Stocks Selloff Despite Strong Earnings
The market is moving lower this morning, and picking up downside steam after the SEC charged Goldman Sachs with fraud. The SEC charged GS with fraud involving a French trader and improper disclosure surrounding the structure of a CDO mortgage product, which allegedly resulted in as much as a billion dollars of losses after the subprime collapse.
GS stock is down more than -10% on the news, and this could further damage their reputation. I think the stock could be in the penalty box for some time. It could also weigh on the financials as a whole, as more institutions and transactions come under scrutiny by the SEC's new "Structured Products Unit'.
Last night, both Google (GOOG) and Intuitive Surgical (ISRG) reported strong earnings, beating top and bottom line estimates. But both stocks are being sold off this morning nonetheless. Ditto for Bank of America (BAC) and GE this morning. This was bound to happen at some point, as the relentless rise in stocks already discounted solid earnings reports, so when the news finally came it was time to take profits.
Today is also options expiration day, so my inclination is that the downside pressure in these stocks is being exaggerated as out-of-the-money puts that were sold are now coming into play.
Asian markets were lower overnight; the 10-year yield is down sharply to 3.76%; the dollar is higher, pressuring commodities. Oil is down to $84.50 while gold is down more than $10 near $1148.
Trading comment: The VIX is having a sharp spike higher, rising almost 20% near the 19 level. We have seen this scenario play out before, where the market grinds higher and higher until one day something finally breaks the streak. Past occurrences have proved to be more than just a one-day wonder, so I am not doing any buying today as I think this pullback has more to go.
The S&P 500 has been up for 6 straight weeks, but the streak looks like it will be broken this week. The SPX would have to close above 1194 to keep the streak alive. But the Nasdaq 100 still has a nice cushion, and is likely to log its 7th consecutive weekly gain.
long BAC, GOOG, ISRG; probably selling what little GS we still own