Friday, July 16, 2010

SMASHING! Stock Hammered as Banks, Google Disappoint

The first week of second quarter earnings season actually came to an abrupt end on Tuesday, when all the major indices topped out after a six day rally. Wednesday and Thursday were flat-lined, as nervous investors jockeyed in and out of equities. With options expiring on Friday, the stage was set for a near-panic sell-off, and it was a doozy.

When Bank of America (BAC) and Citigroup (C) followed JP Morgan Chase's lead with unsettling results prior to Friday's open, the trade was set and sellers pounded stocks in the opening minutes. Just before 10:00 am, the university of Michigan's Consumer Sentiment Index delivered another in a series of economic blows, as the gauge fell from 76.0 in June, to 66.5 for the current month. The rout was on, as the Dow soon dipped down 200 points from the previous close.

There was no relief for stockholders in a relentless grind lower which lasted through the end of the session.

For the week, all f the major indices ended with losses, as the Dow finished 100 points lower, the NASDAQ shed 17 points, the S&P 500 surrendered 13 points and the NYSE Composite dropped 99 points.

Dow 10,097.90, -261.41 (2.52%)
NASDAQ 2,179.05, -70.03 (3.11%)
S&P 500 1,064.88, -31.60 (2.88%)
NYSE Composite 6,709.51, -207.30 (3.00%)

As expected, internals told the same stark story. Decliners pounded advancers, 5321-1154, with losers beating winners by a 7:1 margin on the NASDAQ. New highs managed to stay ahead of new lows, 150-124, though that trend is weakening and about to roll over again. Volume was not spectacular, though it was far better then the previous three sessions.

NASDAQ Volume 2,183,108,750
NYSE Volume 6,016,648,500

Stock investors were not alone in their desperation. Commodities were also pummeled in concert with the CPI reading (0.2). Crude for August delivery fell another 61 cents, to $76.01. Gold continued its recent shaky form, losing $20.10, to $1,188.00. Silver followed that lead, dropping 57 cents, to $17.77.

Gold hit its lowest level since May, though it is still well above its 200-day moving average. Silver continues to flirt with its 200-day MA, touching it again today. Any further deterioration in precious metals prices might just spread the panic through the commodity space in a deflationary sell-off.

Bank of America was the Dow's worst performer, losing 1.41, to 13.98, a decline of 9%. Citigroup fell 26 cents, to 3.90, a 6.25% loss. Google, after announcing a slight miss on earnings per share Thursday after the close, was punished with a 7$ decline, off 34.41, to 459.61.

All of this in the middle of earnings season does not bode well for bulls. The next two weeks will be interesting, to say the least, and challenging to see where any support might appear.

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