The much-touted Obama rescue plan for homeowners received a polite — and even enthusiastic — embrace from the audience in Arizona Wednesday, but Wall Street appeared to yawn. However, before the speech, the market was down and the speech brought prices back to their opening levels before selling off again in late afternoon and closing unchanged.
The financial group posted gains but it was the only sector among the 10 in the S&P industry groups.
Before the opening General Motors (GM) said it needed another $16.6 billion — despite more layoffs, plant closings, and a sharp cut in the number of models offered. GM closed at $2.06, off 12 cents.
The housing plan offered yesterday appeared to have more detail in it than the financial rescue plan offered last week. And the proposal seems to favor the banks, the building sector, home improvement firms, mortgage companies and some of the public who defaulted on their mortgages. They will be given an opportunity to refinance or rework their mortgages.
Housing starts fell 16.8% in January versus an expected drop of 5%. Additionally, the Fed said there was a bigger decline in industrial production in January, falling 1.8%. December’s data was revised downward to show a 2.4% decline.
At the close, the Dow Jones Industrial Average (DJI) was off three points to 7,556, the S&P 500 (SPX) was down less than a point at 788 and the Nasdaq (NASD) fell three points, closing at 1,468.
On the New York Stock Exchange, 1.4 billion shares changed hands, with decliners ahead of advancers by 9-to-4, and the Nasdaq traded 818 million shares, with decliners ahead by almost 2-to-1.
Crude oil (March delivery) fell 31 cents to $34.62 a barrel, and the Amex Energy SPDR (XLE) closed at $43.49, off 25 cents.
Gold continued its flight north ending up $10.70 at $977.70 an ounce on the February contract. The PHLX Gold/Silver Index (XAU) rose $2.34 to $134.07, closing just under its 200-day moving average.
What the Markets Are Saying
One by one, the key indices appear to be breaking their support lines.
The Dow Industrials (DJI) were the first to break, but the S&P 500 (SPX) has also fallen through its support zone at 800 to 820, and so has the NYSE Composite (NYA). Only the Nasdaq (NASD) is holding above its January low while the others are in a full test of their November bear-market bottoms.
But despite the full attack on the bear market low, it would be dangerous to assume that a market sell-off is inevitable.
Last week I warned of getting too far ahead of ourselves by predicting a new leg down in the bear market. Another Dow reversal like yesterday’s could result in a successful test of the low with the establishment of a double-bottom — but that really is getting ahead of the picture.
What really seems to be developing is a squeeze of the shorts prior to Friday’s expiration of the February options.
The large number of upside reversals on individual stocks yesterday puts pressure on the shorts to cover and could result in the indices running back up to just above their 20-day moving averages. For the Dow (DJI), that line is at 8,027 and for the S&P 500 (SPX), it is at 833. If that occurs, watch for a dramatic high-volume downside reversal which could be the signal for a final high-volume sell-off.
Today’s Trading Landscape
Earnings of note to be reported include: Advance America/Cash Advance Centers, Anworth Mortgage Asset, Apache Corp, Aspen Technology, Asset Acceptance Capital Corp, BAE Systems Plc, Bucyrus Int’l and Build A Bear Workshop.
Cabela’s, Career Education, Century Aluminum, CenturyTel, Chiquita Brands Int’l, Community Health Systems, Companhia Vale do Rio Doce, COPA Holdings SA, CPFL Energia, CVS Caremark Corp, DealerTrack Holdings and Diana Shipping.
Eldorado Gold Corp, Expedia, Gerdau AmeriSteel Corp, Gerdau S.A., GFI Group, Global Industries, Goldcorp, Grand Canyon Education, Health Grades, Hittite Microwave, HLTH Corp, Home Properties, Hormel Foods Corp and Hornbeck Offshore Services.
Idacorp, Innospec, Interactive Data Corp, Intuit, Kindred Healthcare, Knology, LaSalle Hotel Properties, Marchex, Maxwell Technologies, Morningstar, Mylan, Newmont Mining Corp, Newpark Resources, Noble Energy and Nordson.
Odyssey Re Holdings Corp, Oil States Int’l, On Assignment, Orbital Sciences Corp, OSI Pharmaceuticals, Patterson Dental, PetroQuest Energy, Pool Corp, Premiere Global Services and Pride Int’l.
Rackspace Hosting, Red Robin Gourmet Burgers, Regal Entertainment Group, Reliance Steel, Riskmetrics Group, Spartan Motors, Sprint Nextel Corp, Stealthgas, Stewart Information Services, Superior Energy Services, Supreme Industries, Swift Energy and Sycamore Networks.
Tesoro Corp, The E.W. Scripps Co, Theragenics Corp, Toro, TradeStation Group, United Online, Universal Electronics, VASCO Data Security Int’l, VCA Antech, Verigy Ltd, Vital Images and Volcom.
Watson Pharmaceuticals, West Pharmaceutical Services, Williams Companies, Williams Partners L.P., Williams Pipeline Partners L.P., Wright Medical Group and XTO Energy.
Several economic reports are due today including: initial jobless claims for the week ending Feb. 14 (the consensus expects an increase of 5,000), January Producer Price Index (the consensus expects 0.8%), January Producer Price Index excluding food and energy (the consensus expects 0.1%), January Conference Board Leading Indicators (the consensus expects 0.1%), February Philadelphia Fed Business Index (the consensus expects negative 27.0), DJ-BTMU Business Barometer for Feb. 6, EIA Natural Gas Inventories for Feb. 13, and U.S. Energy Dept. Oil Inventories for Feb. 13.
Hewlett-Packard (HPQ) met Q1 earnings estimates but trimmed Q2 guidance to 84 to 86 cents versus prior estimate of 90 cents and lowered its annual estimate. UBS (UBS) has agreed to release the names of 250 account holders who may have avoided taxes to the United States.
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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.
