I woke up this morning thinking today would probably be a weaker day. I switched on the computer and went to check out the futures, and I could not believe my eyes. The Dow was down 180 points, the Nasdaq was down 30 points, and the S&P was down 22 points. Eeek!
What is with all the downward momentum? It began on Friday with some weak economic data from the Michigan Consumer Sentiment Index and neutral core price indexes. That ignited fears in the Asian markets, who were down more than 3% across all the major Asian indices. One of the catalysts for that sell off and the negative futures was a worse than expected GDP number from Japan. The combination of growing fears about the consumer and GDP began a market plummet. The one interesting aspect to note about the market was it dropped significantly and traded pretty much sideways throughout the day in that very negative zone.
Also adding to the mixture was the closing of Colonial Bank, announced this weekend. The bank’s closing was the sixth largest in the history of the country, and it should be a “gentle” reminder to investors that the financials are not out of the woods just yet. Additionally, the week started off on a poor note for earnings as Lowes Inc. (LOW) reported a 19% drop in profits earning $759 million or 0.51 EPS. That number missed consensus estimates that had placed Lowes’ earnings at 0.54 cents per share. The stock is down 11.50%, and the miss does not bode well for the housing sector.
We will be getting some interesting and important economic data before the market opens. My only concern is that the market’s downward momentum cannot be harnessed unless these numbers are really exceptional. At 8:30 AM we have the NY Empire State Manufacturing Index. The industrial production numbers on Friday were very solid, but the market had already made up its mind and took it lower. The most important indicator is at 9:00 AM, which is the TIC Net Long Term Transactions Index. This index measures the difference in value between US purchases of long-term foreign securities and foreign purchases of US long-term securities. The expectations are for a positive number in favor of US securities by $17.7 billion over foreign securities. Definitely watch out for these tow indicators. They are not market movers, but they could help bring up some of…
