Market Recap: Stocks Sputter on Earnings Worries
Profit concerns, weak economic data weigh on equities.
Stocks staged a feeble rally after the release of the minutes from the latest Federal Reserve meeting on interest rates. Although the Fed governors expressed their concern over weakening economic conditions, traders looked for the silver lining. Most expect further rate cuts at the next FOMC meeting -- scheduled for April 30th – while others see the extreme pessimism as a contrarian indicator that the worst is over.
Profit warnings from Advanced Micro Devices (AMD) and Novellus (NVLS) weighed on the technology space. Bad news abroad from GPS-maker Tom Tom pushed shares of fellow gadget-maker-for-the-directionally-challenged Garmin (GRMN) down over 8% to $48.47. Intel (INTC) fell over 3% to $21.08 in sympathy with AMD and Google (GOOG) lost almost 10 points to $467.81. As earnings season rolls on, get prepared with Professor Tatro's earnings season survival guide.
Financial shares didn't fare much better. Washington Mutual (WM), a big winner yesterday after its announcement of a $7 billion share offering, lost ground today, falling almost 11% to $11.71 on weaker than expected earnings. Read banking expert Minyan Peter's analysis of the deal, where he explains why calls for a bottom in financial stocks are premature. Taking the other side, Professor Goepfert explains why the extreme negative sentiment of small-business owners could provide an excellent buying opportunity.
The Amex Broker/Dealer Index (XBD) lost 1.19% and the Philadelphia Banking Index (BKX) fell 2.15% on concerns the weaker economy will delay a turnaround in financial firms' earnings. Despite an upgrade of several financial names from Goldman Sachs (GS), Citibank (C) finished lower by 3.41% to $23.76, Lehman Brothers (LEH) was down 3.61% to $42.99 and Wells Fargo (WFC) closed lower by 2.79% to $29.97. Ironically, Goldman was one of the few bright spots amidst the selling, finishing higher by 0.10% to $178.90, and Wachovia (WB) bucked the trend to close just above unchanged to $27.52.
On the economic front, pending home sales dropped further, registering the lowest reading since the housing downturn began in late 2005. Shares of builders were weaker across the board: Lennar (LEN) down 8.30% to $20.00, Beazer Homes (BZH) off 6.15% to $10.22, Pulte Home (PHM) lost 5.80% to $26.01 and Centex (CTX) dropped 5.05% to $24.99.
Oil prices took a breather, and traders took the opportunity to take some money off the table after crude's recent run up. Oil service names like Schlumberger (SLB) and Baker Hughes (BHI) traded slightly lower on the session.
This morning, The Wall Street Journal ran an interview with Alan Greenspan, who defended his record on monetary policy. Criticism is mounting that his lax policies and weak oversight are partly to blame for the current credit crisis. Greenspan, for his part, says market forces, not policy, are responsible for the shifts in the market that have led to the current situation. In his Five Things You Need to Know, Professor Depew points out that the former Federal Reserve Chairman is now being scrutinized for the very policies he was lauded for during his tenure.
In commodities, crude oil fell 0.32% to 108.74. Gold lost 0.94% to 914.00. Silver closed down 2.32% to 17.90 and copper dropped 2.14% to 390.90.
The dollar index gained 0.11 to 72.28.
For more Buzz insight, check out Minyanville's Buzz Bits.
Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.
Some bullish trade or investment ideas: CDTI, GTLS, LAYN, V, IWM, MSFT, LAYN, FCSX, GFIG, MF, ARAY, GEF, RIMM
Some bearish trade or investment ideas: NDX, ASTI, GRMN, BIO, TM, LEH, SLB, IBM, CIT, LEN, HOG, NCC, COF
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