That was nice and dull for a change!
We needed that, a day where we could take the time to adjust our positions ahead of the fed without all the wild intraday swings we’ve been getting pretty much every day this month. The Dow passed our days test at 12,420, dipping below it just once at 10 am but then holding that line on 4 sell-off attempts. That is, at least, encouraging.
Birinyi put up an interesting chart detailing the major S&P declines since 1982 and it’s nice to put things in perspective:
So this is an "average" decline so far but we are at a tricky sort of mid-point. As Tom2oc and I have noted for weeks, this is where we expected to be on a correction but, below this is a gaping abyss filled with pain and suffering the likes of which few men have ever seen! OK, maybe a little dramatic but you get the point…
Tom has shifted his outlook on the BKX to "unconfirmed bullish" so we will watch that index closely, especially around the 90 mark, where they just broke over. On a longer view, the finanicals are still down from a solid 115 that started failing in July so we still have about 20% of upside to get back on track, we will watch each 5-point increment with great interest.
The financial sector did gain 1.4% on the day, leading all other indices but there is talk that the ratings agencies will be downgrading the bond insurers and the FBI has opened up criminal inquiries on 14 companies in a sweeping subprime mortgage probe – either of those things could derail our little rally.
Asianomics makes the bear case on the financials, comparing the decline of the homebuilders – which indicates the financials have room to fall or the builders have room to rise:
While that’s all very doom and gloomy, it’s the builders that have been rising to meet the XLF as the XHB have been on a tear since last week, gaining a quick 25% off the lows. Try to keep this in mind as "THEY" try to panic you in and out of the markets, you can use charts and data to illustrate any point you want to but do not be satisfied until you have several sources (and sources that were linked from your original source don’t count!).
After the bell we got devastating news from YHOO as they beat estimates by 36%, causing the company to be crushed in after-hours trading. The issue was, of course, guidance, and Yahoo dropped the midpoint of their guidance 5% below consensus. Tha consensus hasn’t changed since October, when the stock was trading in the $30s so a 10% drop when it had already dropped 33% seems a tad overdone to me.
The company has bought back $1.5Bn worth (5%) of their own stock in the past 12 months and is trading at just 8 times cash flow at $19, very much on the low end of media stocks and their p/e is lower than Google’s so we’d better hope Google has a better story to tell us tomorrow or we may see the same kind of merciless sell-off. Frankly all GOOG has to do is have the same earnings beat at YHOO and give in-line guidance and they should pop back over $600 no problem (are you listening Eric?).
Meanwhile, Yahoo’s potential suitor and competitor, MSFT is having troubles of their own as they lost a bid to limit restrictions on their business conduct as a federal judge ruled the company failed to provide technical details that it was required to disclose to competitors.
U.S. District Judge Colleen Kollar-Kotelly in Washington yesterday extended until November 2009 an antitrust decree that was originally due to expire last year. The judge agreed with a group of states arguing the agreement wasn’t given a fair chance of promoting competition because Microsoft didn’t turn over to competitors required information about communications links. This nonsense has been going on since 2001 and shows what a total joke anti-trust regulation is in this country as they continue NOT to provide the technical documentation to allow competitors to write programs that function with windows code under the extension.
The extension of the decree was opposed by Microsoft and (surprise!) the Bush administration, which negotiated the settlement during its first year in office. In a brief filed in November, the Justice Department said there was “no basis” to extend the decree. “The fact remains that more than five years after the final judgments were entered, the technical documentation is still not available to licensees’‘ in a usable form, the judge wrote. Originally just 10 Microsoft employees were assigned to produce the technical documentation – there are now 320 assigned to the project and they can’t get it done either…
