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MV Weather Report: Clouds Starting to Gather on Market's Horizon


Rain or shine, we review the day's biggest stock stories.

The most anticipated sell-off ever arrived on Wall Street today. As we mentioned yesterday, the weakness in tech stocks could lead the downside push. Tech was weak again today, with profit-taking occurring in Baidu (BIDU), Apple (AAPL), Research in Motion (RIMM), Amazon (AMZN), and many others.

But the market really didn't start selling off until a poor bond auction hit the Street. The auction was for a $14 billion 30-year Treasury bond; the bid to cover was 2.14. The deal was expected at a yield of 4.190% but it went off higher at 4.288%. The market immediately started selling off on this news as the 30 year drooped to its worst levels since mid-November.

Our newest Minyanville professor, Branden Rife, analyzed the action for Buzz readers.

"30-year paper was trading at 4.19% prior to that auction. That is what's known as a basis point tail... a very fat tail. This was a BAD auction and is a serious SHOT ACROSS THE BOW. The former on the run 30-year paper immediately got crushed, as it should."

Professor Fil Zucchi added more context:

"Not surprisingly, the auction of 30-year Treasuries (USM9) was ugly, to put it mildly. I say "not surprisingly" because the notion that anyone would pay "good" money to buy monopoly bills is inherently silly. I stated before - and I'll repeat it now - that sooner than later, long term interest rates will be in the double digits."

This has been the first poor bond auction for quite some time, and the market didn't like it. This could be a sign of things to come.

After today's sell-off, the big question is: What happens tomorrow?

Tonight we get the official stress-test results - but they've already been leaked, so no real big surprise there. But tomorrow morning, all eyes will be on the important jobs number.
The current estimate for non-farm payrolls is -600,000 and the current unemployment rate is 8.9%.

These past few weeks, every economic datapoint has been better then expected, and I wouldn't be surprised if the same happens tomorrow. The question then becomes: How much of an upside surprise is baked in here?

I don't know the answer to this but I do know that tomorrow will be a very important trading day. If the market likes the number, we could make up today's loses easy, a bad number allow the bears to kick the S&P below 900.

I'm off to rest my back - I pulled a muscle in a pick-up hoops game last night.

Have a great night!
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No positions in stocks mentioned.

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