Reply #105: a side of "look over there!" blather [View All]

[UpInArms]

4:30 pm : The stock market covered a lot of ground Wednesday, riding a roller coaster that was put into motion by the earnings reports from Intel (INTC 19.88, -2.81) and JPMorgan Chase (JPM 41.43, +2.26). The former report was deemed disappointing by the market whereas the latter report was deemed better than feared since it contained a write-down of "just $1.3 billion."

The end result was that the technology sector got hit with selling interest while the financial sector received a guarded bargain hunting bid that was aided in part by a Bear Stearns upgrade of the U.S. Financials sector to Market Weight from Underweight.

Intel, though, was the real story stock of the day as it plummeted 12% despite reporting a 51% increase in fourth quarter earnings. It was done in by a tempered outlook for the first quarter that was blamed on U.S. economic indicators and a continued weak NAND pricing environment. Specifically, Intel said it expects first quarter revenues in the range of $9.4 billion to $10 billion, the midpoint of which is below the $9.9 billion consensus estimate and marks a larger than usual 9.4% sequential decline.

The harsh treatment Intel received carried over to many of its technology peers, including Apple (AAPL 159.64, -9.40), Dell (DELL 20.68, -0.22), Microsoft (MSFT 33.23, -0.77) and Cisco (CSCO 25.15, -0.70) whose combined losses helped drive a 1.2% decline in the Nasdaq 100. Oracle (ORCL 21.92, +0.61) bucked the trend after announcing the purchase of BEA Systems (BEAS 18.46, +2.88) that is expected to be accretive to earnings.

It was the energy and basic materials sectors, though, that suffered the biggest hit on Wednesday, falling 3.1% and 3.2%, respectively, as economic slowdown concerns got the better of investors. In addition, a report of a larger than expected build in crude stockpiles in the latest week applied added pressure to the energy stocks which followed crude prices lower (-$1.27 to $90.46).

Commodity prices, in general, were weak on Wednesday as evidenced by the 2.5% decline in the CRB Index. A flat reading for Industrial Production in December contributed to the selling interest as it fed prevailing slowdown arguments. Separately, December core CPI came in as expected, up 0.2%, and offered a welcome reminder that the core inflation trend remains steady.

Financial stocks were mostly higher, along with many of the consumer discretionary stocks that benefited from the drop in oil prices and the belief that many have gotten oversold in recent weeks. The financial and consumer discretionary sectors were Wednesday's winning standouts, with each sector gaining 1.3%.

Despite their winning performance, the major indices ended the day in poor fashion as a wave of selling interest left them all in negative territory on very heavy volume when the closing bell rang.

The Treasury market also succumbed to selling interest. The 10-year note shed 12 ticks, bumping its yield up to 3.72%. DJ30 -34.95 NASDAQ -23.00 NQ100 -1.2% R2K +0.4% SP400 -0.5% SP500 -7.75 NASDAQ Dec/Adv/Vol 1382/1650/3.51 bln NYSE Dec/Adv/Vol 1573/1603/2.11 bln

3:30 pm : The stock market is trading in the green with modest gains, slightly below its best level of the session. The Nasdaq is trading with a slight loss, as Intel (INTC 19.88, -2.81) continues to weigh on tech as the stock has failed to stir up any buying interest. Meanwhile, the recent strength in stocks has weighed on Treasuries. The 10-year note is down 16 ticks, sending its yield up to 3.73%.

Looking toward tomorrow, Dec. housing starts, weekly initial claims, and the Jan Philadelphia Fed are set for release. There are 18 companies set to report earnings before the open, with Merrill Lynch (MER 55.54, +2.53) expected to be the focal point. Merrill is expected to report a large write-down.DJ30 +55.44 NASDAQ -1.58 SP500 +3.75 NASDAQ Dec/Adv/Vol 1242/1781/2.85 bln NYSE Dec/Adv/Vol 1330/1819/1.53 bln

3:00 pm : The major indices break through their afternoon trading ranges, and the Nasdaq briefly made it to positive territory for the first time this session. The indices have pulled back a bit, but continue to trade near their recently reached session highs. The gains are broad-based, but once again financials (+3.2%) are pacing the advance.

Specifically, Freddie Mac (33.66, +2.93) and Fannie Mae (FRE 38.31, +2.01) have seen a steep increase in buying interest. The thrifts & mortgages group (+6.4%) is providing leadership.

Gains in homebuilders (+6.7%) and retailers (+3.6%) is helping to lift the consumer discretionary sector (+2.4%)

In currency trading, the dollar is up 0.98% against the euro after European Central Bank (ECB) council member Mersch emphasized downside risks to Europe's economy, according to Bloomberg.com. The comments increased the expectation of a ECB rate cut, which is giving the U.S. dollar support. DJ30 +60.08 NASDAQ -2.85 SP500 +4.89 NASDAQ Dec/Adv/Vol 1171/1831/2.61 bln NYSE Dec/Adv/Vol 1361/1771/1.38 bln