Continued uncertainty over the state of European financial reform depressed stocks for the fifth day in a row. Potential new government stances in France and Greece are threatening the current bailout and traders are questioning whether or not the rest of the Union, especially Germany, will stand for further negotiating. The concerns are adding to fears brought on by mixed economic and earnings information here at home.
Declining stocks led by a wide margin today. In early trading losers led 3 to 1 over gainers. Late in the afternoon the margin had declined to around 2 to 1.
Aside from a string of earnings reports there was little in the way of US economic news today. Tomorrow look out for the mortgage index, wholesale inventories and crude oil inventory data. Oil inventory is at 20 year highs and is expected to increase again.
Futures were down about a half percent before the bell as traders were digesting the new developments out of Greece and the European Union. The possible emergence of new government in Greece has set the markets on edge. The elections have brought the recent austerity measures and Greek bailout into question. According to reports this morning Greece has about 5 weeks of money left and Germany is reluctant to assist any more. Some traders speculated on the possibility of Greece being removed from the European Union. Greek stocks closed near twenty year lows today.
France and Spain are also expected to go back on some of their own spending measures. Spain is reported to be in the process of bailing out another bank, after stating earlier that no more bailouts were needed.
Germany remains the bright spot in Europe. The country is expected to keep itself out of recession and the new data supports this. Industrial production rose in the country by 2.8%, hotter than the expected 0.8%. Factory orders also increased in the month of March on strong foreign demand, especially from Russia, the US and China.
The events in Europe have sent gold tumbling. The metal lost about $35 in today's trading to fall below the technical $1600 mark. Intra-day trading brought the commodity down to the low's of January 3. The move was been sparked by the dollar's gain against the euro and has been accelerated by technical trading and stop-losses. Analysts say that short sellers could be moving in and send gold prices even lower. The CBOE gold index moved down in tandem with the metal and made a fresh twelve month low.
CBOE gold index, daily
The yield on 30 year bonds dropped today.
30 year bond rates, daily
Oil continued it's slide today, losing close to 1%. This is the fifth day of declines for US crude oil prices and brings the price to just above $97. Growing US oil stockpiles, worries over world demand fueled by the European elections and OPEC's statements about supply have all helped to bring the price down. The US energy agency raised its forecast for global demand in 2012 by 70,000 barrels a day but lowered its estimates for 2013. Be on the lookout for oil inventories on Wednesday and natural gas supply on Thursday.
Earnings continue to drive the markets as well. Several big names released information today but the biggest headline was Fossil. The stock reported weak earnings, guided the year lower and lost more than 35% of it's share value. Fossil reported first quarter earnings in line with expectations but the revenue for the quarter missed. Sales were strong in America and Asia but Europe was weak and is impacting the company's future expectations. The news sent the entire retail sector down.
The retail sector Spider XRT traded down on the news. The exchange traded fund made a new two month intra-day low. The move came on high volume and bearish indicators.
Retail sector spider,daily
Coca Cola Bottling Company (COKE), not to be confused with Coca Cola (KO), is the US bottler of Coca Cola products. The stock traded quietly today just above its recent support in anticipation of its earnings release which came after the close of today's trading. The stock gained 1% today on a mild spike in volume.
Coca Cola Bottling Company, daily
Walt Disney Company was also quiet today ahead of an after market earnings announcement. The company has taken some hits on recent movies but this weekends release of â€œThe Avengersâ€ set US box office records. The stock gained in today's session to close at a new twelve month high. The move was accompanied by higher volume and bullish technicals. In the report, Disney beat analyst expectation by 3 cents. The company earned $0.58 cents a share on revenue of $9.63 billion.
Walt Disney, daily
DIRECTV went directly down after it released its earnings report. The company reported earnings increased by 26%, in line with expectations. DIRECTV made the gains on increased subscriptions in North and South America. Revenue in the quarter grew by 11% fueled by new subscribers in Latin America. The stock lost more than 3% in intra-day trading but may have found support in the $46 range.
OfficeMax pleased its shareholders today. The stock rose by 10% today following the announcement of first quarter earnings. On an adjusted basis the company improved results by more than 50% from last year at the same time. The adjusted results do not include one time charges related to store closures earlier in the year. The closings were part of strategic re-alignment of the company and have begun to pay off for OfficeMax. The reported results were below analysts estimates but the adjusted results were well above the consensus. The company is guiding revenue estimates for the year in-line to slightly higher than expected. The stock moved up from support today with high volume and bullish indicators.
SunOpta, manufacturer and distributor of organic, natural and specialty foods, has been on the rise in 2012 since hitting a low in January. The stock traded down today and is expected to release earnings after the bell. The specialty foods maker earned $.07 per share in the previous period and is expected to earn $.08 this quarter.
Discovery Communications is down sharply today. The cable network operator increased revenue in the quarter by 16% and income by 9%. The increase in income is excluding a one time charge from the previous year. The company's results were impacted negatively by the Oprah Winfrey Network. The Oprah Winfrey Network did not perform as expected. The stock lost more than 6% today on high volume but did not break trend.
Discovery Communications, daily
HSBC Holdings moved down today. It released earnings before the market opened. Profits in the quarter were down from the previous period due to adverse credit spreads on its own debt. Excluding these write downs the bank increased profits by around 25%. The stock moved down and closed just above the short term moving average, in the middle of a three month trading range.
HSBC Holdings, daily
McDonald's also moved lower today. The fast food bench mark reported April sales figures that were weaker than expected. The stock continued its three month down trend from the all time highs set at the end of last year. Same store sales were expected to be in the 5% range but came in at 3.3%. Strength in the US and Europe offset weakness in China and Asia. First quarter strength was based on strong comparable store sales. This new weakness in comp store sales gives traders cause to question McDonald's full year outlook. The decline in share prices has brought McDonald's dividend yeild up to 3%.
Cognizant Technologies received a couple of surprise nods today following yesterday's disappointing earnings announcement. The company lowered its growth forecast due to a â€œslow startâ€ to the year. Today, analysts at firm Robert W. Baird and Citigroup think the stock's revision is OK and the sell off yesterday was over blown. They are expecting earnings to rise in the coming quarters. The stock regained about a third of yesterday's loss.
This week is hot for IPO's. Not only has Facebook begun it's final push toward public sale but there are ten IPO's scheduled for the week. Be on the look out for NSE, LLGX, WAGE, CCFI, RIBX, ADNC, WMC, EVAC, IRG and CUBI.
The Dow was down today for the fifth day in a row. This marks the second biggest 5 day decline this year. Many of the stocks rebounded in the afternoon and hovered around neutral near the close of the day. All 30 were down at some point in today's trading. The Dow is in a trading range now, between 12,700 and 13,300. Concerns for global slowdown are counterbalancing hopes of expansion. Momentum has turn bearish and could bring the index lower in the near term. Long term momentum has turned bearish as well but overall volume in the index is weak.
The stocks in the S&P were able to cut their losses in afternoon trading but all S&P sectors were down for the day. The move was weak, just like the Dow, and short term momentum indicators are divergent. The S&P has support around 1350 that could keep the index around 1400 in the short term.
S&P 500, daily
The VIX made another move up to resistance at 20. The fear gauge was stopped at the line and is now being squeezed by the short term moving average and resistance.
CBOE Volatility Index, daily
The Nasdaq experienced the steepest decline today. The tech heavy index dropped down to support at 2900 before bouncing back in the afternoon trading to regain some of the days lost ground.
The markets seem to be pulling back in fear of more European fall out. Our own economic data is mixed and makes it easy to question the stability of the recovery. Traders are waiting for a clear sign of US and world economic direction. Economic data, earnings and growth outlooks will drive the markets into the near future.