Closing Update for Monday, August 31: Trimming August Gains

4:14 PM, Aug 31, 2009 --

• NYSE down 65.8 (0.9%) to 6,643.24.
• DJIA down 47.9 (0.5%) to 9,496.
• S&P 500 down 8.3 (0.8%) to 1,021.
• Nasdaq down 19.7 (0.9%) to 2,009.

GLOBAL SENTIMENT

• Hang Seng down 1.86%
• Nikkei down 0.40%
• FTSE up 0.81%

DOWNSIDE MOVERS

(-,+) INTC lower for most of the day despite analyst raising price target, ekes into the green late.

(-) MS gets analyst downgrade.

(-) C down as Barron's article suggests profit-taking in issue.

(-) AIG down as Barron's says stock looks expensive.

(-) LDK loses early upside after signing pact with Chinese city for PV power projects.

(-) JCI loses upside from Barron's story saying stock may gain on continued demand for energy-efficient cars.

(-) CMCSA court rejects limit on market share for cable companies.

(-) EXPD no help from favorable Barron's coverage.

(-) ATVI no help from favorable Barron's coverage.

UPSIDE MOVERS

(+) TSRA remains lower after reports late Friday said company lost ruling.

(+) MDCO gains on data showing Angiomax reduces cardiac mortality.

(+) MESA gained amid reported challenge to Delta's dropped contract.

(+) BBI sells Irish retailer.

(+) PACR gets amended credit pact.

(+) SVA says H1N1 vaccine passes expert evaluation.

(+) ETFC gains after Citadel scraps share sale.

(+) AZN presents positive late results in coronary study PLATO.

(+) GME gets analyst upgrade.

(+) BJS sold to Baker Hughes.

(+) DCTH gets FDA orphan drug status for Doxorubicin.

MARKET DIRECTION

The major averages close down by less than 1%, clawing back from deeper losses earlier in the session. The DJIA will close August up 3.5% for the month, while the S&P 500 gains 3.4% and the Nasdaq Composite is up 1.5%.

Stocks fell as investors bail on financial stocks on advice from Barron's and weakness in Chinese markets trigger concern about the ability of the global economy to recover from the recession. Energy and consumer-discretionary stocks are leading on the downside.

Today's sell-off began with a sharp drop in Chinese equities and falling commodity prices on concerns that asset prices have outpaced economic realities. The Shanghai Composite Index fell to a three-month closing low and recorded its second-biggest monthly loss in 15 years.

Markets got little support from a regional survey, the Chicago PMI, which came in at 50%, topping the consensus call for 47.0% and July's 43.4% reading. It was the strongest gain since September.

Semiconductor sales tumbled 18% in July, but the fall-off continued to moderate, topping June's sales by 5% and beating the year-over-year average decline of 25%, according to the Semiconductor Industry Association, a trade group. Nonetheless, the sector is trading lower across the board.

A measure of investor sentiment has dropped significantly. The AAII survey, which measures the percentage of individual investors who are bullish, bearish and neutral on the stock market over the coming six months, last week saw bullish sentiment falling to 34%, beneath the long-term average of 38.9%; neutral sentiment dropping to 17.5%, below the long-term average of 31.1%; and bearish sentiment climbing to 48.5%, above the long-term average of 30%. Just two weeks earlier, bullish sentiment stood at 51%; neutral sentiment registered at 16% and bearish sentiment came in at 33%.

Mergers did lend some support to the broader market.

Oilfield service company Baker Hughes Inc (BHI) said it will buy smaller competitor BJ Services Co (BJS) for $5.5 billion in stock and cash.

The Walt Disney Co. (DIS) is acquiring Marvel Entertainment Inc. (MVL) for $4 billion in cash and stock, bringing characters like Iron Man and Spider-Man into the family of Mickey Mouse and WALL-E. Disney will get the rights to 5,000 Marvel characters.

Chemical company Huntsman (HUN) has offered to pay about $415 million for Tronox Inc.'s titanium dioxide and electrolytics businesses in a deal that would make Huntsman the world's second-biggest maker of a whitener used in products as diverse as food, plastics and paint. Tronox is in bankruptcy.

Crude oil fell 3.8% to close regular trading at $69.96 a barrel. It's the first close below $70 in two weeks.

Comments

[REXMOND:]

CPRX just went up 200%
Did any of the experts notice it?

Aug 31 05:16 PM

[Mark Bern:]

While fundamentals do not support even the levels we are current at, it is likely that GS and da boyz (with Fed help) could take the market higher after a small correction. They may let it drift lower by 5% - 10% and then prop it back up for a final run before any external catalyst can bring the market down (like the Sept. 21 deadline on Iran or an outbreak of swine flu H1N1 virus in the schools).

As long as there is no real outside interference those guys have the money to keep things rolling, at least in the short-term. In the intermediate-to-long-t... I would be surprised if we don't retest the March lows a part of the process of building a base from which a "real" bull market can rise from the ashes of our economy. But I won't be holding my breath waiting for the economy to find the robust growth currently built into the market.

Aug 31 05:52 PM

[Bill L.:]

Mark, I completely agree. I tend to look and more technicals, but I think they support your argument. You can see momentum and breadth indicators starting to show underlying weakness in the market, not confirming the new recent highs. Furthermore, when these signals occur along side with the extreme levels of optimism we are now experiencing... history shows us that this is a very dangerous time to be owning stocks.

Aug 31 06:15 PM

[Greyowl:]

I recently sold my stocks when the sentiment on SA turned more bullish than bearish.

Now it looks it turned bearish ... as it was in March, April, May and most of the summer when the market was going up.

I guess I need to start going long again. ;-)

Aug 31 06:49 PM

[rick12345:]

The PMI measures managers' (decision makers) investment activity re new money that was invested into the ongoing production process over the last month, an essential part of running a manufacturing business. A reading of 50 or higher indicates growth, while a figure below 49 is representative of a contraction. It doesn't matter how much lipstick you bears claim we bulls are applying to this pig, the fact remains that the figure has jumped from 43 in July to 50 in August. If this isn't a sign that more money has been invested into the economy during August, then I don't know what is? Overnight, we saw a dire (not) announcement that unemployment accross the Euro area rose by 0.1%. Again, unemployment being a lagging factor I would not expect anything less. I stil believe that people are more willing to discount positive news depending on their investment strategy, and unfortunately this will hold markets back in the meantime.

Sep 01 07:01 AM