Reply #124: blather

[ozymandius]

4:20 pm : Momentum from yesterday's late-day rally carried forth into today's session, but it did not last. Investors grappled with an array of items, and sellers eventually dominated. Leadership lacked, and each of the indices registered losses.

A 1.0% rise in the price of crude helped to take the steam out of the market. The Energy Department's report that natural gas supply last week fell less than expected initially sent energy prices lower. With the extension of their pullbacks, the market benefited. Reports that Nigerian terrorists engaged soldiers in an attempt to capture a fuel tanker, which came on the heels of yesterday's geopolitically-driven OPEC decision, weighed on the market. Crude rallied, and gasoline and heating oil also rose. That action squelched gains across the market, particularly in the Consumer Discretionary sector (-0.4%). At the same time, it did not spark any buying in the Energy sector, which would have potentially served as an offsetting factor. Energy fell 0.9% and weighed heavily. Tech was another influential sore spot. Google (GOOG 343.00 -10.88) was a drag, following news that it will pay $90 million to settle a click fraud lawsuit. Semiconductors were also weak, despite upside earnings and guidance from National Semi (NSM 27.18 -0.85).

Recoveries in metal commodities had helped the Materials sector (-0.2%), but its gain was erased by the bell. Several analyst upgrades (on NUE, X, and ECL) were supportive. Telecom (+0.3%) continued its outperformance today, and Consumer Staples (+0.2%) also clung to a gain. Those two sectors' modest contributions were muted by wide-spread selling, though.

The Treasury market remained in the stock market's spotlight. Some moderation in the 10-year note's yield was another factor behind the early, upbeat sentiment. Additionally, the yield curve had managed to stay out of inversion after exiting that yesterday. By the end of the day, though, the 10-year fell to a 4.72% yield and the curve flattened. Rate-sensitive areas of the market did not fare well. Pressured by banks, Financials declined a heavy 0.6%. The Utilities sector fell 0.5%, and homebuilders contributed to the Discretionary sector's weakness. Within the latter sector, General Motors (GM 21.28 +0.86) was its support. Reports indicated that it and Delphi are nearing a cost-cutting pact with the UAW. Reports also indicated that the UAW asserted that an agreement is not near, but GM still rose more than 4%. Boeing (BA 73.76 +0.94) was the Dow's other source of support, and helped limit the Industrials (-0.2%) sector's slide. The catalyst was news that the company received a new $406.5 million jet order. Speaking of the Dow, Johnson & Johnson's (JNJ 58.31 -0.43) board authorized a repurchase program of up to $5 billion in common stock.

Japan garnered a lot of attention today. The Bank of Japan announced its decision to abandon its five-year deflation-fighting policy. The move demonstrates the central bank's confidence in the country's economic turnaround, and supports our view that investors should continue to seek exposure to the Japanese market. The Nikkei jumped about 2.6%, and that bullish response was another factor behind early domestic gains. At the same time, the global interest rate environment continues to concern the market, and there is some degree of uncertainty over Japan's monetary policy.

Anticipation of tomorrow's employment data also helped keep the market in check. Economists are expecting a solid report. Given that expectations for Fed policy are well set, this is a time when stronger economic numbers are likely to be interpreted positively by the stock market. However, much focus will be placed on the hourly earnings portion. If the bond market sees that read as inflationary, that market is apt to weigh upon the stock market.

With respect to today's economic calendar, two items were featured. Initial Claims rose 8,000 to 303,000 - the first time in seven weeks that they have crept above the 300,000 mark. Still, initial claims remain at very low levels. Second, the trade deficit widened to $68.5 billion. Neither data had much effect upon trade today. DJ30 -33.46 NASDAQ -17.74 SP500 -6.24 NASDAQ Dec/Adv/Vol 1782/1213/2.07 bln NYSE Dec/Adv/Vol 1785/1447/1.55 bln