Reply #50: 12:08 EST bobbing at the surface [View All]

[UpInArms]

Dow 10,717.92 +0.42 (+0.00%)
Nasdaq 2,206.09 +0.77 (+0.03%)
S&P 500 1,251.13 +2.84 (+0.23%)
10-Yr Bond 4.354 -0.41 (-0.93%)

NYSE Volume 1,056,639,000
Nasdaq Volume 851,967,000

12:00 pm : Despite strong futures indications and an upside start to 2006, the indices took a mid-morning turn south and continue to struggle as afternoon trading gets underway. A pair of lower than expected economic reads helped to dampen the early bullish sentiment, and a 3.5% surge in the price of crude oil futures weighs heavily.

The crude action has incited buying interest across the Energy sector, and its 3.0% gain offers some leadership. Ultimately, though, that sector's support is not enough to counter losses levied by six of the ten economic sectors. With relative weakness in the retail industry, due largely to a pair of sharply declining Dow components, teamed with crude-induced selling pressure, the Discretionary sector (-0.6%) fares worst. General Motors (GM 18.75 -0.67) extends its suffering into the new year after Bank of America cut its target price on the stock. Meanwhile, Wal-Mart (WMT 45.98 -0.82) asserted that December same-store sales should rise 2.2% -- the low end of its previously-forecasted +2-4% range. This has made for some bearish anticipation of this week's stream of same-store sales data that will reflect sales during the industry's most crucial period. WMT's decline has simultaneously taken the Consumer Staples sector (-0.4%) lower. Industrials (-0.7%), facing relative crude-induced weakness in transportation issues, also contributes a weighty decline.

Financial's 0.2% slide, while modest, has lent some muscle to the market's downturn. Investment banks and brokers stand as the sorest spot, despite a somewhat improved Treasury market. Following last week's inversion and long-flattening curve, the spread between the two-year and ten-year notes has slightly steepened. The former presently yields 4.35%, while the latter offers 4.36%. Traders' attention remains focused upon the afternoon release of the minutes from the FOMC's December 13 meeting; the stock and bond markets alike will scrutinize the minutes for insight into just how far away the end of the Fed's current tightening cycle lies, and hope for indication of whether or not rates will be hiked in excess of the two additional times that are widely anticipated. Further to today's economic front, the December ISM Index checked in at a four month low. At the same time, however, the 54.2 read still reflects growth. Construction spending rose a lower than expected 0.2% in November, but that data is essentially "old news" that has a lesser effect on today's trading.

On the other side of the aisle, the Materials (+0.5%), Technology (+0.3%), and Healthcare (+0.2%) sectors contribute some modest gains. With respect to the latter, strength in pharmaceuticals - driven by an analyst upgrade on Johnson & Johnson (JNJ 61.23 +1.13) shares - serves as its best source of support. DJ30 -1.69 NASDAQ -0.25 SP500 +2.76 NASDAQ Dec/Adv/Vol 1764/1188/830.9 mln NYSE Dec/Adv/Vol 1484/1705/734.0 mln