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Courtesy of David Brown, Chief Market Strategist, Sabrient
The market was not a pretty sight today, but it ended a lot more attractive than at midday when the S&P 500 was down 21 points. In the end, the S&P 500 lost 10.7 points (-0.81%) to close at 1305.44, holding important support at 1300.
Much of the damage was in the Financial Sector, which lost nearly 2% today, as it continued to be pummeled by the bank meltdown in Europe. European sovereign debt populates the balance sheets of major banks, which aren’t required to carry assets as mark-to-market. Instead, assets are valued at what the banks paid for them, not what they’re selling for today. That’s like valuing CSCO at $77, its peak in 2000, rather than the current price of $15.44. So banks have failed stress tests right and left.
Also weighing on the market is our own debt crisis, as our dysfunctional Congress struggles toward the only viable solution, raising the debt ceiling. We remain confident that will happen, but will the market like it? That’s the 64 BILLION dollar question!
Meanwhile, other market forces had little effect today. Oil was up about 0.5%; the dollar down about 0.3%, and the only economic report of interest was the housing market index. Today’s reading of 15 was two points higher than the prior reading but still shows a depressed industry. (We’ll learn more about the housing industry with reports on housing starts/building permits on Tuesday and existing home sales on Wednesday.)
Corporate earnings could have an impact, but so far they’ve done little to help the overall market. Last week Google (GOOG), JP Morgan (JPM), and Citibank (C) handily beat estimates, and each stock got an immediate bounce but only Google held on to it. JPM and Citibank both took it on the chin with today’s bank pummeling. IBM announced today that its earnings increased by 8%, and it raised guidance for the rest of the year. The stock was up almost 2% in after-hours trading. Let’s see if they hang on to it tomorrow.
Not all corporate earnings were stellar. Cubist Pharmaceuticals (CBST) missed its earnings by 190%! (It was expected to make $+0.42 butlost $-0.34). Progressive Corp (PGR) missed its earnings by 10%. CBST dropped 3% today, while PGR dropped…
