The S&P 500 (SPX) is heading toward the first quarter ever of negative earnings after undergoing the sixth quarter of negative growth. And last Friday, stocks ended the worst week in almost three months, with 27 of the 30 stocks on the Dow Jones Industrial Average (DJI) ending the day with a loss.
All through last week, the market tended to ignore corporate and economic news, focusing instead on the government’s ability to pass legislation that can get the economy out of the mess.
But on Friday, nothing could turn stocks higher — not even the Senate’s passing of the economic stimulus bill nor the White House spokesman’s report that the administration is working on a plan to subsidize mortgages to help homeowners avoid foreclosures. And, again, the financials took a direct hit, down 4.2%, which produced a weekly loss of 10.2%.
At the close, the Dow Jones Industrial Average (DJI) was off 82 points at 7,850, the S&P 500 (SPX) fell eight points to 827, and the Nasdaq (NASD) was down seven points to 1,534.
The New York Stock Exchange traded 1.2 billion shares, with decliners ahead of advancers by 8-to-5. On the Nasdaq (NASD), 778 million shares traded with decliners ahead by 7-to-6.
Crude oil (February contract) rallied $3.53 to $37.51 a barrel. The Amex Energy SPDR (XLE) closed at $46.99, up 11 cents.
The February gold contract fell $7 to $941.50 on profit-taking since the contract had rallied for three successive days, surging above $950 on Friday. The PHLX Gold/Silver Index (XAU) closed at $130.88, off $2.05.
For the week, the Dow Industrials were off 5.2% (negative 10.6% year-to-date), the S&P 500 fell 4.8% (negative 8.5% year-to-date) and the Nasdaq was down 3.6% (negative 8.5% year-to-date).
What the Markets Are Saying
From September to early November, the volatility was staggering and if you were on the side of the major trend (down), you’ve made money. But now traders are grumbling that there just isn’t enough volatility to make trading profitable.
On Friday, Standard & Poor’s reported that in the past 22 days, the S&P 500 (SPX) has remained between 805 and 874, or about an 8% range. But during the past 12 days, the closing price range for the “500” has been only about 50 points.
On Thursday, it looked like the market was breaking down for a test of the November low, but a late rally turned Thursday into a major reversal day (up). And so on it goes, with the same support zone at S&P (SPX) 800 to 820 holding firm while the Dow (DJI) has fallen slightly below its support. The NYSE Composite (NYA) has held firm, and the Nasdaq (NASD) has formed a small “V” type bottom (which is bullish).
Investment advisors continue to be bearish, the American Association of Individual Investors (AAII) members’ survey shows that the public is still bearish (although not at the same level as the past four weeks), and insiders (especially bankers) are buying their own stocks (which is bullish).
I hate to say it, but it looks like the future, as far out as I can see (which is only several weeks), is more of the same boring, sideways movement with some whipsaws that could catch traders as they try to adjust to a less volatile environment.
Today’s Trading Landscape
Earnings of note to be reported include: Abraxas Petroleum, Agilent Technologies, Alliance One Int’l, American Medical Systems, Arbitron, Arch Capital Group, Axsys Technologies, BlueLinx Holdings, BluePhoenix Solutions Ltd, Chesapeake Energy Corp, Cognex and Curtiss-Wright Corp.
Daimler AG, Evolution Petroleum Corp, Fossil, FreightCar America, Gen-Probe, Genuine Parts, Georgia Gulf, Gilat Satellite Networks Ltd, GTx, Halifax, Holly, Hospira, Idenix Pharmaceuticals and IPC Holdings.
Jack in the Box, Kaiser Aluminum Corp, La-Z-Boy, MannKind, Meadowbrook Insurance, Medtronic, Montpelier Re Holdings Ltd, MTS Medication Technologies, Natco, Noah Education Holding Ltd, Otelco, Palatin Technologies and Penske Automotive Group.
Republic Airways Holdings, State Auto Financial, StatoilHydro ASA, Stone Energy, Stratasys, Switch and Data, Tanger Factory Outlet Centers, Telecomunicacoes de Sao Paulo S.A., Telmex Internacional SAB de CV, Teva Pharmaceutical, The Navigators Group and Transocean Ltd.
Ultra Petroleum Corp, United America Indemnity Ltd, United Therapeutics, US Dataworks, Valassis Communications, Valmont, Volcano Corp, Voltaire, Wal-Mart Stores, Watsco, and Zebra Technologies.
The following economic reports are due today: January Empire State Fed Manufacturing Survey (the consensus expects negative 24.0), December Treasury Int’l Capital, Fourth-quarter 2008 E-commerce Sales Report, February NAHB Housing Index, and ABC/Washington Post Consumer Confidence for Feb. 14.
Late news: Donald Trump’s casino units in Atlantic City will declare bankruptcy for the third time, Smithfield Foods (SFD) said it plans to close six plants and lay off close to 1,900 workers and Wal-Mart (WMT) reported Q4 results of $1.03 versus an estimate of 99 cents. But the big news this week will be the stimulus plan and an announcement from the Obama administration of the long-awaited housing plan.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
