Option Investor
Market Updates

Better than expected sentiment gave early boost

Printer friendly version

This morning's preliminary University of Michigan consumer sentiment reading for May of 96.0 gave stocks an early boost and was higher than the consensus estimate for 93.0. Stocks jumped higher on the news, but have since settled back near unchanged levels.

The Dow Industrials jumped to a weekly high of 10,352, but have since given back those gains and now trade down 16 points at 10,272. The broader S&P 500 (SPX.X) is holding onto fractional gains at 1,098.53, after a brief surge back above the psychological 1,100 level.

Breadth on the broader scale has the NYSE Composite (NYA.X) 581.87 +0.02% showing decliners outnumbering advancers by a 14 to 13 margin, while the NASDAQ Composite (COMPX) 1,732 +0.04% shows similar action with decliners edging out advancing issues 15 to 14.

A stock to watch

Technology consulting firm Accenture (NYSE:ACN) $20.08 +0.4% announced a 93.5 million share secondary offering of common stock at $20.00, making the deal worth $1.87 billion. Goldman Sachs (NYSE:GS) $80.09 +0.11%, which had been a lead underwriter of the deal, pulled out as lead underwriter, leaving co-lead Morgan Stanley (NYSE:MWD) $50.36 +1.34% as the lead underwriter.

We have seen no news on "why" Goldman Sachs pulled out of the deal, but now have a watchful eye on Accenture (NYSE:ACN). Should the stock discount much below the $19.50, this might have bears looking for some downside on the speculation that Goldman may have pulled out of the deal for some reason or another.

We're also keeping a close eye on Goldman Sachs (NYSE:GS), should their be some developing issue at Goldman that has the firm deciding to pull out of a large offering.

Accenture Ltd. Chart - Daily Interval

Anytime a lead-underwriter pulls out of a deal, it will raise a few eyebrows. A break in ACN below the recent relative lows will most likely have bears showing up with the thought that Goldman may have uncovered something that they didn't like about the deal going forward.

However, it may not just be ACN related. With the SEC looking into recent broker activity, there is the chance that Goldman pulled out of the deal simple to reduce underwriter risk should something be brewing on the Goldman front.

We're never certain what the "reasons" are for pulling out of a lead-underwriter roll, but traders should be alert in both Goldman Sachs (NYSE:GS) and Accenture (NYSE:ACN). I get the feeling "something is going on!"

Jeff Bailey
Senior Market Technician
Option Investor

Intraday Update Archives