Market Update 071024 http://biz.yahoo.com/mu/update.html 4:20 pm : Some disappointing earnings developments, a weak existing home sales report, and a spike in oil prices precipitated a sharp decline in the major indices in the early-going. A late-day rally, however, made things look a lot better by the closing bell than they had been.
Once again, there was a host of companies reporting quarterly results. The two reports that drew the most attention, and which were most responsible for the early declines, were the ones from Amazon.com (AMZN 88.73, -12.09) and Merrill Lynch (MER 63.22, -3.90).
In the case of Amazon, it actually beat the consensus EPS estimate by a penny and issued in-line guidance. With shares of AMZN up 49% from their July low, though, momentum accounts wanted more and sold the stock aggressively when they didn't get it. In turn, underlying concerns about Amazon's profit margins also drove the selling interest.
The strikingly negative response to Amazon's report got the better of a lot of high-flying technology stocks, as investors moved to secure profits. Those losses weighed heavily on the broader market and culminated in a 79-point drop for the Nasdaq Composite at its lows for the session.
The Dow and S&P suffered considerably, too, with declines of 205 points and 30 points, respectively, at their worst levels. A dreadful third quarter report from Merrill Lynch, which posted a net loss of $2.85 per share from continuing operations after recording a massive $7.9 billion write-down for collateralized debt obligations and U.S. subprime mortgages, served as a driving catalyst.
Merrill Lynch's stock held up reasonably well initially, but when the news hit that Standard & Poor's cut its debt ratings for the investment bank, and noted a negative outlook, losses in the stock accelerated.
The financial sector (-0.8%) was taken along for the ride on pressing concerns that Merrill's bad news suggests more write-downs will be coming in the fourth quarter. In brief, the realization hit that the third quarter may not have been the bottom for the financial sector as many pundits had claimed.
Compounding the selling activity was the indication from the National Association of Realtors that existing home sales fell 8.0% in September to an annualized rate of 5.04 million units (consensus 5.25 mln) while median prices dropped 4.2%.
Soon after the existing home sales report, the Dept. of Energy's inventory report showed sharp declines in stockpiles versus the market's expectations for a build in inventory levels. The surprising drawdown led to a 2.2% increase in crude prices to $87.10 per barrel.
After suffering the early pounding, the stock market attempted to recover the lost ground in halfhearted fashion. The initial recovery try failed and the indices eventually rolled over again. However, when the indices retested their early morning lows around 2:00 pm ET and held, buyers stampeded back into the market and drove the Dow back to positive territory an hour later.
The successful rebound effort most likely prompted some short-covering activity that contributed to the expeditious recovery.
Separately, there was some speculation that the Fed might be on the verge of cutting the discount rate, but a Fed spokesman declined to comment on that speculation. Even so, the prospect of further rate cuts and the successful retest of the morning lows were motivating factors that spurred the renewed buying interest.
The Treasury market for its part benefited from the stock market's volatility and the weak housing data. The 10-year note gained a half point and saw its yield drop to 4.34%.DJ30 -0.98 NASDAQ -24.50 SP500 -3.71 NASDAQ Dec/Adv/Vol 1997/967/2.78 bln NYSE Dec/Adv/Vol 2048/1220/1.57 bln
3:30 pm : The major indices have rallied back in impressive fashion after holding on a re-test of this morning's lows. The resilience has spurred additional buying efforts, and most likely short-covering activity that has contributed to the expeditious rebound effort.
The Dow has made it to positive territory for the first time this session.
The Dow, Nasdaq and S&P are 210, 53 and 27 points off their session lows, respectively.
After the close, 102 companies are set to report their earnings.
3:05 pm : The major indices have recovered some more of the session's losses. The broad-based buying interest has pushed the materials (+0.02) and Energy (+0.5%) sectors into positive territory. Tech stocks are underperforming today, and the Philadelphia Semiconductor Index (-4.7%) is a notable pocket of weakness.
Broadcom (BRCM 33.77, -8.29) is the main drag after reporting earnings of $.05 per share, which was two cents shy of the expectation. The company was also downgraded at three brokerage firms.
There is a bright spot in the semiconductor industry. Micro-cap Transmeta's (TMTA 14.11, +9.93), stock has rocketed over 200% following news that it has settled a patent dispute with Intel (INTC 25.75, -1.05). Under the settlement terms, Intel has to pay Transmeta $150 million upfront, and an annual license fee of $20 million for the next five years. Transmeta's market cap was a mere $42 million prior to the stock's rally this session. DJ30 -76.90 NASDAQ -47.71 SP500 -12.95 NASDAQ Dec/Adv/Vol 2289/651/2.07 bln NYSE Dec/Adv/Vol 2534/823/1.03 bln
2:30 pm : The stock market has been somewhat choppy since the last update, although its range has been limited. The major indices are now above their midday range due to a broad-based pickup in buying interest, but are still posting good sized losses.
Despite the gains, the ten sectors still remain in negative territory.
In currency trading, the dollar index is up 0.025%. DJ30 -101.78 NASDAQ -55.59 SP500 -16.82 NASDAQ Dec/Adv/Vol 2369/570/1.86 bln NYSE Dec/Adv/Vol 2572/640/891 mln
2:00 pm : The major indices are largely unchanged since the last update as there has not been any resolute buying or selling interest. The market has been stuck slightly above its intraday low for about two hours.
This session has not been good to Merrill Lynch (MER 62.36, -4.79). As previously stated, the company reported earnings that were drastically worse than expected, and its rating was downgraded at S&P Ratings Service.
In addition, Moody's Investors Service has now downgraded the long-term ratings of Merrill Lynch to A1 from Aa3 and assigned a negative outlook to the new ratings. Moody's stated, "The jump in the write-down suggests that management did not fully understand their exposures."
Meanwhile, Deutsche Bank cut its price target on Merrill Lynch to $80 from $107. DJ30 -163.15 NASDAQ -69.05 SP500 -24.42 NASDAQ Dec/Adv/Vol 2293/617/1.72 bln NYSE Dec/Adv/Vol 2568/644/852 mln
1:30 pm : The major indices continue to trade in a relatively tight range near their session lows.
The Russell 2000 Index (-2.1%), which is made up of small-cap stocks, is trailing its large-cap counterparts. For the year, the index is underperforming. The Russell 2000 is up 3.9% while the S&P 500 is up 7.1%.DJ30 -146.16 NASDAQ -59.82 SP500 -22.10 NASDAQ Dec/Adv/Vol 2291/617/1.60 bln NYSE Dec/Adv/Vol 2607/584/760 mln
1:00 pm : The major indices have been trading in a relatively tight range for the last hour. The ten major sectors remain in negative territory.
Dow component Boeing (BA 94.08, -0.87 ) reported third quarter earnings of $1.44 per share, with beat the consensus estimate of $1.24. The stock is down, though, after the company issued mixed earnings guidance.
Only three Dow components are currently in the green. Caterpillar (CAT 74.80, +0.38), DuPont (DD 47.11, +0.30) and Coca-Cola (KO 59.86, +0.11) are relative outperformers. IBM (IBM 112.63, -2.05), AIG (AIG 62.74, -1.53) and AT&T (T 40.89, -1.13) are the main laggards. DJ30 155.59 NASDAQ -60.28 SP500 -22.22 NASDAQ Dec/Adv/Vol 2273/617/1.48 bln NYSE Dec/Adv/Vol 2562/611/714 mln
12:35 pm : Since the last update, the major indices have made some gains. The gains are small relative to this session's range.
The financial sector's (-2.3%) industries are in negative territory, with the exception of specialized finance (+1.5%). CME Group (CME 660.64, +25.74), which operates the Chicago Mercantile Exchange, is giving the industry a boost after topping its earnings expectations by $0.19.
Meanwhile, the 10-year note is up 22/32, pushing its yield down to 4.33%DJ30 -138.93 NASDAQ -56.19 SP500 -19.32 NASDAQ Dec/Adv/Vol 2260/596/1.35 bln NYSE Dec/Adv/Vol 2604/569/640 mln
12:00 pm : Disappointing earnings, sinking existing home sales, and rallying crude oil prices have taken a toll on the stock market this session. Currently, the major indices are off their session lows, but continue to trade with substantial losses.
Amazon.com (AMZN 84.16, -16.66) quadrupled its earnings and beat its estimate. The stock has plummeted, however, as investors were expecting more from the online retailer. There are also concerns over the company's profit margins.
Another catalyst for the selling pressure today is Merrill Lynch's (MER 63.50, -3.62) worse than expected earnings. Merrill reported a loss of $2.85 per share, compared to the consensus estimate that called for a loss of $0.45. The large loss is attributed to write-downs of $7.9 billion across CDOs and U.S. sub prime mortgages, significantly greater than the $4.5 billion write-down disclosed earlier.
Standard & Poor's Ratings Services lowered its ratings on Merrill Lynch to 'A+/A-1' from 'AA-/A-1+', as well as the ratings on Merrill Lynch's related entities, in response to the company's earnings report.
Separately, the housing market remains in a deep slump. Existing home sales in September dropped 8.0% to a low 5.04 million annual rate. Expectations were for a 5.25 million rate.
There is more bad news. Median home prices were down 4.2% to $211,200 on a year-over-year basis. The inventory of unsold homes rose again. It will take quite a while for the housing market to recover, even with potential rate cuts. Stocks dropped shortly after the report.
Meanwhile, crude oil prices rallied following the weekly Energy Information Administration report that stated for the week ended 10/19 inventories had a draw of 5288k. A build of 963K was expected. Oil is currently up 1.5% to $86.57.
All ten economic sectors are in the red. The financial (-2.5%), telecom (-2.8%), and tech (-2.3%) sectors are the main laggards. The energy sector (-0.2%) is currently a relative outperformer, due to the rising crude prices. DJ30 -161.44 NASDAQ -61.08 SP500 -23.15 NASDAQ Dec/Adv/Vol 2275/523/1.18 bln NYSE Dec/Adv/Vol 2588/537/543 mln
11:30 am : The bearish bias persists as the major indices fall into fresh intraday lows. The three major indices are trading with considerable losses.
No sector has been able to resist the selling pressure. Even the energy sector (-0.5%) is in the red despite rallying crude oil prices. The financial sector (-3.1%) is the main laggard following Merrill Lynch's (MER 63.18, -3.93) dissapointing third quarter earnings.DJ30 -169.82 NASDAQ -67.86 SP500 -24.53 NASDAQ Dec/Adv/Vol 2254/496/959 mln NYSE Dec/Adv/Vol 2470/591/426 mln
11:00 am : As of now, yesterday's stock market gains have been wiped out and then some. The major indices have hit fresh session lows as crude oil hits fresh intraday highs.
Crude oil, up $1.54 to $86.84, rallied after the crude oil inventory report showed a large draw when a build was expected. The energy sector (+0.3%) now stands alone in positive territory.
Meanwhile, Standard & Poor's Ratings Services lowered its ratings on Merrill Lynch (MER 65.08, -2.02) to 'A+/A-1' from 'AA-/A-1+', as well as the ratings on Merrill Lynch's related entities.DJ30 -129.09 NASDAQ -52.97 SP500 -18.48 NASDAQ Dec/Adv/Vol 2087/587/722 mln NYSE Dec/Adv/Vol 2238/753/283 mln
10:30 am : The stock market dropped to fresh intraday lows following the disappointing existing home sales report. The major indices are now trading above their session lows following a slight recovery.
Just reported, crude oil inventories had a draw of 5288k for the week ended 10/19. A build of 963K was expected. DJ30 -55.69 NASDAQ -33.36 SP500 -10.26 NASDAQ Dec/Adv/Vol 1896/681/445 mln NYSE Dec/Adv/Vol 2046/824/161 mln
10:00 am : The major indices are trading slightly above their opening lows, but currently lack any substantial leadership. The Energy (+0.1%) and utilities (+0.2%) sectors are posting slight gains, and are the only sectors in the green. The tech (-0.9%) and telecom (-0.7%) sectors are the main laggards.
Just reported, the National Association of Realtors September existing home sales slid 8.0% to an annualized rate of 5.04 million. Analyst expected a 4.6% decline to an annualized rate of 5.25 million.DJ30 -33.41 NASDAQ -20.65 SP500 -5.86
09:40 am : The stock market opened on a negative note following yesterday's late day rally. Amazon.com (AMZN) is a drag despite the company beating earnings estimates by one penny. Many investors were expecting Amazon to report blowout earnings, and are concerned about the company's profit margins.
Merrill Lynch (MER) is also a laggard after reporting a larger loss than expected. The company reported write-downs of $7.9 billion across CDOs and U.S. sub prime mortgages, significantly greater than the $4.5 billion write-down disclosed earlier. DJ30 -30.81 NASDAQ -23.25 SP500 -6.28
09:15 am : S&P futures vs fair value: -7.9. Nasdaq futures vs fair value: -19.8. The September existing home sales report will be released at 10:00 ET. Existing home sales are expected to decline 4.6% to an annualized rate of 5.25 million. Separately, The weekly energy report will be released at 10:30 ET.
09:01 am : S&P futures vs fair value: -7.9. Nasdaq futures vs fair value: -20.8. The futures market has made some gains, but continues to point to a lower start. ConocoPhillips (COP) reported a decline in third quarter earnings, but the slide was less than analysts expected.
08:31 am : S&P futures vs fair value: -10.3. Nasdaq futures vs fair value: -25.5. Early action continues to have a bearish bias. Prior to the 8:00 ET update, Boeing (BA) and CME Group (CME) reported earnings that beat the consensus estimate.
08:01 am : S&P futures vs fair value: -9.7. Nasdaq futures vs fair value: -24.3. The futures market is pointing to a decidedly lower start. Amazon (AMZN) is acting as a drag after not beating expectations by as much as some had hoped, and due to concerns over the company’s profit margins. Merrill Lynch (MER) reported a larger than expected loss.
06:19 am : S&P futures vs fair value: -9.9. Nasdaq futures vs fair value: -26.0. . .
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