Despite excellent earnings from many of the most visible stocks and confirmation of Fed Chairman Ben Bernanke for another term, stocks took a broad-based beating yesterday.

Key stocks like Procter & Gamble (PG), 3M (MMM), Ford (F), Bristol Myers Squibb (BMY), and Nokia (NOK) all exceeded analysts’ quarterly earnings estimates, but their achievements seemed to have little or no impact on investors.

Selling was initially centered on the technology group as profit-taking slammed into Apple (AAPL) following the presentation of its new tablet computer, the iPad. Traders seemed to believe that with the release of the innovative product now public, the recent run on Apple’s shares by speculators had run its course and there was little reason to hold the shares. 

Initial jobless claims for the week ended Jan. 23 were reported as 470,000, exceeding estimates of 450,000 — a big disappointment. And another economic miss announced early was the durable goods orders for December. Analysts had expected 2% and instead were greeted with a rise of just 0.3%. 

At the close, the Dow Jones Industrial Average (DJI) fell 116 points to 10,120, the S&P 500 (SPX) lost 13 points at 1,085, and the Nasdaq (NASD) fell 42 points to 2,179.

The NYSE traded 1.1 billion shares with decliners exceeding advancers by almost 3-to-1. On the Nasdaq, 904 million shares crossed (a significant increase in volume) and decliners were ahead by 5-to-2.

March crude oil fell 3 cents to 473.64 a barrel, and the Energy Select Sector SPDR (XLE) lost 59 cents, closing at $55.50. 

February gold fell to an almost three-year low closing at $1,083.60, down 90 cents, and the PHLX Gold/Silver Sector Index (XAU) fell $1.13 to $153.42.

What the Markets Are Saying

The stock market plunged again yesterday, confirming that the intermediate trend is at best sideways, and perhaps even down. The important support line for the S&P 500 at 1,080 to 1,085 (revised), mentioned in Monday’s Daily Market Outlook, which is a quadruple-bottom formed between Nov. 12 to Dec. 9, gave way intraday selling, but stocks rallied enough to close above the line.

If the market can reverse higher today, then this could turn out to be the most important support line on any of the charts of the big indices. But if the market closes lower again, that line will become a resistance line and we should prepare for another aggressive round of selling.

Earlier this week I covered the sentiment indicators and noted that the American Association of Investors (AAII) survey was showing some improvement by slipping from bullish to more bearish (since it is a contra-indicator).

A further slippage occurred last week. AAII reported that the bulls have fallen to 35% from 40% and from 47% three weeks ago. This is the lowest reading since Oct. 8 and very close to the lowest March number.

It is one of the few positive technical indicators at the moment. But until the market reverses, despite this survey’s very low number, we should remain on the defensive.

Today’s Trading Landscape

Earnings to be reported include: Arch Coal, Autoliv, Avery Dennison, Chevron, Dover, Enbridge Energy, Fortune Brands, Graham, Honeywell, Horizon Lines, IDEXX Labs, Mattel, Newell Rubbermaid, NuStar Energy, PACCAR, Provident Financial, Saia, Wilmington Trust and Yucheng Technologies.

Economic reports due: GDP (the consensus expects 4.5%), employment cost index (the consensus expects 0.4%), Chicago PMI (the consensus expects 57), and consumer sentiment (the consensus expects 73).

Earnings news: Amazon.com (AMZN) reported 85 cents vs. a 72-cent est. Chubb (CB) reported $1.66 vs. a $1.45 est. City National (CYN) reported 5 cents vs. a 4-cent est. Genworth Financial (GNW) reported 19 cents vs. a 10-cent est. KLA-Tencor (KLAC) reported 28 vs. a 27-cent est. Microsoft (MSFT) reported 60 cents vs. a 59-cent est. Mattel (MAT) reported 81 cents vs. a 68-cent est. Honeywell (HON) reported 91 cents vs. a 90-cent est. Dover (DOV) reported 55 cents vs. a 49-cent est.  

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