Dark Thursday, Black Friday?

Anyone who was surprised by today's dramatic sell-off simply has not been paying attention. The signs were everywhere: weak second quarter corporate earnings, an outright implosion in the US housing market, sub-prime defaults beginning to leak over into mainstream mortgage loans and corporate lending, a market soaring (the Dow was up 30% in just the past year) over and beyond 50 and 200-day moving averages.

Everything was in place for a selling spree of monumental proportions and on Thursday, it all came to fruition.

Dow 13,473.57 -311.50; NASDAQ 2,599.34 -48.83; S&P 500 1,482.66 -35.43; NYSE Composite 9,654.43 -275.93

The day began badly with ExxonMobil (XOM) announcing - prior to the open - that it had fallen short of analyst expectations for the 2nd quarter. Boo hoo, the largest corporation in the world and the company held widely responsible for causing people so much pain for US motorists only booked $10.26 billion, or $1.83 a share, from $10.36 billion, or $1.72 a share, a year earlier. Analysts were hoping for $1.96 per share. They were sorely disappointed and the stock lost more than 6 % on the day.

At 10:00, with the Dow already down more than 100 points, the Commerce Department provided more proof that the US housing collapse was getting even worse than anticipated. New home sales were down 6.6% to 834,000 units, the biggest percentage drop in 6 months. Sales are 22.3% lower than they were a year ago. Additionally, the median price dropped to $237,900, down 2.2% from a year ago.

As the day progressed, the selling intensified. From noon through 2:30 p.m. the Dow fell by more than 200 points as volume reached historic levels.

So powerful was the downdraft, that even oil traders were scared. Crude, up to $77 earlier, fell through the afternoon, eventually closing down 73 cents at $75.15. Gold dropped another $11, with silver closing 20 cents lower.

The Dow bottomed at 13,335.30, a loss of nearly 450 points. Then, something strange happened, just like yesterday. The Dow jumped nearly 90 points in a matter of minutes. It was either the invisible hand of Maynard Keynes, but more likely the clandestine hand of the Plunge Protection Team (PPT), otherwise known as the working group on financial markets, created by Ronald Reagan to prevent a repeat of the Wall Street meltdown in October 1987.

As usual, the foreign press - in this case the London Telegraph - had the story more than a year ago.

Nevertheless, not even Treasury Secretary Henry Paulson and his able team of financial commandos could stem the tide. By days end, the markets were in tatters, with advancers swamped by declining issues by a ratio of 7-1. New lows hit a number I have heretofore never witnessed - 1110 - to only 104 new highs.

And whatever the interlopers did to spike the market, it broke the feeds to Yahoo Finance and CNN Money. The volume figures on Yahoo Finance were totally knocked out (see the chart at right).

Judging by the late figures, the volume was the highest of the year, surpassing the mark of 4.283 billion shares, set yesterday. The overall Dow drop of 311 points was second only to the China rot on February 27 of this year.

There were over 400 stocks reporting on the day, but the biggest stories belonged to ExxonMobil (XOM), Apple (AAPL, beat estimates, +8.74), 3M (MMM, beat estimates), Black & Decker (BDK, beat estimates on lower profit, lowered guidance, -6.88), Office Depot (ODP, met on lower profits, -1.79) and Dow Chemical (DOW, beat, -2.22).

There will be more tomorrow, as investors digest earnings after hearing the government's preliminary figures for 2nd quarter GDP prior to the market open. The so-called "experts" - who haven't been remotely close lately - are predicting 3.2% growth. After Q1's horrific 0.7% gain, anything short of that number will likely precipitate even more selling.

Make no doubt about it, without the interference from government insiders, today's loss could have easily been 500 or 600 points. This slide certainly isn't over. In fact, it's probably only the beginning of a long, painful unwinding of an equally-long credit binge.

The fear is not in the second quarter results, but in the future, with an interest rate drop now becoming more and more of a distinct possibility as the US lags behind other countries - developed and emerging alike.

Rigged Rally

Any doubt that the US stock markets have been, are being or can be manipulated was put to rest today at precisely 3:00 p.m. Eastern time. It was at that moment that the Dow Jones Industrials climbed an extraordinary 50+ points in just over one minute. There was no news, no report issued that would move the market, only the covert actions by groping, free market fondlers.

Briefing.com called the 3:00 jump a "technical trade," which is a good substitute for "we don't know," and the Fed's Beige Book was released at 2:00, not 3:00, but maybe it took a while to digest.

In any case, the final result was a healthy gain for the Dow, with the other indices tagging along.

Dow 13,784.50 +67.55; NASDAQ 2,648.17 +8.31; S&P 500 1,518.09 +7.05; NYSE Composite 9,930.36 +20.41

Other than the faux late-day rally, it was really a see-saw session with the markets initially buffeted by stellar earnings reports from Amazon (AMZN) and Boeing (BA), then battered by the National Association of Realtors' (NAR) existing Home Sales for June, which came in well below estimates, suggesting that, considering the current malaise in the housing market, those estimates might want to be a little less optimistic going forward.

It was the worst showing for housing in roughly 4 1/2 years, though that in itself should not have been much of a surprise.

Elsewhere, companies were churning out 2nd quarter earnings reports, and some actually weren't all bad.

• Xerox (X) beat estimates by a penny, but was pounded lower by 1.10 (nearly 6%).


• Colgate-Palmolive (CL): Excluding restructuring charges, net income in the most recent quarter was $457.5 million, or 84 cents per share. Analysts expected earnings per share of 84 cents.


• ConocoPhillips (COP) posted income, excluding extraordinary items, of $4.8 billion, or $2.90 a share, compared with $5.2 billion, or $3.09 a share, during the second quarter of 2006. The results were well above the $2.68 analyst expectations.


• Freeport-McMoRan Copper & Gold (FCX): On the acquisition of rival Phelps Dodge in March and increased metal pricing, net income after paying preferred dividends rose to $1.10 billion, or $2.62 per share, from $367 million, or $1.74 per share, a year ago. Revenue surged to $5.81 billion from $1.43 billion last year. Analysts surveyed by Thomson Financial were looking for profit of $2.71 per share on revenue of $5.27 billion.
• GlaxoSmithKline (GSK): Pretax profit was flat at £1.896 billion -- compared with £1.897 billion a year earlier -- and was ahead of analysts' consensus expectations of £1.833 billion. Net profit rose to £1.36 billion from £1.34 billion a year earlier.


• Apple (AAPL): (After the close) For fiscal 2007 third quarter ended June 30, 2007, posted revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share. These results compare to revenue of $4.37 billion and net quarterly profit of $472 million, or $.54 per diluted share, in the year-ago quarter.

The story beyond the headline numbers was in stark contrast. Decliners beat advancing issues by a 3-2 ration, and new lows swamped the market, beating new highs by 630-134 (no, that's not a misprint).

Oil posted huge gains on the NY Mercantile Exchange, with crude up a massive $2.32 to $75.88. So, square those facts and numbers with a nearly 70-point rise on the Dow... really, try it.

Gold was hammered down $11 to $673.80, with silver losing 29 cents to close at $13.15.

More hijinks are in store for certain tomorrow, as new home sales figures for June are released and another 400+ companies roll out earnings reports.

Bear Claws

How bad was it?

It was in the top five worst performances for the combined indices this year, and likely the third worst showing (at least for the Dow it was). What triggered the Tuesday tempest was poor showings by a multitude of companies reporting second quarter earnings, most notably, McDonald's (MCD) huge miss and a miss by DuPont (DD) prior to the market open and Texas Instrument's (TI) poor showing announced Monday after the close.

Dow 13,716.95 -226.47; NASDAQ 2,639.86 -50.72; S&P 500 1,511.04 -30.53; NYSE Composite 9,909.95 -211.63

Here are just some of the early headlines, which seemed to get worse as the trading session wore on.

IN PLAY: Corn Products reports 2Q07 results; beats by $0.09
DuPont reports flat 2Q earnings
Kimberly-Clark 2Q Profit Beats Outlook
Legg Mason profit climbs 22 percent
Lexmark net profit slips 16 percent
Northrop 2Q profit rises 7%
PepsiCo 2Q Profit Rises 13 Percent

While there were a smattering of positives, they were overwhelmed by more than just a few companies not meeting 2nd quarter estimates.

Declining issues crushed advancers by a 5-1 margin and new lows swamped new highs, 642-162.

Not even bonds, tame, with the 10-year note yielding 4.92%, or oil, down $1.33 to $73.56, could pick up the spirits on Wall Street. The continual unwinding of the sub-prime mortgage blow-up (now spreading into other credit areas) combined with the spate of earnings disappointments led to an all-out rush for the exits.

For those with weak stomachs, stop here, because I'm going to tell you why it's going to get worse the rest of the week.

First, more companies will be releasing earnings reports and some are certain to miss estimates. Investors are in a sour mood already, and they simply don't need any more reasons to sell. Later in the day, US Steel (X) reported a 25% dip in profits from the year ago period. Net income fell to $302 million, or $2.54 per diluted share, for the quarter, from $404 million, or $3.22 per share, during the same period last year. Analysts were looking for earnings of $2.35 per share on $4.05 billion in sales and the stock ended the day up 42 cents at 106.41.

After the close, Amazon (AMZN) booked solid profits. Earnings climbed to $78 million, or 19 cents per share, from $22 million, or 5 cents per share during the same period last year, soundly beating expectations of 16 cents per share.

Eli Lily (LLY) also reported after the close. Excluding charges, adjusted earnings totaled $978.7 million, or 90 cents per share. Analysts had expected 82 cents per share on that basis.

Tomorrow, in addition to the more than 300 companies reporting 2nd quarter earnings, the following report prior to the open:
Colgate-Palmolive (CL), ConocoPhillips (COP), DaimlerChrysler (DCX), Freeport-McMoRan Copper & Gold (FCX), GlaxoSmithKline (GSK), Xerox (XRX)

After the close:
Apple (AAPL), Pulte Homes (PHM), Symantec (SYMC), Boeing (BA).

Additionally, Existing Home Sales for June will be out at 10:00 am. On Thursday, New Home Sales figures for June and on Friday, the preliminary 2nd quarter GDP estimate.

With those economic reports on the way, traders may have taken an early hiatus, expecting the worse. It's likely to not be as bad as the worst skeptics suspect, but don't look for a quick turnaround - at least not this week.

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.

Google, Caterpillar Sink Dow

After the close on Thursday, Google - for the second time in its brief 2-year existence as a public company - missed analyst expectations and sold off wildly in after-hours trading. On the open, Google (GOOG) was down 36 1/2 points, at 511.90, from the previous day's close. The stock regained some of the loss during the trading day, closing at 520.12, for a loss of 28.47.

With Google still fresh in the rear-view mirror, Caterpillar released second quarter results prior to the open, sinking the general market. The company earned $823 million, or $1.24 per share, in the three months ended June 30, down from $1.05 billion, or $1.52 per share during the same period last year. Analysts had expected a profit of $1.49 a share on revenue of $11.12 billion. The miss was staggering and shares traded lower by 3.78, closing at 83.20.

Dow 13,851.08 -149.33; NASDAQ 2,687.60 -32.44; S&P 500 1,534.10 -18.98; NYSE Composite 10,072.93 -121.08

Damage was widespread, as declining issues outpaced advancers by a 7-2 margin. New lows retook the edge over new highs for the second time in the last three sessions, 368-228.

Other issues reporting on the day were:

• Citigroup Inc. (C): Net income rose to $6.23 billion, or $1.24 per share, in the second quarter, from $5.27 billion, or $1.05 a share, in the same period a year earlier. Analysts had sought 1.13 per share, but, shares of the nation's largest bank still were down 40 cents on the day, closing at 50.73


• Schlumberger (SLB): Amid the dour tones of the day, the oil services company posted net income for April-June of $1.26 billion, or $1.02 per share, compared with $856.9 million, or 69 cents per share, in the year-earlier period. Revenue rose to $5.64 billion from $4.69 billion a year earlier. Analysts had expected earnings per share of 95 cents on revenue of $5.53 billion. Shares rose 3.23 to 96.68.


• Wachovia Corporation (WB): Net earnings increased 21.1% to $2.3 billion, or $1.22 per share, from $1.9 billion, or $1.17 per share in the year-earlier period. Those results were in line with analyst expectations of 1.22 per share. The stock, however, sold off sharply, finishing the session down 1.63, at 49.98

Microsoft (MSFT) was also in line with estimates, but was punished after a series of upside surprises. Shares of the software maker declined 0.35 to 31.16 on volume that was nearly double the average.

Oil dropped 35 cents to settle at $75.57. Gold rose another $6.60 to end at $684.70, while sister silver added 3 cents to $13.40. Friday was the culmination of the best week for the metals in at least 3 months.

Monday will witness more earnings reports with a number of heavyweights, including American Express (AXP), Halliburton (HAL), Merck (MRK), Schering-Plough (SGP) and Texas Instruments (TXN).

Results thus far have been less-than-inspiring, with a fair share of misses and few clear winners. The week will be important as the majority of US companies will have reported by Friday.

Economic indicators will also be in focus, with existing home sales at 10:00 a.m. on Wednesday, new home sales on Thursday and a preliminary reading on GDP for the 2nd quarter out prior to the market open on Friday. Analysts are expecting GDP to show a 3.2% gain. This, on the heels of first quarter's dismal 0.7% showing, may be a bit optimistic. Anything below 2.5% may signal further weakness and precipitous losses in stocks.