4:20 pm : With the market pricing in a possible rate cut over the last several months, the FOMC minutes providing no indicationn that a rate cut will happen anytime soon exacerbated early consolidation efforts and snapped the Dow's eight-session winning streak.
According to the Stock Trader's Almanac, April has been the best month for the Dow since 1950, turning in an average return of 1.8%. However, with the blue-chip index already surging 1.7% during the first week of April alone and not closing in negative territory since March 28, it wasn't surprising to see some early profit-taking activity.
However, a market having placed way too much emphasis on the belief that the Fed was moving away from a tightening bias to a neutral view, as reflected in the broad-based rally following the surprise removal of "additional firming" in the Fed's latest policy directive, got a wake-up call late Wednesday.
While most of the nine pages of minutes brought few surprises, the FOMC minutes from the March 20-21 FOMC meeting stating that "further policy firming might prove necessary to foster lower inflation," even if offset by economic concerns, showed that there is no leaning towards an easing anytime soon. That reality check further underscored why we remain cautious about the near-term outlook.
It is worth noting, though, that stocks were succumbing to selling efforts before the 2:00 ET release of the minutes.
Contributing to the negative disposition that stalled momentum from the onset of trading was the absence of any notable earnings reports other than the one from Alcoa (AA 35.08 +0.18), which officially kicked off the first quarter earnings season Tuesday night. Unfortunately for the bulls, Alcoa's record net income merely rising 9.0% underscored the strong likelihood that 14 straight quarters of double-digit profit growth for the S&P 500 will come to an end.
With the market increasingly sensitive to weak data, especially from the housing sector, the National Association of Realtors saying it sees median existing home prices down 0.7% in 2007, the first decline in nearly 40 years, also weighed on sentiment. That news, coupled with KB Home's (KBH 41.50 -0.46) CEO saying the housing market will get worse before it gets better, gave investors another reason to keep selling this year's worst performing S&P industry group. Homebuilding is now down 21.7% this year.
All 10 economic sectors closed lower, paced by a 1.1% decline in Telecom, but were more influentially impacted by a 0.8% pullback in the rate-sensitive and much more heavily-weighted Financials sector.
Everything from banks to brokers to REITs extended their year-to-date declines. Citigroup (C 51.83 -0.57), yesterday's best performing component (+1.6%), came under added pressure as shareholders questioned whether today's announced restructuring, which will include 17,000 job cuts, will be enough since cost-cutting can only take the investment bank so far. BTK -0.4% DJ30 -89.23 DJTA -0.5% DJUA -0.4% DOT -1.1% NASDAQ -18.30 NQ100 -1.0% R2K -0.8% SOX -1.1% SP400 -0.6% SP500 -9.52 XOI -0.2% NASDAQ Dec/Adv/Vol 1952/1056/1.98 bln NYSE Dec/Adv/Vol 2242/1046/1.48 bln
3:30 pm : Stocks are clawing back from their worst levels of the day, but decidedly bearish market internals offer little conviction on the part of buyers and the uphill battle they face with only 30 minutes left in the trading day.
After coming in to today's with eight straight days of gains, the Dow was already looking a bit fatigued and ripe for a pullback. Throw in the possibility of further Fed tightening and a questionable restructuring from yesterday's best performing component, Citigroup (C 51.69 -0.71), and the blue-chip index is on pace to post its first decline this month. DJ30 -80.54 NASDAQ -18.61 SP500 -8.69 NASDAQ Dec/Adv/Vol 2060/937/1.65 bln NYSE Dec/Adv/Vol 2275/986/1.25 bln
3:00 pm : Selling remains the name of the game as the major averages continue to hit fresh session lows. A decline of more than 1.0% in Technology stands out as the biggest obstacle for the bulls to overcome; but a 0.8% pullback in the more influential and rate-sensitive Financials sector due to diminished hopes of a rate cut anytime soon is now acting as the market's largest hurdle.
Property & Casualty Insurance (+0.5%) is still one of today's best performers, following better-than-expected Q1 earnings from Progressive Corp (PGR 22.97 +1.17); but everything else, from banks to brokers to REITs, are falling out of favor yet again. DJ30 -101.58 NASDAQ -23.18 SP500 -10.59 NASDAQ Dec/Adv/Vol 2074/914/1.51 bln NYSE Dec/Adv/Vol 2243/1007/1.12 bln
2:30 pm : The indices spike to afternoon lows within the last 30 minutes after the FOMC minutes fail to contain any reference to a rate cut. While most of the nine-page report brought few surprises, with recent economic releases showing that core-PCE is above the Fed's comfort zone while the unemployment rate is below it, the minutes stating that "further policy firming might be necessary," even if offset by economic concerns, shows that there is no leaning towards a rate cut.
In fact, the Fed also stated that they still expect the economy to pick up later this year, presumably without a rate cut. With the market pricing in a possible rate cut over the last several months now, no inclination toward an easing anytime soon is providing more fodder for the bears to question the sustainability of recent market gains. The 10-year note has reversed course and is now down 4 ticks, lifting the yield to 4.73%; but the short end of the curve has gotten hit even harder, as the yield on the 2-year note climbed 3.5 basis points to 4.725%. DJ30 -89.96 NASDAQ -18.38 SP500 -9.28 NASDAQ Dec/Adv/Vol 1995/977/1.36 bln NYSE Dec/Adv/Vol 2163/1066/1.00 bln
2:00 pm : Stocks are pulling back a bit as investors anxiously await the minutes from the March 20-21 FOMC meeting, which will be out momentarily.
While the report will be studied carefully for comments relating to the debate on inflation and the pace of economic activity, investors will be closely watching to see if the surprise removal of "additional firming" in its policy directive that sparked a broad-based rally in stocks on the premise of some softening in the Fed's long-standing tightening bias was justified.DJ30 -64.03 NASDAQ -11.43 SP500 -5.62 NASDAQ Dec/Adv/Vol 1825/1115/1.21 bln NYSE Dec/Adv/Vol 1904/1305/896 mln
1:30 pm : The market is trading at its best levels of the afternoon, finding some comfort from recent remarks from Fed Chairman Bernanke; but the indices continue to sport modest losses.
Even though Bernanke recently made no comments on current economic conditions or monetary policy at the top of the hour, the Fed Chairman saying that a "light regulatory touch'' on hedge funds is largely justified and seems to have "worked well" appears to have struck a positive chord with investors. DJ30 -51.29 NASDAQ -8.74 SP500 -3.83 NASDAQ Dec/Adv/Vol 1841/1080/1.11 bln NYSE Dec/Adv/Vol 1968/1196/822 mln
1:00 pm : Not much has changed since the last update as today's first scheduled Fed speaker fails to offer much of an incentive to keep paring market losses. Within the last 15 minutes Richmond Fed President Jeffrey Lacker began speaking on inflation and unemployment.
However, since Lacker is no longer a Voting Fed Official and he merely echoed his March 29 speech, warning against taking risks with Fed inflation credibility, investors are now waiting to see if Fed Chairman Bernanke's upcoming remarks (1:00 ET) on market discipline and regulation will have any impact on today's trading. DJ30 -63.53 NASDAQ -12.52 SP500 -6.01 NASDAQ Dec/Adv/Vol 1917/999/1.01 bln NYSE Dec/Adv/Vol 2012/1140/740 mln
12:30 pm : Buyers are kicking off the afternoon session with a sense of resolve, finding some relief as oil prices turn negative. Crude for May delivery is back below $62/bbl; but its modest 0.2% pullback isn't offering a whole lot of conviction that the commodity will remain under pressure.
The lack of follow-through in Energy earlier, even as oil prices hit session highs, is also something investors are keeping a close eye on should crude retrace its morning levels. Oil & Gas Storage and Refiners are still among today's top ten performing S&P industry groups; but respective gains of only 0.4% and 0.3% have been unable to offset a pullback in the Energy sector's most influential component, Dow component Exxon Mobil (XOM 77.08 -0.48). DJ30 -65.67 NASDAQ -12.09 SP500 -6.06 NASDAQ Dec/Adv/Vol 1891/994/898 mln NYSE Dec/Adv/Vol 2031/1088/650 mln
12:00 pm : The major averages are turning in their worst performance in two weeks midday as investors lack overwhelming evidence to build on recent market gains.
With the Dow closing higher for an eighth straight day, its longest winning streak in four years, it's not surprising to see stocks taking a breather this morning, even though the index's best performing component this quarter is building on recent gains. Alcoa (AA 35.12 +0.22) officially kicked off the first-quarter earnings season last night, topping analysts' expectations with record Q1 net income.
However, the fact that Alcoa's net income merely rose 9.0% further underscores the strong likelihood 14 straight quarters of double-digit profit growth for the S&P 500 will come to an end. Apparently the market is waiting to see more earnings results to get some validation behind last week's surprise run-up heading into earnings season.
A market increasingly sensitive to weak data is viewing more disappointing developments out of the troubled housing sector as a reason to keep selling this year's worst performing S&P industry group. Homebuilding is now down 21.5% this year. The National Association of Realtors said it sees median existing home prices down 0.7% in 2007, the first decline in nearly 40 years, versus a 1% rise in 2006. Adding insult to injury has been KB Home (KBH 41.72 -0.24) CEO saying the housing market will get worse before it gets better.
Investors grappling with gasoline futures hitting eight-month highs earlier have also digested news that the International Monetary Fund cut its forecast for U.S. economic growth this year by almost a full percentage point to 2.2%. That's the weakest growth in five years. Crude for May delivery is well off its highs, now trading up 0.3% near $62.10/bbl; but it's upward momentum is exacerbating the underlying sense of nervousness that leaves all 10 S&P 500 sectors trading lower.
Separately, the fact that this afternoon's FOMC minutes (2:00 ET) may bring to light the realization there's still virtually no chance of the Fed lowering interest rates any time soon is also stalling the market's recent momentum and inviting some consolidation. BTK -1.0% DJ30 -75.17 DJTA -0.6% DJUA -0.2% DOT -1.0% NASDAQ -13.20 NQ100 -0.7% R2K -0.8% SOX -0.9% SP400 -0.5% SP500 -6.96 XOI +0.3% NASDAQ Dec/Adv/Vol 1967/889/800 mln NYSE Dec/Adv/Vol 2089/991/570 mln
11:30 am : The major averages are bouncing off their recent lows but hardly enough to make a significant change in the standings. Oil prices seeing their gains more than halved since the last update is providing some reprieve and creating an intraday bottom for equities. Crude for May delivery is now up just 0.3% near $62.10/bbl as natural gas futures fail to hold above $8mbtu and gasoline futures are now well off their best levels.
The Dow was down as much as 102 points (-0.8%) earlier, but it is still on pace to see its eight-day winning streak snapped as 27 of its 30 components remain negative. DJ30 -75.82 NASDAQ -13.63 SP500 -6.94 NASDAQ Dec/Adv/Vol 1991/824/682 mln NYSE Dec/Adv/Vol 2077/974/462 mln
11:00 am : The indices continue to hit fresh session lows, with oil prices spiking to their highest levels of the day providing the latest reason to consolidate recent market gains. Crude for May delivery is now up 1.0% and back above $62/bbl following a larger-than-expected plunge in weekly gasoline inventories. Gasoline Futures have hit $2.17 a gallon, the highest level in eight months.
A market increasingly sensitive to weak data is also digesting news that the International Monetary Fund cut its forecast for U.S. economic growth this year by almost a full percentage point to 2.2%, the weakest in five years, citing a weaker housing market than previously estimated. Briefing.com currently sees 2007 real GDP rising about 2.5%. DJ30 -91.09 NASDAQ -18.74 SP500 -8.55 NASDAQ Dec/Adv/Vol 1839/907/516 mln NYSE Dec/Adv/Vol 1814/1188/324 mln
10:30 am : The major averages are taking a turn for the worse as sellers remain in complete control of this morning's action. All 10 sectors are now trading lower with Technology matching Health Care's 0.5% intraday decline. IT Consulting Services (-2.2%) and Application Software (-1.1%) rank among today's worst performers. Homebuilders (HGX -1.0%) are at session lows after the National Association of Realtors said it sees median U.S. existing home prices down 0.7% in 2007, the first decline in nearly 40 years, versus a 1% rise in 2006.
Adding to the market's recent struggles has been the inability by the Dow, S&P 500 and Nasdaq to find initial support near key technical levels of 12540, 1444, and 2468, respectively. DJ30 -52.96 NASDAQ -11.31 SP500 -4.59 NASDAQ Dec/Adv/Vol 1561/1063/342 mln NYSE Dec/Adv/Vol 1707/1144/196 mln
10:00 am : The indices are extending their reach to the downside as nine out of 10 sectors are now negative. Health Care (-0.5%) is pacing the way as the biotech group (-0.9%) gets hit following the abrupt resignation of Amgen's (AMGN 56.32 -0.79) CFO and delay of its Q1 earnings results.
The absence of leadership from Financials and Tech, the two most heavily-weighted economic sectors, is also acting as an overhanging factor. Dow component Citigroup (C 51.94 -0.46) is under pressure as shareholders question whether today's announced restructuring will be enough. Weakness in Consumer Staples, as an anlayst downgrade on Kroger (KR 29.12 -0.37) earmarks Food Retail (-1.0%) as today's second worst performing S&P industry group, is also noteworthy. DJ30 -30.93 NASDAQ -6.27 SP500 -3.36 NASDAQ Dec/Adv/Vol 1464/987/160 mln NYSE Dec/Adv/Vol 1265/1263/64 mln
09:40 am : As expected, stocks open on a relatively flat note. Meanwhile, Alcoa (AA 35.60 +0.70) reported record Q1 profits last night, officially kicking off the first quarter earnings season. However, it's better-than-expected report isn't having a broad impact on the market since a mere 9.0% rise in Alcoa's net income further underscores the likelihood that 14 consecutive quarters of double-digit profit growth for the S&P 500 will come to an end.
There also aren't any other notable earnings reports to help justify the surprise rally last week that lifted the major indices up 1.8% on average ahead of what is widely expected to be an uninspiring quarter of single-digit earnings growth.
DJ30 -10.77 NASDAQ -3.84 SP500 -1.65 NASDAQ Vol 78 mln NYSE Vol 42 mln
09:15 am : S&P futures vs fair value: -0.1. Nasdaq futures vs fair value: -0.8.
09:00 am : S&P futures vs fair value: -0.3. Nasdaq futures vs fair value: -0.8. After the Dow finished higher for an eighth straight day, recording its longest winning streak in four years, it's not surprising to see stocks taking a bit of a breather this morning. The fact that this afternoon's FOMC minutes may bring to light the realization there's still virtually no chance of the Fed lowering interest rates any time soon is also stalling momentum heading into the opening bell.
08:30 am : S&P futures vs fair value: -0.7. Nasdaq futures vs fair value: flat. Still shaping up to be a relatively flat start for the cash market. While Alcoa's better-than-expected report is lifting this year's best performing Dow component to higher highs in pre-market action, the fact that Alcoa's net income only rose 9.0% merely speaks to the strong likelihood that Q1 will mark the end of double-digit profit growth for the S&P 500 over the last 14 quarters. Evidently the market is waiting to see more earnings results to get some validation behind last week's surprise run-up heading into earnings season.
08:00 am : S&P futures vs fair value: -1.1. Nasdaq futures vs fair value: flat. Alcoa (AA) kicked off the first-quarter earnings season last night on an upbeat note, topping analysts' expectations with record Q1 net income. Fellow Dow component Citigroup (C) said it was cutting 17,000 jobs in a bid to save $2.1 bln this year and as much as $4.6 bln in 2009. Be that as it may, neither news item has been able to excite a market still increasingly concerned about the interest rate outlook. Futures indications are pointing to a sluggish start for stocks as investors show some reserve ahead of Fed Chairman Bernanke's speech at 1:00 ET and the release of the minutes from the last FOMC meeting (2:00 ET).
06:16 am : S&P futures vs fair value: -2.2. Nasdaq futures vs fair value: -1.8.
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