Wednesday, April 17, 2013

Fear Rising In Aftermath of Boston

Busy morning already, which is why this post is later that normal.  The markets are sharply lower in early trading on little economic news.  But there have been a handful of earnings reports coming out, and none of them has contained a big upside surprise.

The volatility index is spiking +23% back above the 17 level today.  I think fears are being exacerbated by the news coming out surrounding additional suspicious packages being found at the White House as well as two letters that tested positive for ricin.  While not exactly like post-9/11, it is likely sparking memories of that and spooking folks.

In China there are continued reports of a new bird flu spreading, and we remember how the markets didn't like the H1N1 flu epidemic when it was spreading.  China is already struggling with slowing growth, and if folks over there panic about this bird flu it could hit their economy.

Asian markets closed mixed overnight.  A former Chinese official spoke and described local government debt levels as 'out of control'.

European markets are lower across the board today.  UK unemployment rose to 7.9% and there are rumors that Germany and/or France could be the subject of sovereign debt downgrade.

In earnings news, we are seeing more stocks trade lower after reporting that trade higher.

Stocks rising on earnings: ABT, MAT, PNC, DGX

Stocks falling on earnings: INTC, BAC, YHOO, URI, CSX, BMI, TXT

The 10-year yield is lower to 1.69%.  The dollar is higher today, and most commodities are lower.  Oil prices are lower to $86.90, and copper prices are also down sharply.  Gold prices are holding up and are nearly unchanged around $1386.

Trading comment: After Monday's sharp selloff and the small-cap index breaking below its 50-day average, we thought there would be more consolidation in the market.  Yesterday's rally now looks more like just a short-term bounce that came on lighter volume than Monday.  We thought the S&P 500 could test its 50-day average, and today it is within striking distance of that support level.  So far the SPX is -3% off its recent highs.  We figured the market was due for a 3-5% correction, but think it would probably bounce from there.  So in this SPX 1520-1550 level we want to look for opportunities to add to stocks.  Our hope is to find stocks that report great quarters but don't take off due to the overall weak market.

KAM Advisors has long positions in BAC

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