No News, Stocks Lose

In a very choppy trading session, the major indices fell further to the downside on Monday, as investors were largely left without guideposts. There were no meaningful economic reports nor corporate releases upon which to trade, so the overwhelming overhang of a continuing negative feedback loop sent investors bailing again.

Dow 6,547.05, -79.89 (1.21%)
NASDAQ 1,268.64, -25.21 (1.95%)
S&P 500 676.53, -6.85 (1.00%)
NYSE Composite 4,226.31, -58.18 (1.36%)

Stocks opened lower at the open, but quickly rebounded and traded in positive territory for a while, but by 11:00 am, the bears had taken control again. The only encouraging news was merger-related, though the combinations were deemed dilutive to two companies, one a Dow component: Merck (MRK) and Dow Chemical (DOW). In the pharma sector, Merck signed definitive agreements to purchase Schering-Plough for $41.1 billion in stock and cash. Dow Chemical, meanwhile, convened talks with buyout target Rohm & Haas to resolve thorny issues which have resulted in litigation. Merck lost 1.75, to close at 20.99, the largest percentage decliner on the Dow at a loss of 7.78%. Dow Chemical lost 0.79, to close at 6.32, an 11% loss.

Overall, the Dow finished with 14 stocks up and 16 down, but the severity of the losses was far greater than what amounted to skimpy gains.

In the general market, declining issues outnumbered advancers, 4613-1947, The number of stocks making new lows was again very high, at 1244. There were only 6 new highs. Volume was less than it was last week, reflecting some degree of disinterest or outright exhaustion.

NYSE Volume 1,556,423,000
NASDAQ Volume 2,053,304,000

Commodities were split once again, with oil rising $1.55, to $47.07 on word of more desperate OPEC supply cuts, despite heating oil and natural gas both finishing lower. Natural gas finished at a seasonal low of $3.87, a sign that milder weather through the latter part of February and into March has led to lower consumer demand.

Gold dropped $24.70, to $918.00; silver fell 39 cents, to $12.94.

There is continuing evidence of price destruction in the US and beyond, which will no doubt put pressure on many corporate profits this quarter. Looking out 6 weeks at the next earnings season, prospects continue to dim, and that was reflected in Monday's sluggish trade.

Stocks have now fallen in 14 of the last 18 sessions, resulting in a net loss of 1392 points on the Dow. The DJIA is now off 25% for the year.

Dwindling Gains and Is OPEC Friendly?

After barely surpassing the magical 14,000 mark last week, the Dow Jones Industrials struggled to get close again on Money Monday, but close was all they could do. The blue chip index got as close as 27 points from the mark, but that was all, and the index closed some 30 points below that level.

Dow 13,943.42 +92.34; NASDAQ 2,690.58 +2.98; S&P 500 1,545.90 +11.80; NYSE Composite 10,121.58 +41.65

While the Dow and S&P were up handily, the NASDAQ didn't fare quite so well, rising just less than 3 points on the session.

Earnings were still the driver, with Merck (MRK) and Schering-Plough (SGP) getting off first thing in the morning, prior to the open.

• Merck (MRK) said second-quarter net income rose to $1.68 billion, or 77 cents a share, from $1.5 billion, or 69 cents a share, a year earlier. Excluding restructuring and other charges, official earnings rose to 82 cents a share from 73 cents a share a year ago, exceeding the widely-held forecast of 72 cents per share. Shares of Merck soared on the news, up 3.31 to 52.33.


• Schering-Plough (SGP): Net income climbed to $517 million, or 34 cents per share, after preferred dividends for the quarter ended June 30 from $237 million, or 16 cents per share, a year ago. The stock lost 19 cents, closing the session at 31.30.


• For Dick Cheney lovers (and who doesn't love Dick?), Halliburton (HAL) reported net income of $1.53 billion, or $1.62 a share, up from $591 million, or 55 cents, a year earlier. The most recent quarter's results include a gain of $933 million relating to the KBR split. Analysts were only looking for 56 cents, so the stock made a new 52-week high during the trading session before closing up 1.17 at $37.74.


• After the close, American Express (AXP) reported second quarter net income for the quarter also totaled $1.1 billion, up 12 percent from $945 million a year ago, and 0.88 per share, up 16 percent from 0.76. Analysts were seeking 0.86 and their solid quarter should help stocks on Tuesday.


• Texas Instruments (TXN) reported revenue of $3.42 billion for the second quarter of 2007. Earnings per share (EPS) were $0.42, down from 0.47 in the year-ago period. The results were in line with expectations, but the results will do little to excite tech investors.

Decliners actually led advancing issues by a narrow ratio of roughly 16-15, while new highs narrowly beat new lows, 327-286. These numbers are in line with our own expectations that this earnings season is not as robust as Wall Street might like. With a preliminary reading on 2nd quarter GDP due out on Friday, this week could determine direction for the remainder of the summer, and it's not looking particularly encouraging.

Who's the best friend of the American motorist? Would you believe OPEC President and UAE Energy Minister Mohammed al-Hamli? How about Hasan Qabazard?

Concerned over high prices, al-Hamli said that the world economy was still expanding, despite the exorbitant price for crude. Analysts saw his comment as indicative that OPEC may announce a supply increase at their September meeting.

Qabazard, head of OPEC's global research division, stated separately that a price of between $60 and $65 per barrel would be advantageous for both producers and consumers.

Light crude settled 90 cents lower at $74.89 a barrel on the New York Mercantile Exchange. Kudos to our friends in the Arabian world! They actually may be more concerned - and effective - about lowering gas prices than our very own Congress or President. Ya gotta have friends...

Meanwhile, the rally in gold and silver was cut short, with both falling marginally on Monday.

With techs showing some weakness today and after-hours and readings on existing and new home sales due Wednesday and Thursday, respectively, Tuesday may be a good time to exit positions if the market doesn't respond well by mid-day.

Tomorrow's earnings calendar is reasonably heavy, with reports due from Amazon.com (AMZN), AT&T (T), DuPont (DD), Eli Lilly (LLY), JetBlue Airways (JBLU), McDonald's (MCD), Occidental Petroleum (OXY), PepsiCo (PEP), UPS (UPS), United States Steel (X), and many, many others.