Equities Update: Last-Hour Reversal

4:18 PM, Oct 21, 2009 --

• NYSE down 51.1 (0.7%) to 7,107.21.
• DJIA down 92 (0.9%) to 9,949.
• S&P 500 down 9.7 (0.9%) to 1,096.30.
• Nasdaq down 12 (0.6%) to 2,151.

GLOBAL SENTIMENT

• Hang Seng down 0.30%
• Nikkei down 0.03%
• FTSE up 0.28%

DOWNSIDE MOVERS

(-) WFC lower despite earnings beat.

(-) AGEN announces negative vote on Oncophage marketing application.

(-) BA misses with revenue, warns for FY results.

(-) PLCM beats with results, guides for Q4 sales to beat.

(-) MO lower despite Q3 beat.

(-) LLY beats with results and lifts guidance.

UPSIDE MOVERS

(+) KEY loss widens, but capital-ratio improving.

(+) YHOO earnings improve on cost-cutting.

(+) MS tops with Q3 results.

(+) APCVZ gets FDA OK to market Chlorothiazide.

(+) NVAX secures collaboration for H1N1 vaccine.

(+) CRXX reports positive results for Synavive.

(+) USB tops with Q3 earnings.

(+) SLM seeing continued upside reaction to improved earnings out late Tuesday.

MARKET DIRECTION

Stock averages end in the red, as a late-day reversal capped a volatile session. Some support was found in banking and tech earnings, commodity gains and in the generally improved tone found in the Fed's Beige Book report. Wal-Mart's (WMT) decline, which followed price cuts, tugged on the blue-chip DJIA.

Stocks did chop around near mid-day as well. Volatile trading is a reflection of shaken confidence that stocks can continue to sretch 2009 highs without something of a correction.

Stocks overcame early weakness as Wall Street chose to focus on upbeat bank and tech earnings amid a mixed batch of quarterly results overall. Airlines were among the issues to decline after their results.

Stocks maintained their upward tilt after the release of the Federal Reserve's Beige Book report, offering anecdotal evidence of economic improvement from around the country.

"Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered," the Fed report said.

Yahoo (YHOO) provided a lift after it beat the Street's profit and sales expectations, thanks to months of cost-cutting and restructuring and an uptick in Q3 advertising.

Also in the tech space, SanDisk (SNDK) jumped after the chip maker's results came in above Wall Street's forecasts.

In the financial sector, Morgan Stanley (MS) reported net income for common shareholders of $498 million, or 38 cents a share. Analysts on average had forecast 27 cents a share, according to Thomson Reuters. Morgan Stanley shares were up more than 6% at mid-day. Wells Fargo (WFC), among volume leaders, reported a Q3 profit of $2.64 billion, or 56 cents per share, after paying preferred dividends, up from $1.64 billion, or 49 cents per share, a year ago. Analysts, on average, were expecting earnings of 37 cents per share.

Cadbury (CBY) beat sales forecasts and raised targets, lifting shares and pressure on suitor Kraft (KFT) to come up with a bigger bid to win its takeover battle.

Boeing (BA), a Dow component, limited upside for the industrials average. The company reported hefty Q3 losses on charges, totaling $3.62 billion, which led the company to cut its 2009 profit forecast to $1.35 to $1.55 per share, down from $4.70 to $5 per share. Analysts had predicted $1.53.

Crude oil futures finish at a one-year high above $81 a barrel. The dollar returned to 14-month lows. Gold closed higher, at $1,064.50 an ounce.

Crude oil reversed a slight loss in early trading after the government reported a smaller-than-expected build in U.S. crude inventories last week in the face of falling imports.

Crude inventories rose 1.3 million barrels in the week ended Oct. 16, the Energy Information Administration reported. Analysts surveyed by Platts had expected an increase of 2.2 million barrels. The EIA also reported that petroleum demand remained weak, with gasoline demand falling to the lowest level in more than five months.

Comments

[bottoms-up:]

People who are jumping into the equity markets right now are are called Jim Kramer or idiots.

This is nothing but a government-sponsored casino where the house will always win, and by house I don't mean the investors or taxpayers for that matter.

Tomorrow could see a rally of 150 points or a drop of the same or more and none of this has anything to do with market or company fundamentals. If it did, we would have seen the Dow drop to 5,000 and then a slow, but sure recovery over a few years, but this has been nothing but government shilling and insider trading.

Look at the volume on up days, vis-a-vis down days... None of this is indicative of a healthy market situation.

Oct 21 05:11 PM

[Gary A:]

People better take note of lack of end demand. Even Maria Bartiromo, a Wall Street insider has her doubts about end consumer demand. In the world, the engine of real growth is the US consumer. Once he is cautious, where will the growth come from?

Oct 21 05:43 PM

[Bill L.:]

docs.google.com/View?i...

Look out... I think this says it all.

Oct 21 05:48 PM

[robert.b.fe...:]

Just another day at the office for Da Boyz taking money off the table. Light volume pump and dump. I'm still cautious here but up about 40% since March. Keep your eyes open there is money to be made but make sure your gains are protected as best you can. Keep your traveling stops tight and your powder dry there will be opportunities on the pull back.

Oct 21 06:55 PM

[tripleblack:]

I agree. Stops cocked and loaded, though I'm mostly in commodities and cash now, a few mines and mineral plays.


On Oct 21 06:55 PM robert.b.ferguson wrote:

> Just another day at the office for Da Boyz taking money off the table.
> Light volume pump and dump. I'm still cautious here but up about
> 40% since March. Keep your eyes open there is money to be made but
> make sure your gains are protected as best you can. Keep your traveling
> stops tight and your powder dry there will be opportunities on the
> pull back.

Oct 21 07:14 PM

[Peter Mycro...:]

The drop today was pure market manipulation. Downgrading a stock to a sell after it beats its earnings estimates by +74% is insane in my book. I just wish traders would take the time to think and actually do some analysis before they dump their holdings in the last 20 minutes before the close, based on one analyst's opinion. Unfortunately those traders sell first and ask questions later. How is the average investor supposed to learn how to invest for the long term in quality companies when these so called professionals sell off a market 120 points in just 20 minutes. What a shame.

Oct 21 09:35 PM

[robert.b.fe...:]

Are you on tickerspy.com ? Go to that site and look at the portfolio VEGAS. That is not a complete representaion as they don't track bonds and funds; but it's still fun and educational to look at what others are doing graphicaly.


On Oct 21 07:14 PM tripleblack wrote:

> I agree. Stops cocked and loaded, though I'm mostly in commodities
> and cash now, a few mines and mineral plays.

Oct 21 10:25 PM

[untrusting ...:]

Yes, but they have been doing exactly the same thing on the upside for many months now. How do you think the market rose almost every day since Mar/09? If you check you would see exactly the same type of spike-up action at the end of the day at least 30-40 times since March. If they had not done this the market would long ago have corrected downwards. They have artifically prevented the market from correcting downwards for the vast majority of this artifical recovery rally.

One should watch the market very very closely for the next few days and perhaps all of next week. If one sees similar spike-downs over this time, then one can probably assume that the big boys (GS, JPM, HFT) have sold out at the top and probably are setting up large short positions. After all how are the big boys gonna keep paying themselves billions in bonuses trying to force the markets higher at these hughly overvalued levels. It sure would be a lot easier for them to short, as short postions have hughly declined, and run the market down now. They would make a lot of very easy money in a real hurry and be able to rebuild their inventory of stock again at much cheaper prices.

As many has pointed out there is very very little real money going into the US stock market. As Bob Pisciani, CNBC and on the floor pointed out today the flow of money in mutual funds the last 5 weeks was: US stocks=OUTFLOW of $18.1 billion, Global stock=inflow of $1.9 billion, Bonds=inflow of $70.7 billion

There are simply no REAL BUYERS of US equities. In fact real buyers are really selling and pulling money out. So are almost all corporate insiders selling as fast as they can. Da big boys maybe have finally figured out that they are just selling to themselves and the game is up in terms of trying to reflate the market higher.

Further Morningstar published a report a few days ago showing exactly the same things. They said that since Jan/09 the net inflows into US stocks= about $15 billion, whereas the net inflows into Bonds=about $250 billion.

It is obvious, at least to us anyway, that the market has been manipulated for a long long time now. It's just that they (Fed,Treasury, GS, JPM, HFT, etc) have been manipulating it up. At some point it will stop. Who knows when, but maybe just maybe today was the start of the manipulation down.

Just no way to know except to observe the price action. But our guess is it will move down as that likely will make GS, JPM and da boys a lot more money from now to Dec.31 which all that matter to them. Got to lock in them multi-billion dollar bonuses by year-end.

Another key factor may the US dollar. It is reaching pretty low levels and lots of complaints starting to emerge from the other countries about it. Minor interventions by Asian countries last week to slow the dollar fall. Crashing the market would substantially raise the dollar in the ST, and alleviate some of those complaints. There are tons and tons and tons of US dollar shorts to take out and make a bunch of money from by forcing them to cover. Reports say 97% of the market is short the US dollar. If Fed, Treasury, GS, JPM, etc have been building large long US dollar positions, they can literally make a fortune by forcing short covering and driving the US dollar back up some. And you know what GS, JPM and da boys want, easy money. They just may have the massive resources to do it and if they can they will, assuming they have the Fed and Treasury backing which they probably do.

On Oct 21 09:35 PM Mycroft Research wrote:

> The drop today was pure market manipulation. Downgrading a stock
> to a sell after it beats its earnings estimates by +74% is insane
> in my book. I just wish traders would take the time to think and
> actually do some analysis before they dump their holdings in the
> last 20 minutes before the close, based on one analyst's opinion.
> Unfortunately those traders sell first and ask questions later. How
> is the average investor supposed to learn how to invest for the long
> term in quality companies when these so called professionals sell
> off a market 120 points in just 20 minutes. What a shame.

Oct 21 10:59 PM

[How so?:]

I'm a non believe in this rally and have been unsuccessfully short for several months now. However what is your option on the theory that foreign investor are still buy stocks for cheap do to the deflated USD?
For example if the currency you're investing with were the Euro and you now buy stocks traded in USD (ie DJIA) you win automatically (making +17.2% on the currency exchange (Euro) alone in the last 3 months) since the dollar has and seemingly will continue to decline therefore mitigating risk for those investors. The market can bounce pretty far down before those investor are loosing $$. Yes or No, I'm unclear?
Thanks


On Oct 21 10:59 PM untrusting investor wrote:

> Yes, but they have been doing exactly the same thing on the upside
> for many months now. How do you think the market rose almost every
> day since Mar/09? If you check you would see exactly the same type
> of spike-up action at the end of the day at least 30-40 times since
> March. If they had not done this the market would long ago have corrected
> downwards. They have artifically prevented the market from correcting
> downwards for the vast majority of this artifical recovery rally.
>
>
> One should watch the market very very closely for the next few days
> and perhaps all of next week. If one sees similar spike-downs over
> this time, then one can probably assume that the big boys (GS, JPM,
> HFT) have sold out at the top and probably are setting up large short
> positions. After all how are the big boys gonna keep paying themselves
> billions in bonuses trying to force the markets higher at these hughly
> overvalued levels. It sure would be a lot easier for them to short,
> as short postions have hughly declined, and run the market down now.
> They would make a lot of very easy money in a real hurry and be able
> to rebuild their inventory of stock again at much cheaper prices.
>
>
> As many has pointed out there is very very little real money going
> into the US stock market. As Bob Pisciani, CNBC and on the floor
> pointed out today the flow of money in mutual funds the last 5 weeks
> was: US stocks=OUTFLOW of $18.1 billion, Global stock=inflow of $1.9
> billion, Bonds=inflow of $70.7 billion
>
> There are simply no REAL BUYERS of US equities. In fact real buyers
> are really selling and pulling money out. So are almost all corporate
> insiders selling as fast as they can. Da big boys maybe have finally
> figured out that they are just selling to themselves and the game
> is up in terms of trying to reflate the market higher.
>
> Further Morningstar published a report a few days ago showing exactly
> the same things. They said that since Jan/09 the net inflows into
> US stocks= about $15 billion, whereas the net inflows into Bonds=about
> $250 billion.
>
> It is obvious, at least to us anyway, that the market has been manipulated
> for a long long time now. It's just that they (Fed,Treasury, GS,
> JPM, HFT, etc) have been manipulating it up. At some point it will
> stop. Who knows when, but maybe just maybe today was the start of
> the manipulation down.
>
> Just no way to know except to observe the price action. But our guess
> is it will move down as that likely will make GS, JPM and da boys
> a lot more money from now to Dec.31 which all that matter to them.
> Got to lock in them multi-billion dollar bonuses by year-end.
>
> Another key factor may the US dollar. It is reaching pretty low levels
> and lots of complaints starting to emerge from the other countries
> about it. Minor interventions by Asian countries last week to slow
> the dollar fall. Crashing the market would substantially raise the
> dollar in the ST, and alleviate some of those complaints. There are
> tons and tons and tons of US dollar shorts to take out and make a
> bunch of money from by forcing them to cover. Reports say 97% of
> the market is short the US dollar. If Fed, Treasury, GS, JPM, etc
> have been building large long US dollar positions, they can literally
> make a fortune by forcing short covering and driving the US dollar
> back up some. And you know what GS, JPM and da boys want, easy money.
> They just may have the massive resources to do it and if they can
> they will, assuming they have the Fed and Treasury backing which
> they probably do.
>
> On Oct 21 09:35 PM Mycroft Research wrote:

Oct 22 02:40 AM

[Albertarocks:]

untrusting investor wrote the lengthy post below. Let's all read it together and give it a friendly, constructive critique, shall we!


On Oct 21 10:59 PM untrusting investor wrote:

> Yes, but they have been doing exactly the same thing on the upside for many months now. How do you think the market rose almost every day since Mar/09? If you check you would see exactly the same type of spike-up action at the end of the day at least 30-40 times since March. If they had not done this the market would long ago have corrected downwards. They have artifically prevented the market from correcting downwards for the vast majority of this artifical recovery rally.<

I was going to argue with that, but I can't see anything wrong with it. It's all true. Ok then, let's rip this next paragraph apart and correct all the errors.


> One should watch the market very very closely for the next few days and perhaps all of next week. If one sees similar spike-downs over this time, then one can probably assume that the big boys (GS, JPM, HFT) have sold out at the top and probably are setting up large short positions. After all how are the big boys gonna keep paying themselves billions in bonuses trying to force the markets higher at these hughly overvalued levels. It sure would be a lot easier for them to short, as short postions have hughly declined, and run the market down now. They would make a lot of very easy money in a real hurry and be able to rebuild their inventory of stock again at much cheaper prices.<

Hmmmm..... this makes good sense. Damn... we'll have to find something wrong with this next argument. Surely this guy... untrusting investor, doesn't know everything.


> As many has pointed out there is very very little real money going into the US stock market. As Bob Pisciani, CNBC and on the floor pointed out today the flow of money in mutual funds the last 5 weeks was: US stocks=OUTFLOW of $18.1 billion, Global stock=inflow of $1.9 billion, Bonds=inflow of $70.7 billion<

Wow... that is a bid deal. No problems with those points above. And besides, Bob Pizani's an ok guy.


> There are simply no REAL BUYERS of US equities. In fact real buyers are really selling and pulling money out. So are almost all corporate insiders selling as fast as they can. Da big boys maybe have finally figured out that they are just selling to themselves and the game is up in terms of trying to reflate the market higher.<

What? that's what I've been saying all along.


> Further Morningstar published a report a few days ago showing exactly the same things. They said that since Jan/09 the net inflows into US stocks= about $15 billion, whereas the net inflows into Bonds=about $250 billion.<

Geez... I didn't know that! Wow!


> It is obvious, at least to us anyway, that the market has been manipulated for a long long time now. It's just that they (Fed,Treasury, GS, JPM, HFT, etc) have been manipulating it up. At some point it will stop. Who knows when, but maybe just maybe today was the start of the manipulation down.<

When was the last time we saw a killer drop in the last 30 minutes? I believe it was in February. I think this guy may be onto something here.


> Just no way to know except to observe the price action. But our guess is it will move down as that likely will make GS, JPM and da boys a lot more money from now to Dec.31 which all that matter to them. Got to lock in them multi-billion dollar bonuses by year-end.<

That makes too much good sense to argue with.


> Another key factor may the US dollar. It is reaching pretty low levels and lots of complaints starting to emerge from the other countries about it. Minor interventions by Asian countries last week to slow the dollar fall. Crashing the market would substantially raise the dollar in the ST, and alleviate some of those complaints. There are tons and tons and tons of US dollar shorts to take out and make a bunch of money from by forcing them to cover. Reports say 97% of the market is short the US dollar. If Fed, Treasury, GS, JPM, etc have been building large long US dollar positions, they can literally make a fortune by forcing short covering and driving the US dollar back up some. And you know what GS, JPM and da boys want, easy money. They just may have the massive resources to do it and if they can they will, assuming they have the Fed and Treasury backing which they probably do.<

I didn't understand the first sentence. That's the only sentence I didn't understand. Every other sentence made perfect sense.


There, we've criticized this guy's post and I've come to the conclusion he's bang on the money on all counts. In fact, this is such a good read on what's really been going on that we needed to read it again anyway folks.

Oct 22 03:13 AM

[H. T. Love:]

Well, I have no choice but to agree. Because I took a dare and positied similar in this comment back on Aug. 1.

seekingalpha.com/artic...

I'm not patting myself on the back, I'm *suggesting* that if I could make this call, there was a lot of common knowledge around that, when connected, leads one to this conclusion.

In the link above, there's some follow-on with Dialectical Materialist.

HardToLove


On Oct 22 03:13 AM Albertarocks wrote here:
seekingalpha.com/artic...

Oct 22 08:06 AM

[Albertarocks:]

That was too funny... "Karl was too smart to try to answer that question and since you're not quite as smart, you'd take a crack at it". Too funny.

No doubt about it, you catch on quick. Believe me I don't know much more than you do, but I'm kind of a sponge... just soakin' it up as I slide along the floor.

Man, the European markets are down hard... about 1.3% across the board.

Oct 22 08:15 AM

[Philly Jim:]

How much longer till those forex reserves are all burned up back East? It's very fragile out there and exporters are flipping out every time the dollar falls, because they know the domestic consumption scheme in developing nations may not work.

On Oct 21 05:43 PM Gary A wrote:

> People better take note of lack of end demand. Even Maria Bartiromo,
> a Wall Street insider has her doubts about end consumer demand. In
> the world, the engine of real growth is the US consumer. Once he
> is cautious, where will the growth come from?

Oct 22 09:33 AM