Looks like we're looking forward to a week of more of the same in my opinion. I am going to go out on a limb and say we close the DJIA under 12,000 this week. Asia markets bleeding across the board atm (9:30 PM PST).
4:20 pm : After seeing roughly $1.8 trillion in world market value erased last week, it was anyone's guess as to whether continued fears of a global economic slowdown would carry over into today's trading. To the dismay of the bulls relishing an eight-month winning streak on the S&P 500 before last week's sell-off, tepid bargain-hunting efforts Monday were eventually met with another aggressive round of profit taking.
Further deterioration in overseas markets ushered in a new week of nervousness, which merely reminded investors that oversold markets tend to get more oversold before a bottom can be formed. Japan's Nikkei plunged 3.3% while Hong Kong's Hang Seng led the way a 4.0% decline, as a rising yen continued to feed fears about the ramifications of carry trades being unwound by hedge funds that borrowed money at low rates.
The European bourses lost about 1.0% on average while the Nasdaq led the way domestically, tacking a 1.2% decline onto last week's 5.8% drubbing. All 10 economic sectors posted losses; of the 147 S&P industry groups, 138 closed lower.
On a positive note, St. Louis Fed President Poole dismissed fears of a recession for the second time in as many trading sessions. However, he also discounted the need for possible government intervention, saying it doesn't make sense to respond to stock market declines unless they're extremely large and disruptive. Poole said that it would take a 1987-like market meltdown to justify interest rate cuts.
Adding insult to injury to a market now fixated on everything negative and inundated with overblown recession fears was another round of negative developments in the sub-prime mortgage space. New Century Financial (NEW 4.38 -10.27) tumbled 70% after reports of a federal criminal probe exacerbated concerns about a domino effect knocking over the prime lenders as well.
Countrywide Financial (CFC 35.17 -1.85), already under additional pressure after being downgraded at Lehman Brothers, was the worst performer (-5.0%) in the Financials sector. As the most influential of the 10 S&P sectors, the financial sector's 1.6% decline was among the biggest reasons for yet another day of disappointment for the bulls. DJ30 -63.59 NASDAQ -27.32 SP500 -13.05 NASDAQ Dec/Adv/Vol 2491/592/2.15 bln NYSE Dec/Adv/Vol 2736/595/1.87 bln
3:30 pm : After initially spiking to afternoon lows, the major averages have almost as quickly bounced back and are again trading in split fashion. Surprise, surprise, Technology turning the corner is largely responsible for the recent recovery.
It is worth noting, though, that 60 of the sector's 80 components are still trading lower and that Tech, which ranks third among this year's worst performing sectors (-3.4%) would still be in the red if it weren't for gains of at least 1.0% from bellwethers like CSCO, IBM, and AAPL. DJ30 +6.94 NASDAQ -10.90 SOX -0.3% SP500 -4.53 NASDAQ Dec/Adv/Vol 2334/749/1.92 bln NYSE Dec/Adv/Vol 2586/713/1.54 bln
3:00 pm : No real change in sentiment as split sector leadership continues to dictate this afternoon's action. Tech, Industrials, Staples and Health Care continue to trade in positive territory, but their combined gains still aren't enough to offset a 0.7% decline in Financials as another round of negative developments in the sub-prime mortgage space continues to take a toll on prime lenders (e.g. CFC -3.4%, WM -2.3%).
On a positive note, the Energy sector is clinging to a small gain even in the face of plunging oil prices; but a huge 2.6% sell-off in crude fueled largely by concerns of a global economic slowdown provide even less conviction on the part of bargain hunters selectively picking up a couple of beaten-down, large-cap energy names (e.g. XOM +0.6%, CVX +0.3%). DJ30 +10.02 NASDAQ -9.08 SP500 -3.05 NASDAQ Dec/Adv/Vol 2202/860/1.78 bln NYSE Dec/Adv/Vol 2478/799/1.43 bln
2:30 pm : More the same for equities as the Dow and Nasdaq continue to trade in opposing directions. Meanwhile, investors are sifting through some more Fed speak.
Fed Governor Kevin Warsh has recently said that liquidity does not appear to be in short supply and that the economy is demonstrating "extraordinary resilience," with regard to its ability to withstand shocks. Nonetheless, Warsh also stated that full understanding of the recent market declines will depend on further developments. DJ30 +10.42 NASDAQ -11.20 SP500 -3.49 NASDAQ Dec/Adv/Vol 2194/842/1.64 bln NYSE Dec/Adv/Vol 2391/884/1.31 bln
2:00 pm : The indices are paring their losses, spearheaded again by turnaround in Technology. Dow component Intel (INTC 19.38 +0.16) is near session highs after Advanced Micro Devices (AMD 13.90 -0.28), which is at a 52-week low after saying Q1 sales will likely miss forecasts, said it lost market share to competitors in distribution channel sales. Influential areas like Health Care and Industrials have also joined Consumer Staples to the upside, the latter attracting buyers of late due largely to its defensive characteristics.
The Dow has spiked into positive territory and the Nasdaq has more than halved its recent decline. However, the absence of notable catalysts to account for the market's recent improvement offers little conviction on the part of buyers haphazardly looking for bargains. DJ30 +33.32 NASDAQ -5.82 SP500 -1.00 NASDAQ Dec/Adv/Vol 2180/840/1.51 bln NYSE Dec/Adv/Vol 2546/721/1.21 bln
1:30 pm : Not much has changed since the last update as the major averages continue to vacillate in roughly the same ranges. Albeit still off their session lows, the indices are sporting losses across the board as sellers remain in complete control of today's action.
Nowhere is such bearishness more evident than in the A/D line, where decliners now hold a 3-to-1 edge over advancers on both the NYSE and the Nasdaq. DJ30 -14.85 NASDAQ -14.73 SP500 -5.64 NASDAQ Dec/Adv/Vol 2260/761/1.40 bln NYSE Dec/Adv/Vol 2553/701/1.11 bln
1:00 pm : Equities are extending their reach to the downside as traders continue to make their way through the New York lunch hour. Nine out of 10 sectors are now negative with the most heavily weighted of them all -- Financials -- also turning in the day's worst performance (-0.7%).
Even though St. Louis Fed President Poole is again dismissing fears of a recession, he has also discounted the need for possible government intervention, saying it doesn't make sense to respond to stock market declines unless they're extremely large and disruptive. Poole said that it would take a 1987-like market meltdown to justify interest rate cuts. DJ30 -17.23 NASDAQ -14.49 SP500 -5.69 NASDAQ Dec/Adv/Vol 2174/808/1.29 bln NYSE Dec/Adv/Vol 2536/696/1.01 bln
12:30 pm : As presaged in the last comment, with regard to the lack of conviction on the part of blue-chip buying interest, the Dow has now relinquished what minimal gains it was enjoying over the last 30 minutes.
While we still believe valuations are reasonable, with the S&P 500 now trading at just 15.8 times operating earnings, the reality that oversold markets tend to get more oversold continues to act as overhang, especially in the wake of a 180-degree swing last week in market sentiment to anything and everything negative. Thus, it remains to be seen when the market will right itself and provide more sustainable buying opportunities. DJ30 -7.21 NASDAQ -11.14 SP500 -5.34 NASDAQ Dec/Adv/Vol 2150/807/1.17 bln NYSE Dec/Adv/Vol 2468/725/926 mln
12:00 pm : The major averages are mixed midday but, more notably, are showing some good resilience in the face of what was shaping up to be another huge market downturn.
Before the market opened, all signs were pointing to yet anther dismantling on the part of sellers as a sell-off in overseas markets, sparked in part by another rally in the Japanese yen, exacerbated concerns that hedge funds are being forced to liquidate equity positions to pay off low-cost yen loans. Fortunately for the bulls, the stabilization of today's action suggests that some of the investment dollars being extracted from the Asian markets may be finding a home in U.S. markets.
Some short covering as well as safe-haven blue chip buying can also be attributed to the fact that stocks aren't turning in the huge disappointment presaged in pre-market futures trading. The Dow slipped to as low as 12039 (down 75 points) earlier, but the index's ability to find enough support to thwart a spike below the psychologically significant 12,000 level has provided some reassurance that a market bottom may be forming.
With the market also sensitive to positive news, the fact that today's weaker than expected national ISM services index still checked in above 50 last month has also helped put to rest the worst of fears about the economy heading into recession. Oil prices are tumbling 3.0% and have slipped below $60/bbl amid concerns about slowing global economic growth.
Be that as it may, there's also little reason to get overly excited about today's recovery attempts amid more negative developments in the sub-prime mortgage space and since market internals still paint a decidedly bearish bias. Decliners outpace advancers on both the NYSE and Nasdaq by a more than 2-to-1 margin. DJ30 +11.18 NASDAQ -7.68 SP500 -2.79 NASDAQ Dec/Adv/Vol 1927/994/1.02 bln NYSE Dec/Adv/Vol 2170/970/800 mln
11:30 am : The indices are modestly building on recent momentum as the influential Financials sector becomes the latest turnaround story. Even in the face of further deterioration in Treasuries, the rate-sensitive sector has turned the corner as concerns about sub-prime mortgage misfortunes potentially spreading into the broader economy begin to dissipate... for now.
While his comments are not surprising, St. Louis Fed President Poole recently saying the U.S. has seen little fallout from the end of the housing boom so far and that low U.S. inflation helped cushion the financial system is also helping to alleviate some of the market's underlying pessimism. DJ30 +58.72 NASDAQ +2.49 SP500 +3.03 NASDAQ Dec/Adv/Vol 1908/980/896 mln NYSE Dec/Adv/Vol 2121/969/682 mln
11:00 am : The major averages continue to trade at improved levels, considering the huge sell-off that the futures market was foretelling in pre-market action; but are now trading in split fashion. While the Dow slipped to as low as 12039 (down 75 points) earlier, the index's ability to find enough support to thwart a spike below the psychologically significant 12,000 level is providing an added source of reassurance.
Of the 17 Dow components catching a bid, Hewlett-Packard (HPQ 39.11 +0.55) is pacing the way higher. The bellwether's 1.4% advance is helping Technology lead the way among the five economic sectors trading higher; but its listing on the NYSE is part of the reason behind the tech-heavy Nasdaq's recent struggles to stay in positive territory. DJ30 +34.54 NASDAQ -3.56 SP500 +0.08 NASDAQ Dec/Adv/Vol 2011/845/722 mln NYSE Dec/Adv/Vol 2266/788/522 mln
10:30 am : Choppy trading persists early on as a renewed wave of buying interest since the last update lifts all three major averages into positive territory. Technology spiking higher, amid a sense that recent consolidation efforts may be overdone, has spearheaded the market's turnaround. Health Care, Industrials and Consumer Staples have also turned positive and are providing a floor of support.
Meanwhile, the national ISM services index recently checked in with a lower than expected reading of 54.3 (consensus 57.5). However, the report increased for the 47th consecutive month and any reading above 50 reflects growth, which helps put to rest the worst of fears about the economy heading into recession. Renewed confidence about the health of the economy has subsequently prompted a reversal in Treasuries; the 10-year note is now down 2 ticks to yield 4.50%.DJ30 +20.80 NASDAQ +0.91 SP500 +0.09 NASDAQ Dec/Adv/Vol 1630/1141/550 mln NYSE Dec/Adv/Vol 2426/550/334 mln
10:00 am : The indices are off their opening lows but are still on the defensive as the bulk of industry leadership remains negative. Right out of the gate, 144 of the 147 S&P industry groups were in the red, led by declines across a multitude of economically-sensitive areas. Aluminum is pacing the way (-2.9%), while Materials sector (-1.1%) counterparts like Gold (-2.2%) and Steel (-2.0%) also rank among today's biggest laggards.
Energy (-1.0%) is this morning's second worst performing sector as concerns about slowing global economic growth also make oil less attractive. Refiners and Explorers are plunging 2.6% and 1.7%, respectively. Crude for April delivery is down 2.0% at $60.40/bbl. As an aside, the White House has recently said that the global economy remains strong, but declined to comment on the ongoing sell-off in the stock market. Nonetheless, the government's comments are contributing to the market's bounce within the last 15 minutes as the Dow briefly turned positive. DJ30 -10.61 NASDAQ -10.39 SP500 -4.44 XOI -0.8% NASDAQ Dec/Adv/Vol 2204/450/268 mln NYSE Dec/Adv/Vol 2022/313/102 mln
09:40 am : As expected, stocks open sharply lower. With the market increasingly pessimistic, as evidenced by a growing sense of risk aversion ever since last Tuesday's sell-off, investors have found little incentive to start bottom fishing anytime soon. The continued sell-off in overseas markets, sparked in part by another rally in the Japanese yen, are exacerbating concerns that hedge funds are being forced to liquidate equity positions to pay off low-cost yen loans.
Throw in some more negative developments on the sub-prime mortgage front and the bears continue to find fodder to support their argument that valuations are still unsustainable at current levels. DJ30 -32.18 NASDAQ -15.24 SP500 -6.92 NASDAQ Vol 88 mln NYSE Vol 50 mln
09:15 am : S&P futures vs fair value: -10.0. Nasdaq futures vs fair value: -14.5.
09:00 am : S&P futures vs fair value: -9.6. Nasdaq futures vs fair value: -13.5. The futures market is off its worst levels but the modest rebound offers little conviction on the part of the bulls still struggling to find a market bottom amid all of the recent bloodletting. Overblown fears of a recession and a serious decline in earnings growth continue to act as an overhang. The fact that there isn't any notable Monday-morning M&A news making headlines further underscores the guarded state investors are in currently as further market declines would equate to cheaper asset prices for prospective acquirers.
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