Profit Taking in Financial Stocks

[Excerpted from Bill Cara's Daily Report]

Financial stocks pulled the market down on Monday as traders took some of last week’s humongous profits off the table. The broad market indexes started weakly and closed at session lows for the S&P 500 and DJIA. Briefly negative, the NASDAQ was up for most of the day, but succumbed to late selling pressure, closing flat. Traders were looking ahead to this week’s PPI and CPI reports. Volume was anemic.

At the close, the DJIA (8,432.32 -142.33 -1.66%) and S&P 500 (911.37 -17.86 -1.92%) were solidly down, while NASDAQ Composite (1,734.84 -4.16 -0.24%) was down a tad.

The Toronto Composite (10,084.62 -153.37 -1.50%) and Toronto Venture Board (1,060.30 -9.45 -0.88%) were both losers on the day.

Earlier Tuesday, prices were mixed in Asia Pacific markets. Japan’s Nikkei 225 (2,812.7 -16.526 -0.58%) and Aussie All Ordinaries (3,863.6 -46.9 -1.20%) were down, while the India BSE 30 soared (12,158.0 +475.0 +4.07%), and the Shanghai Composite (2,618.2 +38.425 +1.49%) and Hong Kong Hang Seng (17,153.6 +65.69 +0.38%) also closed higher. The French CAC (3,240.1 7:15AM ET -0.26%), German DAX (4,879.9 7:01AM ET +0.27%) and UK FTSE 100 (4,398.3 7:01AM ET -0.84%) were moderately bearish.

In NY, the previous day’s strongest sector gain was the biggest loser, by far, once again. The Financials (XLF -5.2%) were led south by Banks ($BKX -6.2%), and REITs and Broker-Dealers ($DJR and $XBD -4.1%), with Energy (XLE -3.2%) being Monday’s second biggest loser, which was in keeping with the switch from Friday where XLE was the second strongest. Once again, Friday’s weakest industry groups were yesterday’s strongest: Biotech ($BTK +1.0%) and Hospitals ($RXH -0.9%).

The Cara 100 company stocks were led on the up side by Myriad Genetics (MYGN +6.3%) and Adobe (ADBE +2.9%). The losers were headed by Whirlpool (WHR -7.8%) and Brunswick Corp (BC -7.3%).

The $USD (82.72 +0.23 +0.28%) enjoyed a counter-trend move higher. The Euro (135.92 -0.46 -0.34%), Pound (151.17 -1.22 -0.80%) and Cdn Loonie (85.67 -1.26 -1.45%) were weak, but the Yen (102.55 +1.00 +0.98%) was stronger, all against the USD.

In the Saturday Report, we noted that “Yields were higher on the long end but dropped a bit on the short end looking like a brief reversal may be near at hand”, which is precisely what happened yesterday. The US long bond was stronger ($USB 121.75 +1.42 +1.18%) while US Treasury yields pulled back. The 30-year (4.180 -0.94 -2.20%), 10-year (3.180 -1.13 -3.43%) and 5-year (2.028 -1.17 -5.45%) were well down on the day. The T-Bill yield dropped too (0.155 -0.10 -6.06%).

With the strong $USD, commodity prices were weak.

Crude Oil ($WTIC 59.41 -0.33 -0.55%) failed to hold the 60 mark Monday, but today will likely be different. Futures were stronger (60.27 +0.86 +1.44% 07:11am ET).

$GOLD futures closed yesterday down a tad (913.30 -3.20 -0.35%), but were stronger Tuesdaymorning.

Spot (cash) market prices earlier today were: Gold (918.20 +5.50 +0.60% 07:21am ET), Palladium (233), Platinum (1122.0 -3.0 -0.27% 07:21), and Silver (14.150 +0.260 +1.87% 07:21am ET). Silver appears to be headed north of 15, possibly 16-17, while gold may try to break 1000 in this cycle.

The Euro futures were a tad stronger earlier (1.3636 +0.0041 +0.30% 07:10am ET), but the gold bugs will be looking for more than that.

Stock futures for the DJIA were slightly higher (8413 +11 +0.13% 07:10am ET).