(This guest post comes courtesy of the author’s site)
Market Update – Stocks are on pace for their largest % decline since Feb 4 (the sp500 dropped 3.1% on that day); as of 12:15pmET, the sp500 is down ~1.7% on the day as of 12:15pmET, near its lows (off ~21 points to 1190). Equities were seeing some selling pressure even before the GS/SEC headlines hit (they started to cross around 10:35amET) as investors took some profits heading into the weekend. As of this morning, the sp500 was on pace for a 7th consecutive week of gains, although as of 12pmET, the index was flattish-to-down small over the last 5 sessions.
The financials are obviously bearing the brunt of the selling pressure today – in light of the big run in the space (the banks especially) and this new (potentially large) overhang from the SEC, investors are viewing the risk/reward as turning in favour of taking profits/shorting the group. The SEC on its 11amET call today discussed how the charges are coming from a brand new unit that is just starting to look at the industry and certain practices over the last few years – this could leave the issue in the headlines for a while. The desk is seeing large selling occurring in the financials – volumes are stepped up w/both larger vanilla MFs and quicker trading HFs selling/shorting the group.
There hasn’t been a ton of interest in stepping in on the long side into the weekend given the uncertainty. The other non-financial sectors are also seeing profit taking, as investors use the GS/SEC headlines as an excuse to take profits, but the selling isn’t nearly as panicked as is occurring in the banks/brokers. Some investors are starting to notice some eerie similarities to the Q4 reporting period back in Jan: recall back then the market peaked on the Thurs of the first week of earnings season. Back then, as now, #s came in great but were met w/selling pressure (GE and BAC, both of which exceeded forecasts, were for sale today even before the SEC headlines). Also recall back in mid-Jan Washington was a headwind (as it is today w/the SEC charges) as it was then that we first started to hear about the White House plan to tax a portion of bank liabilities. The Bottom Line for this tape: stocks have had a big run and are very extended. Earnings so far for this season have been great, but the reporting period has barely begun and the bar has been set very high. The new headline risk w/the SEC charges will weigh on the market’s best acting group, the financials. Technically, Near term trend stays up above 1190, and 1175; the 20day on sp500 MA is 1183
· Equity sectors – Financials are obviously the big story here today and are the weakest sector in the market, plunging over 3.5% on the SEC charge of Goldman Sachs. The news is weighing heavily on regional and investment banks although a lot of insurers are acting fairly well. Materials are the next weakest group as dollar strength slams commodities on the Goldman news. We’re seeing metals get hit hard and many names have fallen nearly 10% or more from their early April highs. Industrials are second worst, down over 2% after GE reported earnings this morning. GE’s number was very strong but investors were a little worried about a -8% order number when the street was looking for flattish. Energy is off around 2% as the group gets hit on the stronger dollar and a sharp slide in crude. Tech is in line with the market, weighted down by GOOG and AMD on earnings last night. Discretionary is mostly in line with the tape on minimal news. Healthcare is outperforming but still off 75 bps, continuing to slide as it has most of this week. Telecoms, utilities, and staples are all outperforming but still lower as investors move into lower risk assets given the uncertainty in the market.
· Commodities: Commodities are trading near their lows (with the exception of natural gas) – falling as Goldman Sachs was charged with fraud [Bloomberg] Oil is trading near is lows just above $83, down ~2.9%. Natural Gas trading near its highs with choppy trading – its near $4.04 up ~1.4%. Copper trading near its lows, down 2.4%. Gold also near its lows around $1133, down 2.4% as well.
· FX: USD (DXY) has posted gains in choppy trading – near $80.73 up ~0.3%. The dollar is trading near its highs vs. the euro/pound/yen, up ~0.75% vs. both. Both the dollar and the euro are trading close to its lows vs. the yen, down ~1.1% and ~1.8% respectively.
· Corp. Credit: Corp Credit is mixed with Financials the worst performing sector in the S&P500 (down ~3.8%) and GS being sued for fraud for CDO’s [Bloomberg] IG 14 have sold off more than HY – IG 14 is out 4 bps while HY 14 has lost ¾ pt – outperforming equities.
· Treasuries: Treasuries have strengthened with the market moving lower – the 2s have rallied to 96bps (the first time they have been under 100bps since 3/23) while the 10s are yielding 3.76% (the first time yields are below 380bps since 3/23) The spread is relatively unchanged from yesterday at 281bps.
· US housing – Construction of new housing units were started in March at an annual rate of 626,000; while this was only a modest 1.6% increase from the prior month, the February level was revised up noticeably from a 575,000 rate to a 616,000 rate. More impressive yet was the 7.5% increase in building permits to 685,000, the highest level since October, 2008. Both single-family permits (up 5.6%) and multi-family permits (up 15.4%) shared in the gain. Feroli.
· Michigan Confidence – came in light at 69.5 vs. the St consensus at 75.
Europe: Europe is weak across the board – indices are mixed relatively to the S&P 500. The Swedish OMX has posted the most modest loss with the Spanish IBEX and the French CAC (amongst others) >2%. Financials driving the losses in both the S&P500 and throughout Europe off the news regarding Goldman Sachs [Bloomberg]
· The SX5E is down >2% while the FTSE is trading a touch higher the S&P500. In addition to Financials – Tech and Basic Materials also weak in the SX5E.
· The Spanish IBEX posting the biggest loss; down >2.3%. Worst performing stocks include: Arcelormittal, Banco Popular and Iberia
· The Swedish OMX outperforming, mostly due to strength in Industrial. Best performing stocks include: Ssndvik, Assa Abloy and Alfa Laval
· Hardware – the group is in the red today although selling not all that intense. AAPL, DELL, EMC, HPQ, IBM are all down (both less than 1%). IBM reports this Mon night and AAPL comes on Tues.
· SOX – the SOX is off ~2.2% today although is still up >3% on the week. The AMD #s are being used as an excuse to take profits – AMD is off ~6% (although hasn’t even broken through its 20day MA). NVDA off 6% after being downgraded at Needham.
· Wireless – the group is getting hit today after Sony-Ericsson’s #s – SE itself had decent op profit #s, but its unit sales fell short (NOK, MOT, RFMD, SWKS are all pretty heavy on the earnings today).
· PALM – the stock is up 2% and outperforming on back of bullish RBC comments
· Internets – GOOG shares are off 6% on the day after earnings last night disappoint (CPCs came in light and expenses ticked up). Other internets getting hit in sympathy. YHOO is off 5% on the day ahead of its earnings on Tues.
· Weakest performing sp500 tech stocks: AMD, NVDA, GOOG, YHOO, MOT, JDSU, WDC, LSI, SNDK, WFR
· Best performing sp500 tech stocks: FLIR, ERTS, INTU, BMC, IBM, MOLX, MSFT
· Brokers – obviously the big story of the day is the GS news – GS is down ~13%+ on the day on back of the SEC headlines. MS is down ~6%.
· Asset managers – the group is off across the board today; not a ton of news, but selling off along w/the broader tape.
· Banks – the group is for sale today. The space was pressured even before the SEC headlines hit but the threat of more lawsuits is weighing on the whole group now. The group isn’t actually much weaker from where it was before the SEC headlines hit (its down, but not to the same % magnitude as GS or some other brokers). The regional banks are off ~4-5% nearly across the board – people aren’t too worried about the SEC headlines as most weren’t major securitizers, but profit taking setting in nonetheless ahead of a very big week of earnings coming up.
· MIs/financial guarantors – seeing some uptick in the guarantor stocks as people view the space as a beneficiary of the fraud charges (w/the thought being that if certain securities are found to have been fraudulently originated, then the space may not be as liable).
· Credit cards – the group is coming for sale today along w/the rest of the financials. COF and AXP are both off ~4% on the day.
· Best performing sp500 financials: AIG is the only major financial in the green today
· Weakest performing sp500 financials: GS, FHN, MCO, HBAN, FITB, MS, STI, MI, KEY, JNS
Business Insider Emails & Alerts
Site highlights each day to your inbox.