSC 91.43, -1.46) were upgraded to Market Perform from Sell at Punk Ziegel. Lehman Brothers (LEH 64.41, -1.59) was upgraded to Buy from Market Perform. Ziegel said the firms stand to benefit from lower interest rates.

Just reported, December factor orders rose 2.3%, compared to the expected rise of 2.5%. As expected, the release has not had much of an effect on the market.DJ30 -69.91 NASDAQ -15.03 SP500 -9.95 NASDAQ Dec/Adv/Vol 1370/1036/142 mln

09:40 am : Stocks open in lackluster fashion on a slightly lower note. The only economic report today is the December factory orders at 10:00 ET. It is not expected to have an impact on the market.

Corporate news was slow this morning, although there were more developments regarding Microsoft's (MSFT) unsolicited bid for Yahoo! (YHOO). The Wall Street Journal reports that Google (GOOG) CEO Eric Schmidt called Yahoo CEO Jerry Yang offering Google's help to thwart Microsoft's bid. The Journal also reports the bid will get a "hard look" from European and U.S. antitrust enforcers and lawmakers.DJ30 -42.35 NASDAQ -5.20 SP500 -5.88

09:16 am : S&P futures vs fair value: -1.8. Nasdaq futures vs fair value: +1.3.

08:58 am : S&P futures vs fair value: -0.4. Nasdaq futures vs fair value: +1.3. A slightly lower to flat start is expected. It continues to be a slow news day.

08:28 am : S&P futures vs fair value: -2.9. Nasdaq futures vs fair value: -1.3. It looks to be a lackluster start to the trading day with futures pointing to a slightly lower open. The sole economic report today is the December Factory Orders report at 10:00 ET. It is not expected to have much of an impact on the market.

08:00 am : S&P futures vs fair value: -0.6. Nasdaq futures vs fair value: +1.8. Early indications suggest a flat start for the stock market. There has not been much market moving news this morning. Several financial stocks have been downgraded to sell at various brokerage firms. They include Discover Financial (DFS), Capital One (COF), American Express (AXP), Wells Fargo (WFC), and Wachovia (WB). Meanwhile, the Wall Street Journal reports that Google (GOOG) has offered to help Yahoo! (YHOO) fight off Microsoft’s (MSFT) unsolicited offer.

06:25 am : FTSE...6040.70...+11.50...+0.2%. DAX...7038.11...+69.44...+1.0%.

06:25 am : S&P futures vs fair value: -0.8. Nasdaq futures vs fair value: +1.0.

06:25 am : Nikkei...13859.70...+362.54...+2.7%. Hang Seng...25032.08...+908.50...+3.8%.