Reply #126: closing numbers and blather [View All]

[UpInArms]

(wow! check out the volume on the DOW)

Dow 10,317.36 -123.75 (-1.19%)
Nasdaq 2,103.02 -36.34 (-1.70%)
S&P 500 1,196.39 -18.08 (-1.49%)
10-Yr Bond 4.361 -0.15 (-0.34%)

NYSE Volume 2,498,544,000
Nasdaq Volume 1,961,101,000

For the second consecutive session, the major averages closed at their worst levels of the day amid more worries about inflationary pressures, as broad-based selling efforts closed all ten economic sectors with losses. Stocks picked up where they left off yesterday following Dallas Fed President Fischer's hawkish commentary - opening lower amid concerns that inflation will pick up in the aftermath of Katrina and Rita and echoing uncertainty about when the Fed will finally reach its so-called "neutral rate."...

Late-afternoon commentary from Kansas City Fed President Thomas Hoenig, which contained the usual "solid growth" item and referenced a strong economy that is flexible enough to withstand the hurricanes, failed to alleviate such beliefs...

Adding insult to injury, a higher than expected jump in the prices paid component of the ISM services index, which rose to a record high of 81.4 from 67.1, merely exacerbated inflation fears, countering a headline ISM index read of 53.3 (consensus 60.0) which in turn brought into question the pace of economic growth...

A disappointing EIA report further hampered sentiment. Traders learned that the decline in distillates (i.e. heating oil) checked in more than two times greater than expected, while gasoline inventories dropped 4.38 mln barrels (consensus -3.0 mln barrels) following a few weeks of better than estimated reports. Devoid of leadership, Energy's 3.4% decline - fueled by a less than expected drawdown in crude supply (-246K barrels vs. -1.7 mln barrel consensus) that shaved oil's price tag and gave investors reason to lock some of the sector's 34.4% year-to-date gain - served as the weightiest force today. Crude's reversal, though, did nothing to help the inflation-fixated market - not even the Consumer Discretionary sector, which faced the pressure of homebuilders' extended consolidation, losses in retail ahead of tomorrow's same-store sales data, and weakness in autos. General Motors (28.64 -1.43) was up nearly 1.0% in early trading amid reports that it was near a deal with the UAW that could save GM $1.0 bln in annual health-care costs, but spiraled intraday upon reports that its primary parts supplier - Delphi (DPH 2.50 -0.28) - may file for bankruptcy as early as this week. A research note from Goldman Sachs that challenged the likelihood of such a UAW concession served as an additional shove...

Restaurants, however, were one of the day's brightest spots, as a reassuring fiscal Q4 earnings report, strong Sept. comps, and in-line guidance from Yum! Brands (YUM 48.80 +0.53) helped limit the downside...

The Materials sector checked in just behind Energy on the laggard list amid Phelps Dodge's (PD 128.33 -6.17) 4.6% plunge following an analyst downgrade that roiled the sector and intensified wide-spread selling; the sector slid 2.3%...

A fiscal Q4 profit warning form ADC Telecommunications (ADCT 19.61 -3.06), by which the company nearly halved its earnings outlook, sent its shares reeling over 13%, and teamed with Mercury Interactive's (MERQE 31.59 -5.31) plummet to toss the sector 1.4% lower. For its part, Mercury similarly cut its Q3 guidance and thereby affected a 14.4% dive. Additionally, reports that Hewlett-Packard (HPQ 27.47 -1.08) chief, Mark Hurd, has rejected calls to spin off the company's printer arm sent its shares, and the sector, further south...

In spite of modest strength in Treasuries today, the flattening yield curve continues to sit in the spotlight and provided further reason for buyers to stick to the sidelines. Apprehension ahead of Friday's employment data, not to mention the impending Q3 earnings season, also stunted buying action today...

..DJTA -1.96%. ..DJUA -3.31%. ..SOX -1.37%. ..DOT -0.94%. ..XOI -4.04%. ..BTK -4.65%. ..Nasdaq 100 -1.51%. ..S&P Midcap 400 -2.34%. ..Russell 2000 -2.73%. ..NYSE Adv/Dec 607/2661. ..NASDAQ Adv/Dec 599/2414.