Roller Coaster Day for US Stocks

Talk about volatility! The Dow Jones Industrials took a 21-point round-trip, finally ending the session with the third straight loss for the index of 30 blue chip stocks.

Dow 13,892.54 -20.40; NASDAQ 2,792.67 +28.76; S&P 500 1,541.24 +2.71; NYSE Composite 10,165.30 +39.90

Stocks soared early in the day - with the Dow up by more than 100 points - on earnings reports, primarily, from tech stalwarts Intel (INTC) and Yahoo (YHOO), which reported strong earnings after the close on Tuesday and Coca-Cola, which beat estimates for the 3rd quarter.

$100 Car Payments
Edmonton, Vancouver, Bad Credit, Divorced, Bankruptcy OK. Apply online.
secondchancefinance.ca

However, the celebration was short-lived as spiking oil prices and continuing concerns in credit and mortgage markets rattled investors. Slow software sales from IBM and a word from the CEO of United Technologies, who said 2008 would be "challenging," sent those two Dow components reeling.

Advancers and decliners finished virtually in a dead heat, with gainers showing a slight advantage. New lows eked out a win over new highs, 259-249.

Oil was lower by 21 cents, gold and silver registered marginal gains.

Earnings continue to come in weaker than expected and with continuing concerns in the housing and credit sectors, investor mood is quite dour. Even though techs remain a bright spot, retailers and mainstream industrials are returning very poor 3rd quarter performances.

Despite pontifications from Sir Alan Greenspan that there's only a 50/50 chance of a recession, one ponders the former Fed Chief's past performance and overall reputation, which has been severely tarnished of late. Concerns are abundant that not only will the US fall into recession, but that it will be a particularly long and deep one.

Keep that in mind with your trades on Thursday and Friday. This is no time to be overly optimistic.

NYSE Volume 3,638,064,750
NASDAQ Volume 2,440,087,250

More Reality Checks

US equity markets suffered through a second straight losing session on Tuesday, amid skyrocketing oil prices and mixed earnings reports.

Dow 13,912.94 -71.86; NASDAQ 2,763.91 -16.14; S&P 500 1,538.53 -10.18; NYSE Composite 10,125.40 -90.89

It was another dose of reality for the largely-overpriced markets. Fed Chairman Ben Bernanke and Secretary of the Treasury Hank Paulson both jawboned about the continuing housing and credit crises. Bernanke chided bankers from expecting a "bailout" from the Fed on Monday night, while Paulson encouraged the same bankers to figure out ways to save strapped homeowners from falling into foreclosure.

In effect, they both told the banking segment that they were on their own, as it should be. The actual condition is that Fed and Treasury have both been supplying assistance to the banks. These men aren't stupid. They know a banking failure could be catastrophic, however, reading into their words, one wonders what they really know, and whether they actually believe the situation to be much worse than it appears.

Obviously, the bankers know the fix they're in, but they're not telling either. The best they can come up with is a joint fund to repurchase their own lousy paper, which they are unable to unload at this time. I don't know the technical term for their off-the-books repurchasing of faulty investment paper, but it certainly smells a lot like Enron. It's entirely possible that a very big name or two in the financial business could find itself in deep, deep water as early as the first quarter of '08.

As the markets churned in negative territory all day long, declining issues outdistanced advancers by better than a 2-1 margin and the new highs-lows finally rolled over, with 221 new lows appearing against 168 new highs. That particular indicator has been trending lower over the past week and finally is giving a clear signal that more losing sessions are ahead for stocks.

In other words, in a series of shouting headlines I'd like to see, SELL! EVERYTHING! NOW!

Commodity prices continued to dog stocks. Oil was up to another record high, up $1.48 to $87.61. Experts are now calling for 20-30% higher heating bills throughout the winter. God bless Al Gore for giving us GLOBAL WARMING!

Oddly enough, gold lost 20 cents while silver declined by the same amount, closing at $13.36. BUY PRECIOUS METALS

Stocks are offering a mixed picture.

Before the open: Delta Air Lines (DAL) reported better than expected third quarter earnings of $0.56 per share, compared with the consensus estimate of $0.41.

Wells Fargo missed by $0.02, misses on earnings of $0.68 per share, $0.02 worse than the Reuters Estimates consensus of $0.70. Shares of the bank's stock were hammered down to 34.55, -1.40 by the close.

Johnson and Johnson earned 88 cents per share, compared with 94 cents per share during the same period a year ago. Analysts sought .90 cents per share. The stock fell 58 cents to 65.07.

After the market closed on Wednesday, IBM beat estimates by a penny. Apparently, this was not good enough for investors, as the stock was being punished - down nearly 2% - in after-hours trading.

Holders of Yahoo (YHOO) were treated to the first quarterly results with co-founder Jerry Wang as CEO and they were pleasantly surprised when the company announced earnings of 11 cents per share, beating the street estimate by 3 cents. The stock price was down 1.17 prior to the announcement. Shares traded nearly 10% higher in after-hours activity, up 2.59 to 29.28.

Intel (INTC) reported a 43% rise in profits after the close and investors sent it soaring after hours, up more than 5%.

BUY TECHS!

Actually, I've been recommending techs over financials and just about everything else for most of 2007. This market, as a whole, however, is headed lower.

CIT Group (CIT), Coca-Cola (KO) and United Technologies (UT) report before the market open on Wednesday, and their reports should influence early trading.

NYSE Volume 3,181,638,250
NASDAQ Volume 2,093,682,500

Markets Lower; Has Sanity Returned?

In light of the recent market movements to record highs on the Dow and S&P, today's sharp, broad-based selloff should come as a somewhat welcome reaction to recent and ongoing events.

Despite serious tape-painting in the final half hour (the Dow gained back 80 points of the day's losses), markets were dramatically lower. The one guiding stock was that of giant Citigroup, which reported prior to the open that 3rd quarter net income slipped to $2.38 billion or 47 cents a share, down from $5.51 billion, or $1.10 a share in the same period a year ago.

Based on massive writedowns in securitized instruments (marked to model) - mostly related to sub-prime mortgages - Citigroup set the tone for the entire session, and it wasn't very upbeat.

Dow 13,984.80 -108.28; NASDAQ 2,780.05 -25.63; S&P 500 1,548.71 -13.09; NYSE Composite 10,216.29 -85.20

Citi said revenue generated in its US markets and banking business declined 87% in the quarter. That's the kind of message US equity investors feared to hear. The truth about the sub-prime slump and credit calamity is beginning to find the light of day.

In a related story, Citigroup, JP Morgan, Bank of America (both of which report later this week) and other major financial institutions plan to create a super-fund (off their books, off course) to pool about $80 billion to buy complex structured investment vehicles (SIVs) linked to subprime mortgages and other types of debt.

The bankers basically are buying back their own debt.

Substantial Wealth and Riches Creation
The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
substantialincomes.com

It's not a very nifty trick - repricing the investments at full value away from their own balance sheets - and obviously didn't fool investors today. The banks want to prevent a catastrophic fire sale on the debt, some of which is worth less than 25 cents on the dollar.

Decliners beat advancing issues by a 5-2 margin overall, though new highs maintained their long-standing edge over new lows, 291-203, though their edge has been seriously eroded over the past week.

The price of oil certainly didn't help matters. Crude for November delivery closed at a new record, $86.13, up $2.44 on the day. Gold advanced $8.40 to $762.20, while silver declined 5 cents to $13.86 on industrial consumption concerns.

Also prior to the open, toy maker Mattel (MAT) reported third quarter earnings of 61 cents per share, far below analyst expectations of 70 cents, based largely on multiple product recalls from Chinese factories.

All of this wonderful news weighted stocks down. Prospects for the remainder of the week aren't exactly buoyant.

Tomorrow's earnings reports include CSX Corporation (CSX), Delta Air Lines (DAL), Intel (INTC), Johnson & Johnson (JNJ) and Yahoo (YHOO).

Reality may be returning to the markets after weeks of Fed-induced faux-euphoria. If that is the case, expect the Dow to test 13,400 by week's end.

NYSE Volume 2,660,809,000
NASDAQ Volume 1,990,618,500

Choppy Waters

Any canoeist or kayaker worth his or her oars knows the difficulty in navigating choppy water. One must constantly be making adjustments, small moves here, quick moves there, in a never-ending battle to keep the craft on track and moving in the proper direction.

Such was the situation of the stock market on Friday as investors moved variously in and out of stocks, monitored positions and eventually found a path home to a higher close. But, it wasn't without mishap as on the Dow, for instance, nearly half of the day's gain was garnered in the final fifteen minutes. That's what kind of a day it was, and, to a large degree, how the week was shaped as well.

Dow 14,093.08 +77.96; NASDAQ 2,805.68 +33.48; S&P 500 1,561.80 +7.39; NYSE Composite 10,301.49 +56.24

For the week, the Dow gained a full 26 points, less than the entire move in Friday's last 15 minutes. (Hear the sound of one hand clapping.) Hurrah! Cheers!

If this is what today masquerades as some kind of exuberance, either rational or otherwise, many are not impressed. On the cusp of the biggest week of earnings reports for the quarter, the market displayed a tangible sense of caution.

Forex Beginner's Resource Website
Forex Foreign Currency Exchange Trading Beginner's Resource Center.

forexforexforexforex.com

Clearly, investors are not confident about corporate America's ability to deliver quality profits.

The one notable company reporting on Friday was General Electric, which, despite reporting stronger than expected profits was pounded down 0.57, to 41.03, after releasing a strong quarterly, with profits rising 14% over the same period a year ago. Apparently, this is the quarter of higher than high hopes and one in which traders will lock in profits immediately after reports, good, bad or otherwise.

Concerning yesterday's shakeout, my skeptical mind was on the right track. The melt-away apparently involved financial giant Citigroup, which announced a major shake-up Thursday evening. The bank said it would combine two units into one division to be led by former Morgan Stanley executive and Vikram Pandit. The likely cause of yesterday's massive, volume-driven selloff, was a rumor that CEO Charles Prince was about to step down. The rumor proved false, re-igniting the rally on Friday morning, albeit without as much gusto. Volume Friday more resembled a sleepy summer day than a brisk earnings season session.

On the day, advancing issues outstripped decliners by an 8-5 margin. The surprise set-up for Monday, when earnings begin to flow with increasing rapidity, was in the new highs-new lows reading. New highs checked in at a paltry 197, to 133 new lows, the closest this gap has been in many weeks. This solitary indicator shows how nervous the market is, how quickly investors will close out positions and that there is little follow-through or confidence in any rally.

Next week clearly - especially with all of the largest financial companies, such as Citigroup, JP Morgan and Bank of America reporting - is indicating a rough road and quite possibly the beginning of a serious correction in US equities.

Elsewhere, commodities moved in opposite directions, though, as usual, we reiterate that oil prices are not reflective of any kind of reality, being largely manipulated by major players in the futures market. Crude rose 61 cents to $83.69, and whether or not that's a record, it's sure close and far too high to be sustainable for long.

Gold and silver continued to back off, though slightly, reaffirming the idea that credit conditions are still troublingly tight and various financial concerns are selling precious metals to raise cash. It wouldn't be the worst one-line analysis of the metals and may be much closer to the truth than even I would like to admit.

Next week, roughly a third of the S&P 500 will be reporting earnings and it's likely to be raucous. Any misses will result in severe punishment. Options players should be especially attuned to the opportunities present as Friday is expiration day for October options.

Countrywide "PROTECT OUR HOUSE" Wrist Band on eBay

With the current malaise in the mortgage and credit industry, Countrywide Financial, the nation's largest mortgage lender (and sub-prime abuser), recently initiated a PR campaign designed to improve employee morale and boost the company's image.

The plan included a pledge, to be signed by loyal employees and a cheap rubber wristband with the Protect Our House slogan.

Some employees are taking advantage of the public's fascination with the sleazy, rah-rah tactics by Countrywide management and have decided to auction their wristbands on eBay. This one has already rung up bids of $165.00 and nearly 10,000 hits and ends on Saturday. There are at least 6 more available on the popular auction site.