This morning's release of January wholesale inventories gave a lift to the major indexes, which has now faded after Department of Commerce reported that January wholesale inventories fell 0.2%, which was below economists forecast for a 0.2% gain.
I looked at the report http://www.census.gov/svsd/www/mwts0301.html , which showed a 1% jump in January sales, which left the inventory to sales ratio back down at the record low of 1.21 found in November. While the rise in sales gives the impression that inventory drawdowns are being seen as a result of demand, as the morning session has progressed, the major indexes have faltered.
The first sign of weakness that I've noted in this morning's market monitor was our closely watched and previously discussed S&P Banks Index (BIX.X) 259.58 -1.03%, which when the major indexes looked to build gains to their best levels of the session, the BIX.X was finding resistance at its WEEKLY S1 level, which was broken and closed below yesterday. As previously noted, the BIX.X has been a relatively "strong" sector and yesteray's weakness was viewed as bearish for both the S&P 500 Index (SPX.X) 805 -0.27% and S&P 100 Index (OEX.X) 409 -0.11% as banks and financials make up a rather large weighting in both of the major market indexes.
The AMEX Airline Index (XAL.X) 26.36 -8.6% is getting pounded lower this morning and rapidly approaching a destination called a 52-week low found back near its October 10 lows of 26.12 after Delta Air Lines (NYSE:DAL) $6.96 -19.6% said it sees negative cash flows for its March quarter, which is below previous guidance of slightly positive. The commercial airline carrier said it blames soft traffic and bookings from a concern over potential military action.
Bond bulls are back at it again this morning with buying with some marginal buying in the longer-dated maturities. The march 10-year futures contract (ty03h) $117'265 +0.01% just edged to a contract high at $117'29 and that has had the benchmark bond's YIELD ($TNX.X) trading a multi-decade low of 3.549%, which came after this morning's somewhat upbeat January wholesale inventory data.
A quick look at the June Fed Funds futures (ff03m) 98.99 now has traders looking for a 100% chance of a Fed rate cut between now and June. Next Tuesday, the FOMC meets and will make a decision in its Fed funds rate, which currently stands at 1.25%.
Shares of reinsurer Unumprovident (NYSE:UNM) $6.36 -20% are under heavy selling pressure again today. Late yesterday, the company responded to a report by Moody's indicating that Moody's could downgrade the company's credit rating. UNM said that it will continue to work with Moody's through the review process to attempt to address their issues and concerns. In a late morning call, Morgan Stanley believes stock price reaction to Moody's placing the company on negative watch is overdone and believes that while the firm is reducing its 2003 earnings estimates to $2.05 from $2.25 and 2004 estimates to $2.10 from $2.40 to reflect additional dilution, the firm still believes UNM shares could achieve $17.00 as a bullish target.
As mentioned in this morning's market monitor, UNM's point and figure chart has been bearish, and vertical count is $0.00.
Yesterday, Warren Buffett mentioned in a letter to Berkshire Hathaway shareholders that he was extremely negative on practices at his General Re unit and stated that General Re had accumulated an aggregation of risks that would have been fatal if terrorists had detonated several large-scale nuclear bombs in the U.S., and that the World Trade Center attack alone would have threatened its existence if General Re had remained independent. Mr. Buffett also disclosed that one of the world's largest reinsurers had "all but ceased paying claims, including those both valid and due." Buffett said this co "owes many billions of dollars to hundreds of primary insurers who now face massive write-offs."