The market saw selling pressure yesterday, but bounced back from early losses to make yesterday a non-event. This morning, however, futures are pointing to a significantly lower open after heavy losses overnight from the European and Asian markets. On the earnings front, Cisco Systems Inc. (CSCO) is down more than 9% in pre-market trading after reporting weak outlook and margins. Yesterday’s House testimony from Ben Bernanke focused more on the lousy pace of the recovery than his continued efforts to boost asset prices, which is also weighing on the market.
The market accelerated out of the already steep uptrend on Tuesday, and it appears many investors are choosing this recent strength as a profit taking opportunity. Many sectors saw selling pressure yesterday, but strong earnings stocks continued to perform well. We have seen a very clear case of ‘haves’ and ‘have nots’ this earnings season, with mediocre reports being scrutinized heavily while good reports have been met with enthusiasm.
For example, in the banking sector, there has been a clear separation between the good and bad-earnings stocks. JP Morgan Chase & Co. (JPM) and Wells Fargo Company (WFC) had strong reports, and continue to hold in upper level consolidations after beating estimates, while the likes of Goldman Sachs Group Inc. (GS), Citigroup Inc. (C) and Bank of America Corp (BAC) are trying to play catch-up out of lower bases following mediocre earnings.
Big cap tech stocks that reported stellar earnings have also separated themselves from the fading pack, highlighted by Baidu.com, Inc (BIDU), Apple Inc. (AAPL) and Netflix, Inc (NFLX), which continue to make new highs. Takeover rumors are swirling around Twitter today, with reports that executives have had discussions about acquiring the quick-fire social networking site for somewhere between $8-10 million.
Active traders will be looking to measure the action today to see whether we get a buyable dip or finally a deeper correction that will allow investors to feel more long-term money to work. After such a strong run in the market over the last five months, and acceleration to the upside this week, it is not surprising or unhealthy to see this corrective type action.
For more individual stock commentary, check out Scott Redler’s daily morning Price Point Sheet.
*DISCLOSURE: Scott is long BAC, GLD; Short SPY, AMZN.
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