Stocks Shake Off Early Weakness: Turnaround Thursday?

The market opened under further selling pressure this morning, but has since recouped its losses and moved back into positive territory. I would not be surprised to see a 'turnaround Thursday' today, given how oversold the markets are short-term and how bearish sentiment has become.

I thought yesterday might see a rebound for the same reasons, and it was looking like I might have been right, but a midday turnaround in oil prices that drove them from under $133 to back over $136 killed any rally attempt and led to further selling into the close.

Today's action looks more mixed, with semis and retailers trading higher, while financials are again weak. Energy stocks are mixed. Oil is currently trading under $135, but for weeks it has held above this $130 level.

Today, China said that they will be raising prices on gas and diesel. It will be interesting to see how this affects global prices, if at all. China totally subsidizes gas for its citizens, so they have not felt the brunt of rising prices. But that costs the govt. quite a bit of money, and it seems they are passing a bit of that on to consumers now.

Mastercard (MA) said yesterday that retail gas purchases were down 7%. So I think we are already beginning to see some demand destruction from higher prices. This move in China could exacerbate that, as their consumers are not nearly as resilient as those in the U.S., who still drive no matter what, they just complain more.

Asian markets were down overnight, while the dollar is firm vs. the Euro and Yen; the 10-year yield is up to 4.18%.

Investor sentiment has grown more bearish, which should help lead to a bounce in the market. I will be back with an update on the indicators in a bit--