Closing Update for Monday, August 17: Global Sell-Off Visits U.S.

4:06 PM, Aug 17, 2009 --

• NYSE down 185.6 or 2.8% to 6,352.25
• DJIA down 184.9 or 2% to 9,137
• S&P 500 down 24.4 or 2.4% to 979.70
• Nasdaq down 54.7 or 2.8% to 1,931

GLOBAL SENTIMENT

• Hang Seng down 3.62%
• Nikkei down 3.1%
• FTSE down 1.72%

DOWNSIDE MOVERS

(-) Lowe's (LOW) misses with results, guidance.

(-) Home Depot (HD) is lower in wake of LOW results; HD due to report in Tuesday's pre-market.

(-) Guaranty Financial (GFG) drops as regulators reportedly want bids for company by today.

(-) E*Trade (ETFC) down as regulators delay decision on Citadel deal.

(-) Rosetta Stone (RST) terminates plans for stock offering, cuts earnings view.

(-) First Solar (FSLR) declines as Barron's article says upbeat earnings were likely the result of aggressive accounting.

(-) BB&T (BBT) sets stock offering.

(-) Aeterna Zentaris (AEZS) does not achieve statistical significance in drug for benign prostatic hyperplasia.

(-) SinoEnergy (SNEN) not in complience with debt covenants and reports quarterly loss.

UPSIDE MOVERS

(+) Coca-Cola (KO) gets favorable coverage in Barron's.

(+) Protalix (PLX) says FDA OKs treatment protocol for gaucher disease.

(+) BioSante (BPAX) gives H1N1 vaccine presentation.

(+) Goldleaf Financial (GFSI) sold to Jack Henry & Associates.

MARKET DIRECTION

Stocks end near session lows, coming under pressure throughout Monday's session on concerns the global economy could remain weak, particularly if consumers continue to show restraint. Asian and European stocks suffered. Chinese stocks recorded their steepest drop since November, overshadowing a stronger-than-expected U.S. regional manufacturing gauge. Today's stock decline is the steepest in some six weeks.

The New York Fed's Empire State Index registered at 12.1 for August, the best reading since November 2007, according to reports.

The global equity drubbing and firmer dollar took a toll on commodities trading. The slide in commodity prices pressured shares of companies like Alcoa (AA), AK Steel (AKS) and US Steel (X).

Crude futures close regular trading lower though end off the worst levels of the day. September fell $0.76 to end at $66.75 a barrel on the New York Mercantile Exchange. The contract earlier touched an intraday low of $65.23 a barrel in electronic trading. Crude is trading just positive, up $0.10 at $66.85 early in the after-hours session.

Financial stocks declined following a swoon for the group in European trade. UBS (UBS) reportedly may disclose details on thousands of US clients and although the bank may not pay fines, its clients may have to pay taxes and penalties.

Home improvement retailers were weaker after retailer Lowe's (LOW) reports Q2 earnings of $0.51 per share, down from $0.63 per share in the year ago quarter and shy of the Street view of $0.54 per share. Sales were down 4.6% to $13.8 bln, below expectations of $14.3 bln. The company also guided largely below the Street's view. Rival Home Depot (HD), which is due to report its results in the Tuesday pre-market session, fell in sympathy.

First Solar (FSLR) declined after being tugged by mixed reports. Jefferies & Co. analysts are backing their Buy rating on FSLR and disputing a largely negative Barron's article on the stock.

Barron's said the solar company's latest results were the result of aggressive accounting and actually show deteriorating cash flow. Jefferies' analysts said First Solar remains the "best positioned solar name due to its lowest cost structure" and that the company will likely offer 50% to 100% better margins than its peers, according to reports.

On the upside, health insurers like Aetna (AET), Humana (HUM) and Cigna (CI), gained on talk that President Obama's administration will drop the public option in its plans to revamp health care in the United States.

In mergers and acquisitions, Goldleaf Financial (GFSI) rallied after it agreed to be bought by Jack Henry & Associates (JKHY) for $0.98 per share.

Agilent Technologies (A) is slated to report its Q3 results in the extended-hours today, and analysts polled by Thomson Reuters expect the company to report a profit of $0.11 per share on revenue of $1.01 billion.

Comments

[Bill L.:]

I think we're starting to see the start of the correction people have been waiting for. Even bulls have been saying the market is over bought, and that many issues have just gotten way ahead of themselves.

The foreign indexes have been leading, first on the upside and now the downside. Until that relationship breaks down I would watch them for indications on future direction.

Aug 17 04:41 PM

[David White:]

Excluding one time items Agilent earned $.15 vs an average estimate of $.11. The stock was up after hours.

I tend to agree with Bill L. The sell off has likely started. Still declines led advances by a more than 6 to 1 margin. Plus the building permits and the housing starts numbers tomorrow will be good if they keep with their recent trend (and housing market recent trends). On top of the good empire state manufacturing numbers this morning, this should allow the market to rebound tomorrow morning.

Plus some companies are expected to do well. TJX and GYMB may perform well in the retail sector. They report Tuesday. This may relieve some of the distress about the retail sector.

I am not expecting the PPI data to be a huge factor.

HPQ reports after the market closes on Tuesday. Its results may big a big factor in Wednesday's performance. HD reports Tuesday also.

Aug 17 05:01 PM

[james bond:]

are we setting up for sept and october?

Aug 17 05:09 PM

[gabe borens...:]

Market is fine.

Aug 17 11:04 PM

[gabe borens...:]

The global investment community must realize that the U.S economy is not synchronized cyclically with the rest of the economic universe.
Psychology is one thing ,but reality is another.
Both U.S administrations had provided a measured liquidity injection into the key economic sectors and succeeded in stabilizing economy.It is the fiscal spending and the monetary policy that is and will be driving the U.S economic expansion not demand pull (inflationary).
Allowing for the multiplier ,the injected liquidity is almost equivalent to the U.S GDP .It is an insurance against the economic failure and a catalyst for unprecedented non inflationary expansion in the period ahead .
The fourth qtr of 2009 should attain 4.5 % GDP growth.
This will assure above average expansion in 2010 and the decline in unemployment to 3.8% .
The current debacle has allowed corporate America to be come mean ,lean competitive machine.
Without the American economic expansion ,Emerging Market economies and Europe and Asia will fail.
To date ,the deflection of the issues that exist outside the U.S economy has allowed the other markets to keep up with the U.S market gains .
This irrational focus on the U.S ,has allowed the global speculators to keep the dollar under the pressure.
I am convinced that as the global community begins to comprehend the fundamental non- inflationary forces that will maintain economic momentum ,the dollar will gain substantially.
The U.S stock market is not ahead of the curve but behind it.
Only months ago ,Depression was consensus,instead we are heading for unprecedented economic expansion.

Aug 17 11:29 PM

[Joe Shareho...:]

Fundamentals will always win. Fundamentals stink right now, hands down. There has not been one company with top line growth in the second quarter. Okay maybe Golden Slacks, but they have probably bugged the Fed for the last year.

Unemployment down, consumer confidence down, retail spending down. Eventually we'll have more write downs, more layoffs, and more public outrage/chaos. It's in the cards people. We did it with debt. Keysian spending was never meant for a 12 trillion dollar deficit. Every gov dollar we legislate is inefficiently spent, and we're spending a lot of them. Time to turn the reigns over to the private sector and tell the gov where to shove their legislation.

Aug 18 01:08 AM

[Charlie J:]

On Aug 17 11:29 PM gabe borenstein wrote:
> The U.S stock market is not ahead of the curve but behind it.
> Only months ago ,Depression was consensus,instead we are heading
> for unprecedented economic expansion.

Wow. Gov't spending will drive U.S. economic expansion, to the tune of 4.5% GDP?

The toxic assets in the banks are gone, or at least won't have any effect in the future? Consumers will start spending again, because what, their houses will miraculously gain 10% or 20% in value; or because a couple million new jobs will (also miraculously) appear?

If you look at all the data, it is quite evident that we are not heading for "unprecedented economic expansion" in the near future.

Aug 18 01:44 AM

[Suncatcher:]

Do you get your crack for free, or do you have to buy it?


On Aug 17 11:29 PM gabe borenstein wrote:

> The global investment community must realize that the U.S economy
> is not synchronized cyclically with the rest of the economic universe.
>
> Psychology is one thing ,but reality is another.
> Both U.S administrations had provided a measured liquidity injection
> into the key economic sectors and succeeded in stabilizing economy.It
> is the fiscal spending and the monetary policy that is and will be
> driving the U.S economic expansion not demand pull (inflationary).
>
> Allowing for the multiplier ,the injected liquidity is almost equivalent
> to the U.S GDP .It is an insurance against the economic failure and
> a catalyst for unprecedented non inflationary expansion in the period
> ahead .
> The fourth qtr of 2009 should attain 4.5 % GDP growth.
> This will assure above average expansion in 2010 and the decline
> in unemployment to 3.8% .
> The current debacle has allowed corporate America to be come mean
> ,lean competitive machine.
> Without the American economic expansion ,Emerging Market economies
> and Europe and Asia will fail.
> To date ,the deflection of the issues that exist outside the U.S
> economy has allowed the other markets to keep up with the U.S market
> gains .
> This irrational focus on the U.S ,has allowed the global speculators
> to keep the dollar under the pressure.
> I am convinced that as the global community begins to comprehend
> the fundamental non- inflationary forces that will maintain economic
> momentum ,the dollar will gain substantially.
> The U.S stock market is not ahead of the curve but behind it.
> Only months ago ,Depression was consensus,instead we are heading
> for unprecedented economic expansion.

Aug 18 02:33 AM

[Plan B Econ...:]

I would say the market is a little expensive on a valuations basis:

www.planbeconomics.com.../

Aug 18 07:24 AM