Market Update 080205 http://biz.yahoo.com/mu/update.html 4:20 pm : It didn't take much to deduce on Monday that the stock market fell prone to profit taking activity after a 4.9% gain last week. By the same token, it didn't take much to deduce on Tuesday that recession concerns got the better of participants and led to sharp losses for the major indices.
The focal point throughout the session was the January ISM Services report. The latter was a surprise in more ways than one. First, it came out earlier than expected due to what the Institute for Supply Management labeled "a possible breach of information." The real shocker, though, was the headline that business activity slipped to 41.9% from 54.4% in December.
The ISM noted that its new non-manufacturing index, which is the composite number, measured 44.6% after being computed with a new methodology. A number below 50 reflects a contraction.
Recession concerns were further piqued by the realization that the January report marked the first contraction in the non-manufacturing sector in nearly five years. Richmond Fed President Lacker, speaking later in the day on the U.S. economy, didn't help the market's outlook when he acknowledged the ISM Services report bumped up the recession probability.
These concerns reached far and wide on Tuesday. Every economic sector suffered a decline of at least 1.9%; all 30 Dow components lost ground; and oil prices slipped 2.1% to $88.20, helping to pace a 1.1% pullback in the economically-sensitive CRB Index.
The dollar, strikingly, gained 1.0% against a basket of other major currencies. Its strength was attributed to a belief that weak economic data out of Europe might force the ECB to lower interest rates, which would narrow the favorable interest rate differential that is currently supporting the euro. It would be remiss not to add, though, that the fed funds futures market is pricing in a 76% probability of another 50 basis point cut at the March 18 FOMC meeting. That is up from 68% on Monday.
Weakness in the stock market and the rate cut expectations propped up the Treasury market. The benchmark 10-year note jumped 21 ticks, bringing its yield down to 3.57%.
Separately, there was nothing propping up the financial sector Tuesday, which led the broader market pullback with a 4.6% loss. Festering concerns about the implications of bond insurer downgrades, the specter of a recession, the potential for further CDO downgrades, and an Oppenheimer & Co. downgrade of Goldman Sachs (GS 189.86, -10.94) to Perform from Outperform drove the selling interest.
For some perspective on the scope of Tuesday's selling, consider that the consumer staples sector, which declined 1.9%, was the best-performing area.
The S&P 500 dropped 3.2%, marking its worst percentage decline since February 2007. With the combined losses on Monday and Tuesday, the S&P 500 has surrendered nearly the entirety of last week's 4.9% gain.DJ30 -370.03 NASDAQ -73.28 NQ100 -3.0% R2K -3.0% SP400 -2.9% SP500 -44.18 NASDAQ Dec/Adv/Vol 2316/622/2.51 bln NYSE Dec/Adv/Vol 2553/608/1.65 bln
3:30 pm : A fresh wave of selling pressure sends the major indices to their worst levels of the session. The market bulls are not happy with the overall negative sentiment this session. A CNBC commentator reported that there are several bond insurer bailout efforts underway. He noted that Ambac's (ABK 11.68, +0.29) bailout is the furthest along.
After the close 59 companies are set to report earnings, including Dow component Walt Disney (DIS 30.25, -0.65). Tomorrow before the open, 49 companies will be reporting earnings.
The sole economic release tomorrow is the fourth quarter productivity reading. The government will also be reporting its weekly energy inventory statistics. DJ30 -314.83 NASDAQ -64.19 SP500 -37.51 NASDAQ Dec/Adv/Vol 2212/676/1.96 bln NYSE Dec/Adv/Vol 2499/646/1.18 bln
3:00 pm : Stocks are back on the decline after a modest attempt at a recovery. Six of the ten economic sectors are posting a loss in excess of 2%.
According to Thomson Financial, fourth quarter 2007 earnings are expected to decline by 20.7%. The main reason for the decline is the financial sector's whopping 105% decrease in earnings. If the sector was removed, earnings would grow by 11.0%. Homebuilders are also a drag. For example, the consumer discretionary sector's earnings would grow by 7%, instead of declining by 15%, if homebuilders were removed from the calculation.DJ30 -303.18 NASDAQ -56.76 SP500 -34.85 NASDAQ Dec/Adv/Vol 2116/760/1.77 bln NYSE Dec/Adv/Vol 2413/715/1.08 bln
2:30 pm : For now, selling pressure has eased, with the major indices trading slightly above their worst levels of the session. All sectors have participated in the slight uptick.
Richmond Fed President Lacker said risks of recession have risen lately, and that today's weak ISM Services reading increased the probability, according to Reuters. He noted that the Fed might not ease as aggressively as it would otherwise due to inflation risks.
Reuters also reports that Merrill Lynch sees a strong chance of another intermeeting rate cut by the FOMC due to the weak ISM Services reading.DJ30 -279.07 NASDAQ -52.76 SP500 -32.91 NASDAQ Dec/Adv/Vol 2154/717/1.60 bln NYSE Dec/Adv/Vol 2498/615/967 mln
2:00 pm : Stocks continue to get pummeled with sellers in control. The Dow is now down over 300 points. Meanwhile, financials are taking a beating, and are currently down 3.9%. Specialized finance is down 6.4% and thrifts & mortgages is down 4.8%.
Market breadth is bearish. Decliners outpace advancers by nearly a 4-to-1 margin on the NYSE, and by a 3-to-1 margin on the Nasdaq. New 52-week lows outpace new highs by 3-to-1 on the NYSE, and by 12-to-1 on the Nasdaq.DJ30 -307.76 NASDAQ -57.53 SP500 -36.24 NASDAQ Dec/Adv/Vol 2109/730/1.44 bln NYSE Dec/Adv/Vol 2397/699/863 mln
1:30 pm : The major indices hit fresh session lows. There has been a bearish bias throughout the session as traders have responded negatively to the worse than expected ISM services reading. In the last two sessions the S&P 500 has given up 71% of last week's strong 65 point gain.
Commodities are down 0.9% due to concerns about economic growth and the gains in the dollar. Energy is down 1.3%, in part due to the 2.2% slide in crude oil prices. The precious metals group is also showing some weakness with a decline of 1.3%.DJ30 -278.99 NASDAQ -50.49 SP500 -31.49 NASDAQ Dec/Adv/Vol 1995/831/1.25 bln NYSE Dec/Adv/Vol 2334/749/765 mln
1:00 pm : Stocks fall to fresh lows and then recover a bit. The Dow and S&P 500 are now down more than 2.0%.
The dollar is posting hefty gains this session despite traders upping their bets on the size of the next fed funds rate cut. The dollar is up 1.24% against the euro. The Dollar Index, which tracks the dollar against a basket of leading currencies, is also up a strong 1.01%.DJ30 -254.67 NASDAQ -43.82 SP500 -28.87 NASDAQ Dec/Adv/Vol 1998/813/1.19 bln NYSE Dec/Adv/Vol 2378/702/726 mln
12:30 pm : Stocks fall back toward their session lows as comments hit the wires from Richmond Fed President Lacker.
Lacker said the most likely path is sluggish growth in the near term, but noted there is a chance of a mild recession. He said if job growth remains positive in the months ahead, the United States could skirt a recession. Lacker also stated that inflation has increased lately, and he is concerned about the gap between overall and core inflation.DJ30 -254.60 NASDAQ -40.53 SP500 -28.97 NASDAQ Dec/Adv/Vol 1922/847/1.06 bln NYSE Dec/Adv/Vol 2277/763/646 mln
11:55 am : Stocks are sharply lower at midday. The selling pressure is due to renewed fears of an economic recession in response to a lower than expected national services survey.
The January ISM Services report of non-manufacturing business activity came at 41.9, sharply lower than the consensus estimate of 53.0. Because the reading was lower than 50, it indicates a "significant contraction" in business activity. The number was also lower than December's reading of 54.4.
The report's new non-manufacturing index (NMI) also indicated a contraction with a reading of 44.6. The components within the report were down across the board with the exception of a slight increase in new export orders.
The stock market opened sharply lower on this report, which is somewhat unusual as it usually does not have that significant of an impact.
All ten sectors are posting a loss, and five are down more than 2%. Financials (-2.5%) and telecom (-3.2%) are the main laggards.
Consumer discretionary (-0.6%) is outperforming on a relative basis, partially due to a notable pocket of strength in the homebuilders group (+1.5%). Banc of America upgraded several homebuilders to Buy from Neutral, including Pulte Homes (PHM 15.81, +0.57), KB Home (KBH 27.22, +1.06) and MDC Holdings (MDC 46.98, +1.58). Toll Brothers (TOL 22.83, +0.48) was upgraded to Neutral from Sell.
For the most part earnings news was better than expected. Two stocks that are handily outperforming the market include Avon Products (AVP 38.14, +2.13) and Whirlpool (WHR 92.61, +11.02). Both companies reported earnings that topped consensus estimates.DJ30 -206.80 NASDAQ -32.90 SP500 -23.41 NASDAQ Dec/Adv/Vol 1948/797/931 mln NYSE Dec/Adv/Vol 2360/635/545 mln
11:30 am : The major indices continue to be under selling pressure. All ten sectors are posting a loss in excess of 1%, and five of the sectors are posting a loss larger than 2%.
The poor ISM Services reading helped give Treasuries a boost as traders up their bets on the size of the next Fed rate cut. The 10-year is up 27 ticks, pushing its yield down to 3.54%. DJ30 -231.59 NASDAQ -38.38 SP500 -27.34 NASDAQ Dec/Adv/Vol 2019/681/790 mln NYSE Dec/Adv/Vol 2285/670/453 mln
11:00 am : The Dow and S&P fall to fresh session lows, and the Nasdaq is trading near its worst level of the session. Financials (-3.0%) and telecom (-3.4%) remain under selling pressure.
Reuters reports bond insurer downgrades will have a significant impact on banks, including "a few" that may be downgraded, according to Standard & Poor's.DJ30 -238.50 NASDAQ -36.12 SP500 -26.93 NASDAQ Dec/Adv/Vol 1774/875/629 mln NYSE Dec/Adv/Vol 2178/729/353 mln
10:25 am : The indices are languishing near their lows for the session as buyers have been a reluctant bunch thus far. Every sector, with the exception of consumer discretionary (-0.9%) is down at least 1.0%.
The home builders are providing a measure of support for the latter area. Their relative strength has been aided by Banc of America Securities which upgraded several stocks, including Pulte Homes (PHM 15.72, +0.48), KB Home (KBH 27.21, +1.05), MDC Holdings (MDC 47.37, +1.97) and Toll Brothers (TOL 23.30, +0.95).
Overall, though, the absence of sector leadership and the weight of the losses in the financial (-2.6%) and technology (-1.5%) sectors has kept the broader market on the defensive.DJ30 -207.70 NASDAQ -31.47 SP500 -23.87 NASDAQ Dec/Adv/Vol 1881/671/440 mln NYSE Dec/Adv/Vol 2283/530/230 mln
10:00 am : It hasn't been a pretty start to the trading day for market bulls as recession concerns, sparked by the Jaunary ISM Services Index, have triggered broad-based selling interest.
Stock monitors are awash in red figures with only a few exceptions that are limited mostly to individual issues, such as Avon Products (AVP 38.28, +2.27) and Whirlpool (WHR 87.45, +5.86). The latter two companies reported earnings results this morning and both topped consensus estimates.
Notably, in the wake of the ISM Services report we have seen the probability of a 50 basis point cut at the next FOMC meeting bumped up to 100% by fed funds futures traders. Yesterday, they were pricing in a 68% probability.
The rate cut expectations are driving yields down across the Treasury curve.DJ30 -167.38 NASDAQ -30.72 SP500 -20.18 NASDAQ Dec/Adv/Vol 1815/549/210 mln NYSE Dec/Adv/Vol 1899/254/190 mln
09:40 am : The major indices all opened noticeably lower as presaged by the futures market. The catalyst for the broad-based retreat has been the January ISM Services Index, which showed a sharp drop in business activity from the prior month.
The business activity reading of 41.9 compared to 54.4 in the prior month. The Institute for Supply Management noted that it used a new methodology when completing the survey. That method produced a 44.6 reading for the new non-manufacturing index that represents the composite reading. A number below 50 indicates contraction.
The financial (-2.7%), energy (-2.5%) and materials (-2.1%) sectors are pacing the early declines that are rooted in recession concerns.DJ30 -189.73 NASDAQ -40.03 SP500 -23.55
09:22 am : S&P futures vs fair value: -21.2. Nasdaq futures vs fair value: -35.5. The stock market is on course for a decidedly lower start after the January ISM Services report sparked recession concerns. The 41.9% reading for business activity in the non-manufacturing sector marked the first contraction in 58 months. The new non-manufacturing index ("NMI") was reported at 44.6% and represents the composite reading using a new methodology. Any way you slice it, the numbers aren't encouraging so the stock market is reacting negatively. Conversely, Treasuries are running on the news. The 10-year note is up nearly a point with its yield back down to 3.54%.
09:00 am : S&P futures vs fair value: -21.4. Nasdaq futures vs fair value: -30.2. The futures market has taken a noticeable dip after the January ISM Services Index level of non-manufacturing business activity checked in at 41.9 versus the consensus estimate of 53.0 and the December reading of 54.4. The scope of the decline is surprising (and questionable) seeing how this survey never moves more than a couple of points. In any event, the headline has exacerbated the negative tone.
08:30 am : S&P futures vs fair value: -8.3. Nasdaq futures vs fair value: -10.5. It is still shaping up to be a lower start for the stock market. Crude oil is down 1.0% to $89.11 per barrel.
08:02 am : S&P futures vs fair value: -21.4. Nasdaq futures vs fair value: -30.2. The futures market has taken a noticeable dip after the January ISM Services Index level of non-manufacturing business activity checked in at 41.9 versus the consensus estimate of 53.0 and the December reading of 54.4. The scope of the decline is surprising (and questionable) seeing how this survey never moves more than a couple of points. In any event, the headline has exacerbated the negative tone.
08:00 am : S&P futures vs fair value: -8.9. Nasdaq futures vs fair value: -13.0. Futures trade indicates a lower start for the stock market as traders take some more profits. Since yesterday’s close, earnings have overall been better than expected. The sole economic report is the ISM services, set for release at 10:00 ET.
06:20 am : S&P futures vs fair value: -4.0. Nasdaq futures vs fair value: -7.0.
06:20 am : FTSE...6000.50...-25.70...-0.4%. DAX...6966.72...-33.77...-0.5%.
06:20 am : Nikkei...13745.50...-114.20...-0.8%. Hang Seng...24808.70...-223.38...-0.9%.
Market Data 
Markets 
AI
