Closing Update for Friday, August 14: Low Confidence

4:07 PM, Aug 14, 2009 --

• DJIA -76.7 or 0.8% to 9,321
• S&P 500 -8.6 or 0.9% to 1,004
• Nasdaq -23.8 or 1.2% to 1,986

GLOBAL SENTIMENT

• Hang Seng up 0.15%
• Nikkei up 0.76%
• FTSE down 0.87%

UPSIDE MOVERS

(+) Autodesk (ADSK) continues late extended-hours recovery after Q2 beat, guidance that straddles Street view.

(+) Star Bulk Carriers (SBLK) gains as analyst says company likely to pay debts on time.

(+) Discovery Labs (DSCO) CEO resigns.

(+) Allied Irish Bank (AIB) gains on report Royal Bank of Canada wants stake.

(+) Lifeway Foods (LWAY) beats year-ago results.

(+) VanceInfo (VIT) beats with Q2 results.

(+) China GrenTech (GRRF) tops with Q2 results.

(+) Abercrombie & Fitch (ANF) turns higher; swings to Q2 loss on lower sales.

DOWNSIDE MOVERS

(-) Skystar Bio-Pharmaceutical (SKBI) results up sharply from year-ago quarter.

(-) J.C. Penney (JCP) reports breakeven Q2, raises FY EPS view to straddle Street.

(-) Boeing (BA) down as WSJ report says 787 fuselage work halted in Italy.

(-) Mindspeed (MSPD) prices shares.

(-) NetList (NLST) reports Q2 revs down sharply from year-ago levels.

(-) Kimco (KIM) gets analyst downgrade.

(-) Umpqua (UMPQ) increases share offering.

MARKET DIRECTION

A weaker-than-expected consumer confidence reading sent traders scurrying for the exits Friday, pushing the major averages deep in the red.

Friday's dip handed stocks their first weekly decline in five.

The Reuters/University of Michigan Survey of Consumers came in at a 63.2 reading in August, down from 66 in July and below Street estimates for a rise to 68.5. Traders have been betting economic conditions would improve in the second-half of 2009, but today's data demonstrated that consumers, wracked by heavy personal debt loads, employment worries, and continuing deterioration in the housing market, may stall a recovery by tightening spending even further.

In other data released today, the Labor Department said that consumer prices showed no change in July, in line with analysts' expectations and far below the 0.7% jump in June. Prices have fallen 2.1% over the past 12 months, the biggest annual decline since a similar drop in the period ending in January 1950. Most of the past year's decline reflects energy prices falling 28.1% since peaking in July 2008. Some economists are concerned that the economy could fall into a deflationary spiral not seen since the Great Depression.

U.S. industrial output, however, rose in July for the first time since October, the Federal Reserve reported earlier this morning. The seasonally adjusted output of the nation's factories, mines and utilities increased 0.5% last month, reversing course after a 0.4% decline in June. Output is down 13.1% in the past year. It was only the second increase in industrial production since the recession began in December 2007. Since then, output has fallen 14.6%. A Reuters survey of economists called for a 0.3% rise in production and a reading of 68.3% for capacity utilization.

Looking forward to next week, earnings season still has some life left in it as several major names are due with quarterly results. Among companies posting financials on Monday are: Agilent Technologies (A) and Lowe's (LOW). On Tuesday, Hewlett-Packard (HPQ) and Home Depot (HD) are set to issue quarterly numbers, while on Wednesday, JDSU (JDSU), NetApp (NTAP) and Synopsys (SNPS) are slated to report numbers. On Thursday, Brocade Communications (BRCD), Intuit (INTU), Salesforce.com (CRM) and Pacific Sunwear (PSUN) will issue results.

On the economic front, the Empire manufacturing index will be released on Monday. Tuesday will see building permits, PPI, and housing starts data. Crude inventories are set for release on Wednesday, and initial claims and the Philadelphia Fed are due on Thursday. On Friday, existing home sales are slated for release.

Crude oil settled down about $3 at $67.51 a barrel on the New York Mercantile Exchange.

Comments

[TonyNed:]

Good analysis. On the RSI, the SPX bounced off the 70 level with yesterday and today's price action as well as showing downward momentum beginning. My thinking is your indicator is foreshadowing a reversal. Irrational exuberance is king nowadays though and has trumped technical indicators in this run up. I don't understand why this market is being propped up. There is no sector rotation which would provide a sustained rally. The front runners just keep running past levels that typically indicate momentum reversals. I attribute the fact that the sell indicators have been ignored for a couple of weeks to the stall in the market.


On Aug 14 04:53 PM Master Che wrote:

> 8/14/09
> CLOSING COMMENTS:
>
> ESU9:
>
> Quite Strange price action today.
>
> 94% of all market price movement occurred in 120 minutes. In 2 separate
> intervals;
>
> This morning we headed down 17.50 points with 522,900 contracts traded
> in 60 minutes.
>
> We then headed back up 12.00 points with 360,600 contracts in 60
> minutes although he last 30 minutes traded 73% of all the upside
> volume.
>
> From a volume counter point of view the downside is the direction,
> although I don’t believe that ONLY volume determines direction.
>
>
> Today’s trading volume was near average, although less than the last
> 3 days.
>
> The highest volume day the last 10 trading days was the high at 1016.00,
> which from a volume counter point of view confirmations the upward
> direction.
>
> Today’s price action strongly indicates a top or a bottom. They trade
> exactly the same way. Therefore you never know a top can be a bottom
> if a significant breakout occurs.
>
> According to the candlesticks (Daily charts) todays closing spike
> up is the largest we’ve had since 3/6/09, at 662.00, which was a
> major reversal.

Aug 14 10:46 PM

[rick12345:]

One bad day in the markets and all the bears are claiming that the sky is about to fall in. I thought journalism was supposed to present an objective veiw the news, not opinion?
To quote from the article aove "U.S. industrial output rose in July for the first time since October....It was only the second increase in industrial production since the recession began in December 2007"....
Take your head out of the sand people, GDP growth is finally reversing. This piece of news alone should have sent markets to the moon, but strangely enough, whether through a lack of insight in the field of economics, or whether its through sheer ignorance, it didn't make the headlines. I guess people are afraid of the truth and would rather hang onto the safety of the past.
This weeks correction was well and truly expected. I personally thought the DJIA would get back to 9000, but it doesn't look like as if it will sink quite that low now, with a 9200 bottom being the extreme depth of the trough. After this it's all go go go.

Aug 15 06:47 AM

[ari5000:]

The GDP is rising due to huge stimulus from the govt. - which is unsustainable. Furthermore, the market is up 50% from the lows.

Rick -- you shouldn't tell other people to get their heads out of the sand until you get yours out of the clouds.

Aug 18 08:44 AM