Continued bearish credit-related overtures and weak data from across-the-pond keep bulls on the defensive Tuesday. As of 11:05 ET the SP-500 (SPY) is off 0.60%, near session lows and challenging Monday’s key trend support with bulls getting a bit sweatier under that tight collar.
Upending Monday’s second-half technical bargain-hunting off a test of 50SMA and up-channel support in the SP-500, a Spanish-led credit market inquisition continues to spook bulls as bearish momentum feeds on itself. Assisting, late yesterday credit ratings agency Moody’s placed Germany, Luxembourg and the Netherlands “AAA” ratings on “negative watch.”
Also stoking Tuesday's risk aversion, a round of weak PMI reports from China and Europe has proven largely disappointing (again) with readings still entrenched in contraction territory. Highlighting the latest provision for additional monetary stimulus, though unheeded, is Germany’s weaker-than-forecast drop to 43.3. China’s HSBC flash PMI did manage grow at its fasted pace in several months, but a reading of 49.5 is still shy of signaling manufacturing expansion activity.
In those intertwined markets of influence, Spain’s 10-Yr yield is hitting record highs near 7.5%. On the equity side and despite the government instituting a ban on short-selling Monday, the iShares MSCI Spain ETF (EWP) is off nearly 4.5% and striking fresh lows.
The US Dollar (UUP) and 20-Yr (TLT) are both up about 0.45% and similarly pushing their flight-to-safety bids to fresh relative and record highs respectively. The former’s strength appears, in part, to be preventing any storied safe-haven fleeing by bulls into gold (GLD). Though off only fractionally, GLD remains trapped within a multi-week, low-level symmetrical triangle formed while testing its December lows.
The US Oil Fund (USO) is flat on the session. Growing geopolitical risks in Syria, tensions between the west and Iran’s nuclear ambitions and then possibly some cheer for China’s PMI uptick, are rightfully, less likely to sway equity bulls into bargain-hunting and with the influential energy (XLE) and oil services (OIH) sectors under leading pressure of about 2.25%.
And the VIX ($VIX) is up 2.5% near 19% and confined to inside activity wedged between its 30 and 50SMAs. Monday’s pierce test of the closely-watched 20% level and 50SMA generated an overbought extreme indicative of excessive short-term fear on the part of investors as the instrument stretched more than 18% above its mean-reverting 10SMA.
On the corporate side, a slew of earnings in a very heavy week of reports and the crown jewel known as the iShares Bull ETF (AAPL) reporting after the close, boils down to more of the “profit beat, light on revenues” fare and results a second tier distraction at best. For the bulls, shares of Baidu (BIDU) are bucking the broader market with a gain of nearly 10%. By the numbers the company topped profit views by $0.13 on earnings of $1.24, while producing marginally stronger-than-forecast sales growth of 62.4%.
For the bears, UPS (UPS) delivered an unwanted package of a two cent profit miss on earnings of $1.15 per share, modest and weaker-than-forecast sales growth of 1.2% and lowered its FY12 EPS range to $4.50 - $4.70 versus estimates of $4.83. Intraday, UPS is off 5.25% after gapping below its 200SMA.
Shares of Cisco (CSCO) are off 5.5% and hitting fresh lows for 2012 from a bearish inverse cup with handle formation. The network communications giant announced a cut to its workforce of 2% and could be facing additional competition from VMware (VMW) after it announced its acquisition of privately-held network virtualization shop Nicira.
And for the hedge hogs, Texas Instruments (TXN) shares are off 1.75% after opening higher in “buy the news, sell the news” action following its bottom-line beat, top-line shortfall and guiding its third quarter earnings and revenues below Street views.
Finally and in those sometimes accurate heat-seeking option markets, auto parts manufacturer Gentex (GNTX) is seeing its implieds jump to three-plus month highs. Today’s fearful, but not over-the-top bid in premiums is occurring as shares tumble about 30% following the company’s earnings announcement which saw a penny miss, light sales growth of 15.3% and management warning for its upcoming third quarter with a below views revenue range of $269.5M - $282.9M versus estimates of $290.76.
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