The market has days when nothing seems to work from the long side and today was one of them as stocks were slammed with the S&P 500 shedding 1.1%, the Index's worst one-day performance since March. Concerns over rising interest rates also hit the Dow Jones Industrial Average and the Nasdaq, both of which were down about 1%. The Russell 2000 slid nearly 2%.
Oil was certainly one of the culprits to roil the market today after a 5.5% drop on the back of the U.S. Energy Department report that showed weekly inventory rose to 370.3 million barrels last week, an increase of almost 3.8 million barrels from the prior week. Gasoline inventories surged by 1.28 million barrels to 205.8 million barrels for the first weekly gain in three months. Making matters worse was a halt in gasoline futures trading on the New York Mercantile Exchange after gasoline fell 25 cents, limit down on the NYMEX. Rising inflation and lower-than-expected industrial output data for April also weighed on oil prices today.
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Chinese inflation data was another issue to plague stocks today, particularly materials names. Inflation in the world's fastest growing major economy checked in at 5.3% for April, topping the government's target of 4% for the fourth consecutive month. That data point is concerning enough on its own, but another tidbit may have had more to do with today's sell-off. Chinese industrial output slowed to 13.4% last month, the weakest level since November. A 17.1% expansion in retail sales was below economists' median 17.6% estimate, according to Bloomberg News.
The simple way of looking at the situation is Chinese growth is showing some signs of slowing, but inflation is not and that is a toxic brew for global equity markets.
Weak Chinese economic data sends investors and traders in any number of sectors running for cover, but as I just noted, you can always count on materials names to take it on the chin when China spooks the market. If the Chinese economy is not humming along at the pace investors have become accustomed to, copper usually gets whacked and that was the case day as shares of Freeport McMoRan plunged on volume that was roughly 50% above the daily average. The stock closed below its 200-day moving average.
Good news was obviously hard to come by today, but give Intel (INTC) some credit for finishing with a modest gain on the day. The world's largest semiconductor maker said it is raising its dividend 16%. That is the second dividend hike from Intel in the past six months and the new quarterly dividend will be 21 cents up from 18.1 cents. California-based Intel will spend $4 billion on dividends this year compared with $3.5 billion last year. Dividend hikes sure are more pleasant than margin hikes, aren't they?
In more good news from tech land, shares of Rovi (ROVI), the TV listings data provider, soared almost 18% on volume that was more than six times the daily average after the company boosted its full-year guidance to $2.25-$2.55 a share. Analysts were expecting a profit of $2.38.
I have my doubts that what follows will be a major catalyst for the Dow or the Nasdaq on Thursday, but it certainly was a pleasant surprise compared to what investors have seen out of the company following its few earnings reports. After the bell today, Cisco Systems (CSCO) posted a fiscal third-quarter profit of 42 cents a share on revenue of $10.9 billion. Analysts were expecting a profit of 37 cents on revenue of $10.9 billion, so the top-line number was inline with what Wall Street was looking fir, but meeting estimates is better than disappointing, especially in Cisco's case.
The results also topped guidance Cisco gave in February that forecast a profit of 35-38 cents on revenue of $10.89 billion. CEO John Chambers said on the company's conference call that it plans to save $1 billion through restructuring and a workforce reduction is expected this summer.
''We have acknowledged our challenges. We know what we have to do. We have a clear game plan, and we are a company with a track record of market-shaping innovation. We thank our shareholders, employees, customers and partners as we transition to the next phase of Cisco,'' Chambers said in a statement.
It does not appear that shareholders appreciate the requisite Chambers candor. Cisco's fourth-quarter outlook is tepid at best and the job cuts are not going to do much to generate enthusiasm. As such, shares of Cisco are down 1% in after-hours trading as of this writing.
Another sector where it is hard to find good news these days is the junkyard known as the financials services group. That makes a 3.5% jump for American International Group (AIG) today all the more impressive. Along with its best friend forever, the federal government, AIG will sell 300 million shares to the public, according to a regulatory filling. The company did not specify a price for the offering, but the stock closed over $30 today, so it the share sale would raise over $9 billion.
Taxpayers forked over $182 billion to save AIG from the brink of collapse during the financial crisis and while the stock has plummeted this year, the government still has a profitable trade going. The break-even stock price at which taxpayers would fully recover their investment is considered to be around $27 to $28, the Associated Press reported.
Taking a look at the charts, factor in today's decline and the ''sell in May'' crowd is having their way this month just when it appeared that old market notion would not prove valid this May. The S&P 500 is now down 1.4% for the month, but the 1340 held as support today. The index did violate that level intraday, but was able to muster a close at 1342. On the upside, resistance is 1370 and if 1340 does not hold, second support is further back at 1300.
S&P 500 Chart
Everything was looking like roses for the Dow heading into today as the index was just 116 points off a new two-year high. Make that almost 250 points after today's carnage. Resistance is firm at 12,800 and those that are trading from the long side are hoping the same can be said of support at 12,600. This much is clear: The Dow probably will not move higher if CVX and XOM keep turning in performances similar to today's.
As Jim noted last night, the Nasdaq was a mere point away from a new closing high, but that dream was dashed today. Resistance is still just above 2900 and support can be found in the 2800-2825 area. There were some interesting pockets of strength today in the Nasdaq, including online travel stocks, media technology firms and computer peripherals makers and recent strength from tech names could be suggesting the group is ready to be a market leader should the broader market run higher into year-end.
The Russell 2000 was the leader among the major indexes on the upside yesterday and it was easily the worst performer on the downside today. After failing at the 855-860 resistance area, the Russell came to an almost dead stop today at support at 840. From here, next support is 830.
Russell 2000 Chart
Hmmm, concerns about inflation are rising and risk appetite sure looks like it is declining. Sounds like a good time to take a look at consumer staples names in my opinion. Along those lines, Only four Dow stocks were higher today. Exclude Intel and the other three were staples names, KFT, JNJ and PG. Several big staples stocks were ''less bad'' than the broader market today. There is nothing wrong with playing a little defense from time-to-time.