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Stocks turn lower on news out of Iraq

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Stocks have turned lower this afternoon on renewed war fears after Iraq announced it was expelling all foreign journalists, with a deadline of next week.

That news saw many of the major indexes falling from unchanged levels to have the Dow Industrials falling 145 points (-1.8%), S&P 500 shedding 10 points (-1.25%), NASDAQ-100 declining 15 points (-1.5%), the broader NASDAQ Composite dropping 15 points (-1.05%) and smaller cap Russell 2000 shedding 1.8 points (-0.49%).

A quick look at the Defense Index (DFX.X) 160.80 -1.22% shows a decline, and has actually found selling after the Iraq news. This action hints that the markets may be experiencing a knee- jerk reaction to the news.

However, the action in Treasuries has been positive with prices rising among the 5, 10 and 30-year Treasury futures. The belly of the curve has the 10-year Treasury futures (ty02z) 112'235 +0.54% showing gains while YIELD ($TYX.X) falls rather sharp to 4.14%.

Volume has picked up with NYSE volume now approaching the 1.3 billion mark, while NASDAQ volume is heavier at 1.57 billion.

Breadth has turned marginally negative with decliners outnumbering advancers by a 17 to 14 margin at the NYSE, while NASDAQ breadth is slightly bearish at 16 to 15.

After posting double-digit percentage gains earlier in the session, some of the telecom equipment areas have given back some of those gains, but still trade in positive territory. The Networking Index (NWX.X) 107.49 +6.95% is currently leading sector gainers, with Wireless Services (YLS.X) 43.19 +6.72% and Fiber Optice (FOP.X) 33.98 +5.6% close behind.

The bulk of sectors we also monitor have turned red, with the HMO Index (HMO.X) 578 -3% still being today's weakest sector, while the energy sectors, much like defense still trade with losses. The Oil Index (OIX.X) 259 -2.13%, Oil Service (OSX.X) 82.94 -2.5% show losses, while the Natural Gas Index (XNG.X) 128.82 traded unchanged.

The sector action in the DFX and OIX.X hint that the news out of Iraq has perhaps triggered some profit taking and perhaps brought in some speculative bears. However, the lack of bullishness found in the OIX.X doesn't seem to have "Iraq War" bulls making a move at this point.

A quick look at the futures market has December Light, Sweet Crude (cl02z) $28.16 -0.14% trading marginally lower, with little indication of a bullish reaction to this afternoon's news from Iraq.

Jeff Bailey

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