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Following a Disappointing Session


There was only one word to describe yesterday.


Word of the Day: dis•ap•point•ment –noun

  • The act or fact of disappointing: All of his efforts only led to the disappointment of his supporters.

  • The state or feeling of being disappointed: Her disappointment was very great when she didn't get the job.

  • A person or thing that disappoints: The play was a disappointment.

  • Any session in the stock market when the Dow surges out of the gate more than 200-points but finishes at a loss for the day: It was a disappointment when I didn't take profits and returned from lunch and saw my gains had turned into losses.

And so it was that the market let investors down just at the point where many of them were poised to take a close look. Then again another way to look at the session: maybe investors let the market down by not taking the bait and rallying on news that was obviously great. Then again, maybe the same forces that are now considered primary drivers in sending oil lower, falling demand and slower economies, are having a deleterious affect on equities, too. No matter what angle investors and interest observers take on yesterday's session there is only one word that sums up the mood at the close: disappointment.

Now what?

The plot thickens today as investors will grapple with important/influential earnings reports and updates on auto and truck sales. In addition pundits expect factory orders to tumble. Then the session ends with investors analyzing the Fed's Beige Book.

Without doubt there is a ton of anxiety today even though yesterday's session saw volume that barely edged above 2.0 billion shares. In addition to those earnings reports mentioned above, the Street may be energized by news on Ambac Financial (ABK). After the close, the second biggest bond insurer received approval from the Wisconsin Insurance Commissioner allowing the company to establish Connie Lee as a separate entity. The new entity will receive $850 million and hopefully a AAA rating to begin insuring municipal bonds.

Antithesis Play

The antithesis of commodities could be the play of the week as companies that have suffered from higher input costs did pretty well yesterday. Newell Rubbermaid (NWL) was one that really stood out from the crowd with a strong session on huge volume.

The most obvious industry beneficiaries from falling crude oil are the airlines. The AMEX Airline Index (XAL) put in a fantastic session but didn't get above the key resistance point of 28, established just a couple of weeks ago and back in March and April. At some point I believe airlines will trade on fundamentals beyond crude oil and that will be a good thing as they have done an effective job culling capacity and raising prices (although the ham fisted shakedowns at the ticket counter hark back to Al Capone and leave a lot to be desired).

Click to enlarge

So stocks that are the opposite of commodities came to life yesterday, but what happens if commodities rebound? Let's face it, equities should have been a lot higher so if the economic backdrop changes it could be tough sledding.

No positions in stocks mentioned.
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