4:20 pm : Stock prices slumped on Friday under the weight of a weak financial sector, which got marked down on concerns about the problems in the subprime mortgage market. Those aren't new concerns, but the new thought that influenced investors today was the concern that the problems in the subprime market will carry over to prime lenders.
Now, before creating an impression that participants were really spooked by that possibility, let's be real and take a look at the major indices, and specifically the S&P 500 which dropped a mere 5 points.
To be sure, if the subprime issue was really worrying investors, the S&P 500 would have been down a lot more than it was on Friday. The fact that it wasn't speaks to an enduring bullish bias that has been aided by strong liquidity and good old-fashioned momentum.
While Briefing.com has retained a moderately bullish outlook, we are a bit concerned that the market is getting ahead of itself knowing that earnings growth will slow this year and that there is a lingering threat that the Fed will raise interest rates again.
One of the factors contributing to the rate hike threat is the rebound in oil prices, which hit a high of $61.80 today on the April contract before sliding back on profit taking efforts to close at $60.92. Iran's defiance of the UN over its nuclear program and concerns about refinery production played a big part in oil's uptick this week.
The energy sector (+0.21%) was one of the few winning groups on Friday, but its gains got pared as oil prices retreated late in the session. The utilities sector (+0.95%) was the market's strongest area as better than expected earnings from Nicor (GAS 46.87, +0.59), the sector's defensive orientation, and a drop in market rates sparked buying demand for the income-oriented stocks.
Broad-based weakness in the financial sector (-1.08%), though, was the market's biggest stumbling block today that kept it from making any spirited rebound tries. REITs and investment banking stocks were the hardest hit by selling activity.
In other developments, home improvement retailer Lowe's (LOW 34.93, +1.30) was a winning standout after reporting fourth quarter EPS results that topped expectations by three cents. The real impetus for the stock's advance, though, was the company's admission that it is encouraged by indications that suggest sales trends have bottomed.
Separately, the Treasury market fared well in a flight-to-quality trade that saw the 10-year yield gain 14 ticks and its yield drop to 4.67%.DJ30 -38.54 NASDAQ -9.84 SP500 -5.19 NASDAQ Dec/Adv/Vol 1737/1305/2.04 bln NYSE Dec/Adv/Vol 1676/1599/1.37 bln
3:30 pm : All things considered, the market is making another resilient stand.
Today's retreat, frankly, is negligible when taking into account the market's gains this year and several factors - oil above $61, core-CPI higher than expected, earnings growth slowing, subprime mortgage defaults rising, and Iran not wanting to make nice with the UN over its nuclear program - that one might think would invite more aggressive selling interest.
Hasn't been the case today, though, as sellers have shown restraint on their end too.DJ30 -29.16 NASDAQ -5.92 SP500 -3.84 NASDAQ Dec/Adv/Vol 1694/1327/1.68 bln NYSE Dec/Adv/Vol 1720/1526/1.15 bln
10:55 am : The market has extended its losses as the financial sector (-1.30%) has dropped to new lows for the session. The downshift is related to concerns about the problems in the sub-prime mortgage market and the fear that they will carry over to prime lenders. These aren't new fears (we've heard this all week), but it is as good a profit taking catalyst as any ahead of the weekend.
On a related note, the Treasury market has caught a bid on some residual flight-to-quality buying. The yield on the 10-year note has dropped to 4.68% from 4.73% yesterday.
Similarly, some of the stock market's defensive-oriented areas are exhibiting some relative strength today. The utilities sector (+0.50%) and the consumer staples sector (-0.20%) stand out in this respect.DJ30 -53.44 NASDAQ -16.16 SP500 -7.52 NASDAQ Dec/Adv/Vol 1811/969/584 mln NYSE Dec/Vol 1848/358 mln
10:30 am : The indices are sporting modest losses, but have been restricted to negative territory since the opening bell. A weak showing from the financials (-0.70%) is largely responsible for that.
Transports are another notable pocket of weakness as the bump in oil prices above $61 per barrel is spurring selling efforts that have knocked the Dow Jones transportation Average (-0.90%) back from the record high it hit on Wednesday.DJ30 -34.85 NASDAQ -8.19 SP500 -4.51 NASDAQ Dec/Adv/Vol 1595/1075/383 mln NYSE Dec/Adv/Vol 1677/1245/224 mln
10:00 am : The major indices find themselves confined to negative territory as buyers have been slow to action today. There are some pockets of outperformance, but they are related mostly to individual stock moves like the ones seen in H&R Block (HRB 23.53, +1.11), which is a suggested holding in Briefing.com's Active Portfolio, and Lowe's (LOW 35.40, +1.77). Both companies reported their quarterly earnings results.
The jump in oil prices (+$0.31 at $61.26) is generating buying activity among the energy-related issues, which comprise the market's best-performing sector today (+0.66%). Overall, though, the view is one of weakness as 8 of 10 economic sectors are currently trading with a loss.
Financials (-0.50%) are being weighed down by the media's increased attention to the problems in the sub-prime mortgage market and are playing an influential loss role. Not surprisingly, thrifts & mortgage (-1.20%) stands s the worst-performing S&P industry group at this juncture.DJ30 -36.13 NASDAQ -8.49 SP500 -3.47 NASDAQ Dec/Adv/Vol 1515/967/176 mln NYSE Dec/Adv/Vol 1414/1147/74 mln
09:40 am : As expected, the stock market has begun the day on a somewhat sluggish note that is a by-product of there being a general lack of trading catalysts.
We would note that the initial downward move is akin to what has been seen in the past few sessions, but that buyers emerged to pare early losses in each of those sessions. Time will tell if their involvement gets the job done again today.DJ30 -20.59 NASDAQ -3.05 SP500 -1.67
09:20 am : S&P futures vs fair value: -1.0. Nasdaq futures vs fair value: +1.0. Expectations for a mixed start remain intact. With little in the way of notable earnings news and a lack of economic data, today's market is shaping up to have a dull edge to it.
08:59 am : S&P futures vs fair value: -0.1. Nasdaq futures vs fair value: +2.5.
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