Well, that headline could probably have been applied to any number of days over the past 18-24 months and the number is either too high to count or too frustrating to mention, so that will not happen here. However, there is no getting around an ugly performance for equities on Monday as continuing concerns about Europe and downtrodden U.S. bank stocks sent the S&P 500 to a loss of more than 1% and the Dow Jones Industrial Average to a triple-digit loss.
Not the way investors want to be heading into Christmas and as if you needed a reminder, this is the final trading week before Christmas. I was having this conversation with a couple of folks earlier and I predicted volume is about to dry up. Not that I am going out on a limb by saying, I am not, but there are just eight trading days left in 2011 and Hanukah begins tomorrow, so things will probably be at a standstill by the time Friday rolls around. Put another way, time has all but run out on a Santa Claus rally and I say that as someone who is really trying to get into the spirit of the season.
Stocks were dragged lower after European Central Bank President Mario Draghi merely said things most of us already knew, but none of us really wanted to hear again. He said substantial risks to the economy are still out there and European Union law prevents the ECB from going into the market to buy more bonds.
That helped all 10 industry groups tracked within the S&P 500 tumble on the day as all ignored some decent housing data and some small-scale mergers and acquisitions news. The National Association of Home Builders said homebuilder sentiment rose to 21 in December from 19 in November, good for the third consecutive month of gains. Economists expected a December reading of 20.
As I mentioned at the start, financials were the primary culprit among losers today and one of the main, if not all too familiar villains in that group was Dow component Bank of America. Granted, it is just by a penny, but BofA now resides under $5 for the first time since March 2009. Things are tough when a close at $4.99 is pretty good compared to the intraday low at $4.92.
What is even more interesting about these sub-$5 levels Bank of America is dealing with is that it means Warren Buffett has a real turkey of an investment on his hands thus far. Indeed, even the greatest investors are like baseball players: None of them bat .1000, but late in the day, the Wall Street Journal ran an article saying Buffett's Berkshire Hathaway (BRK-A, BRK-B) was $1.5 billion on its BofA investment that was announced in the summer.
Obviously $1.5 billion is not all that much to Buffett, but to put it into context, that is roughly the market cap JetBlue (JBLU) closed with today. And there is no getting around the fact that Berkshire is deep in the red on its BofA investment. The company has warrants to purchase to 700 million BofA shares at $7.14 a share so that means the stock still needs to rise more than 40% from current levels for those warrants just to break-even. I guess it is a good thing Berkshire is raking in $300 million per year in dividends on its BofA stake, something that would be next to impossible for the rest of us to do based on the current quarterly dividend of a penny a share.
Speaking of Dow stocks, it was a day of quashed mergers and acquisitions dreams and speculation. I will start with the speculation. On Sunday, a British paper reported that Exxon Mobil (XOM), the largest U.S. oil company, was considering a $10.9 billion bid for U.K.-based Gulf Keystone. That company is supposedly sitting on some plush oil reserves in the semi-autonomous Kurdistan region of Iraq. Exxon also has a footprint in that area.
Gulf Keystone issued a statement today, refuting the rumor, but traders said the company remains an attractive takeover target and the usual suspects popped up as possible suitors if Exxon really is not interested. The Independent, the British daily that initially reported the rumor, said Chevron (CVX) and Sinopec of China, the largest Asian refiner, were monitoring the situation. Today the Wall Street Journal said Royal Dutch Shell (RDS-A) and BP (BP), the two largest European oil companies, would make for logical suitors for Gulf Keystone.
Shares of Exxon Mobil closed modestly lower on the day.
And in the let us not make a deal department, Dow component AT&T (T) announced this afternoon it would not move forward with its $39 billion bid for T-Mobile. As previously announced, AT&T will pay a $4 billion breakup fee and that charge will be taken in the current quarter. This is not much of a surprise given the opposition to the deal on the part of the Federal Trade Commission and the Justice Department, but AT&T was not happy.
''AT&T will continue to be aggressive in leading the mobile Internet revolution,'' said Randall Stephenson, AT&T chairman and CEO, in a statement. ''Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds â€“ connecting smartphones, tablets and emerging devices at a record pace â€“ and we are well under way with our nationwide 4G LTE deployment.''
AT&T shareholders were not sent away empty-handed. The company raised its annual dividend 2.3% to $1.76 a share today. That is good for 28 straight years of dividend increases. However, the biggest winners in the near-term may be Sprint (S) shareholders. At its highs after-hours, the stock was up almost 9%. As of this writing, it is up nearly 5.6%. Sprint was the ring-leader against AT&T acquiring T-Mobile.
Also in after-hours news China-based Yanzhou Coal (YZC), that country's fourth-largest coal miner, said it will acquire Australia-based Gloucester Coal Ltd. for at least $2 billion, Bloomberg reported, citing sources with knowledge of the matter. The deal will need to be approved by Gloucester's largest shareholder, Noble Group. This is not Yanzhou's first Australian foray. The company acquired Felix Resources in 2009 for about $3 billion. Yanzhou's U.S.-listed shares have dropped almost 35% this year.
Looking at the charts, the S&P 500 is back to flirting with support at 1200. Fall through that level, it would probably be back to 1185. After that 1150, might offer some support, but the S&P could just as easily fall to 1125. Resistance can be found at 1225 and 1255. I am hesitant to believe 1295 will be factor before the end of the year.
S&P 500 Chart
Even with the Dow's 100-point loss today, there is still some breathing between todayâ€™s close and support at 11,600. After that, it could be off to 11,500 and then 11,425. From there, things could be get ugly on a return to 10,600. After 12,000 is reclaimed, next resistance from there is 12,285 and 12,750. As is the case with the S&P 500, I think it is a stretch seeing the Dow getting all the way to the best case year-end scenario.
The Nasdaq is a mess. Round number support at 2500 could be in play in a day or two and from there the declines could be especially nasty with the 2400 level eventually being threatened. Oracle (ORCL) reports earnings after the bell Tuesday and that might be one last saving grace for the beaten down Nasdaq, but not enough to bring 2600 into play on its own.
There are a couple earnings reports watching over the next couple of days, namely ORCL and GIS, but I doubt either will be monumental to move this market. It is still all about Europe and with that pesky issue showing no signs of abating, the money managers that are positive for the year are not likely to mess with a good thing by making new buys this week and those that are in the red may not want to make things worse with Christmas week trades. Expect light volume and do some Christmas shopping instead of over trading. And since next Monday the market is closed, I will take this opportunity to wish everyone happy holidays.