What KO'd Wall Street?
by Peter Switzer
When my charts guy Lance Lai rang me on Friday afternoon and told me the technicals were not looking good, he was hoping I would have a fundamental story that could raise his hopes that the charts might get it wrong.
My reply was simple — GE and the banks had to report better than expected, like Alcoa and Intel earlier in the week, and consumer sentiment had to be not a disaster.
Well, in case you missed it, the Dow dropped 261.41 points to 10,097.9 — that’s 2.52 per cent — and the S&P 500 lost 31.6 points or 2.88 per cent to 1064.88.
So, in summary, it was a bad day at the office on Wall Street with both the company reports and consumer sentiment disappointing investors.
For the week, stocks lost around one per cent after registering seven sessions in a row in the black. As we kick off the week, the only way we can turn to the positive will be for corporate earnings and the European bank stress tests to be better than expected so they can outweigh the negative economic data which is likely to be presented.
The doomsday merchants say this slower data reflects a double dip recession is on the way, while others, such as me, argue that this is an economic slowdown, not another recession in the making.
One good reading from Friday was the VIX or the fear index, which ended up at 26.36. If it broke 30, I would have been a little more concerned but we are in tricky waters this week.
- Consumer sentiment slipped to its lowest level in close on a year. We saw nearly a10-point drop to 66.5 but the previous month’s reading hit a 30-month high.
- The Bank of America dropped a big nine per cent after beating expectations but not showing good revenue growth. Citigroup was in the same boat!
- JPMorgan Chase cut its forecast for US GDP growth from 3.6 to 2.6 per cent.
And these follow a poor week for economic data with the Philly Fed and Empire State Manufacturing reports coming in worse-than-expected.
On the good side, BlackRock vice chairman Robert Doll, a guy who picked the stock market rebound in March 2009, is in the slow-down camp and argues the US will dodge the double dip.
Over 125 S&P 500 companies report earnings this week and 11 of the 30 stocks in the Dow Jones index.
Let’s hope Europe’s bank and the Yank’s companies’ profits can swamp the likelihood of softer economic data as the US goes through this soft patch.
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Published on: Monday, July 19, 2010blog comments powered by Disqus