Midday Action: March 26
March 26, 2008
Some “clearly” disappointed bulls, a second round of downgrades and disappointing data add up to a second session of less-discreet profit taking. As of 11:05 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are each off .90% on slightly higher levels of bullish indecision.
It hasn’t been the best of days or nights for bulls as bearish-sounding reports have continued to trickle in and keep the market tone under pressure. Early weakness actually began in earnest late yesterday as the WSJ reported Clear Channel Communications (CCU) $20B LBO to be on the brink of collapse. The story is the latest potential victim of the global credit crisis as banks collective appetites for financing riskier deals has been vastly diminished. Intraday, shares of CCU are off 5.80 at 26.76. Separately, overnight pressure in the market continued as European investment banker Deutsche Bank (DB) warned it may not meet its profit target for FY08 and reiterated some of the fore-mentioned reluctance for doing business as usual. Shares of the listed ADR are off 2.85 at 112.75.
Out the gate stateside hasn’t been much better. In the premarket, the typically volatile durable goods report came in much weaker than estimates and slid for a second-straight month. February data showed a decline of 1.7% versus expectations calling for a .7% increase. January was revised slightly higher by six-tenths of a percent, but still solidly weak with its 4.7% drop. Additionally, a slip of 2.6% in non-defense capital goods has some investors concerned, as that category measures business investment.
An intraday bearish response to slightly weak, but tweaked new home sales data has pushed the major indices further into profit-taking mode. February sales came in at 590K annualized units and 10K above Street views. Nonetheless, the data registered a “fresh” 13-year low after January was revised upwards by 13K to 601K from a previously announced 588K. For Wall Street “mathletes” focused on reclaiming some lost bearish sentiment, the net result is a slip of 1.8%, which falls one-tenth below estimates looking for a decliner of 1.7%. Shares of the homebuilders ETF (XHB) are off .85 near $22 and a somewhat deconstructive 5% below its weekly base breakout from Monday.
On the corporate side and reacquainting some bulls with the profit-taking, a second day of downgrades to the financial sector (XLF) are aiding in that process. Analysts at Oppenheimer slashed their Q1 profit estimates for large money center banks. BofA (BAC), JP Morgan (JPM), Wachovia (WB) and Citi (C) were all fingered and apparently guilty per investors, with shares off between 2.5% and 5% respectively.
Elsewhere and not helping matters, well some equity bulls at least, commodity and related sector strength are adding to weak broader market sentiment and prices. A weaker US Dollar and technical interest by bulls following last week’s slide in the likes of Comex Gold and the oil contract have, in part, put a bid in those products. Intraday, gold is up 16 points at 951. At the same time, oil is surging by more than 4 points near 105.25 following a much smaller-than-expected buildup in weekly inventories. Analysts were calling for 1.8M barrels but today’s report revealed an increase of just 88K.
Finally, I’ll leave readers with the question, “Do bulls read?” A report this morning by investment banker Jeffries raised its worldwide LCD glass industry forecast through 2011 to reflect strong secular demand trends. In their view, Corning (GLW) “remains the best vehicle” to ride that particular bull market. Nonetheless, after breaking out of a flat weekly base on higher volume Tuesday via our charting tea leaves, also maintaining strong growth and sponsorship data courtesy of IBD and shares enjoying a market-based “confirmed rally” at their back; headwinds are apparent as GLW is slumping by 1.10 near $24 per share. For disclosure purposes, it seems “R.I.F” has taken a back seat to bulls mourning a “R.I.P” situation, which includes this currently-positioned market observer and sometimes participant.
Chris Tyler
Staff Writer & Options Strategist
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