Sellers Ignore A Raft Of Better Than Expected Earnings Reports

The market is sharply lower in early trading, despite a raft of better than expected earnings reports this morning. The bellwethers that topped estimates include Bank of America (BAC), General Electric (GE), and Citigroup (C). The one company that was unable to top estimates was Google (GOOG). I covered the GOOG conf call yesterday, and will post my write-up later.

In economic news, the June CPI actually fell -0.1% (in-line with consensus), so those folks looking for inflation around the corner should still be more concerned with deflation, imo. The Univ. of Michigan consumer sentiment survey dropped to 66.5 from 76.0 the prior month, a large dropoff.

In other corporate news, Goldman Sachs (GS) settled charges with the SEC by paying a $550 million fine, but not necessarily admitting to any wrongdoing. The removal of this uncertainty is boosting GS stock by +3% today, but the victory on the part of the SEC makes me think they will likely try to go after other investment banks with similar lawsuits.

Also, BP has provided encouraging results from its well. For the time being, it appears the flow of oil into the Gulf has ceased. But they have pointed out that there is still more testing that needs to be done.

The dollar is up slightly this morning, as the euro slips from its recent highs. Oil prices are lower to $75.88, and gold is back down below the $1200 level, currently near $1189.

Asian markets were flat to lower overnight; the 10-year yield is moving lower again, currently at 2.95%; and the volatility index (VIX) is spiking higher today by nearly 11%, reaching as high as 28 earlier.

Trading comment: The market was lower yesterday, but rallied back by the close of trading. Some of this may have been exacerbated by today's option expiration. But today the market is lower, which isn't surprising given how overbought the market was after its 7-8 day rally.

As I said yesterday, I believe that bearish sentiment is already sufficiently high than any pullback should be contained. Earnings season has been mostly positive so far, a trend that would support the bullish thesis if it continues.

long BAC, GOOG, VXX