Subprime Rears Its Ugly Head Again

The market opened under heavy selling pressure this morning, after Countrywide (CFC) badly missed earnings and said that delinquencies rose across all mortgage products, causing the company to slash earnings forecasts.

Also, American Express (AXP) missed earnings, Texas Instruments (TXN) offered weak guidance, AT&T said iPhone activations were weaker than expcted, and a proposed LBO deal for a GM unit has been postponed.

All of the above were enough to cause investors to hit the sell button first, and ask questions later. The subprime news is nothing new, but anytime you have a shock to the financial system, it weighs on the overall market.

Asian markets were up across the board last night. Bond yields are lower today, with the 10-year near 4.94%. And oil is plunging again more than a buck and a half, to $73.25. So there are some positives.

Also, sentiment is beginning to get jumpy again. The volatility indexes are spiking nearly +8%, and the put/call ratios are high. The backdrop today is very reminiscent of last summer, and I would not be suprised to see it unfold in a similar fashion. Angst will rise, the shorts will press their bets, the market will experience some pressure, and it will prove another good buying opportunity into year-end.