Indecision has once again raised its ugly head in the markets. Traders appear confused about what to trade on. Do we trade on war news? Do we trade on earnings news? What about the confidence numbers that came out today? Should we worry about the PPI and Retail sales numbers coming this Friday?
Wall Street hates indecision and uncertainty. The normal reaction to this type of environment is to sell first and ask questions later. Fortunately, this is not taking place. The major U.S. indices are trading very close to flat. Meanwhile the major European markets all closed negative but were down between 1.4 and 1.7% each. Is this due to the ongoing speculation of Saddam's health? Or is this concern over the meeting between Russia, France and Germany with U.N. Secretary-General Kofi Annan over the U.N.'s role to play in new Iraq?
If you've been watching market news and not war coverage then you've probably already heard about the string of earnings pre-announcements. Most of them are negative. RFMD and MCHP have hit the semiconductor sector with negative earnings news. ACDO is currently down 43% on the session over its earnings warning. Now that the Q1 earnings season is almost upon us and the war in Iraq appears to be overwhelmingly in favor of the Coalition, investors are left with a sliding domestic economy and no signs of the descent slowing down. It is this rash of negative earnings news and the growing odds that we're about to see more announcements like this that is sabotaging any war rally efforts on hopes that Saddam and his two sons are dead.
Market internals appear to be deteriorating as we head into the last hour of trading. This may be the real clue to investor sentiment. Advancing issues are struggling at 11 to 15 on the NYSE and 13 to 16 on the Nasdaq. Up volume is falling significantly behind down volume on both exchanges. The Dow Jones Industrials average has slipped into the red by a couple of points to just under the 8300 level. Meanwhile the Nasdaq Composite and the S&P 500 are both slightly in the red.
War news is going to continue to hold investor attention but as the likelihood of any true resistance and/or chemical attack fades then Wall Street must look to issues closer to home. That leaves what is likely to be a very poor first quarter and no help in sight for the economy.