After trying to bounce early in the morning, stocks sold off Monday marking the worst three day stretch in quite a while. We continue to see some hand wringing over emerging economies and the Chinese economy. Some of the pro-growth, cyclical, U.S. sectors have taken quite a hit of late which is a new concern as you do sector analysis. The S&P 500 fell 0.49% and the NASDAQ 1.08%. The Turkish central bank announced an emergency meeting for tomorrow as it is one the countries, along with Argentina and Thailand, that have been at the center of the financial storm, so we'll see if any action there lifts markets tomorrow. In economic news in the U.S. the Commerce Department reporting new home sales totaled 414,000 in December versus a 458,000 estimate.
The NASDAQ has broken to the bottom half of its defined channel for the first time since October.
The S&P 500 has come down to test the trendline support it has bounced off a few times since October.
This has happened as the NYSE McClellan Oscillator is now officially in our first "oversold" band outlined in red shade. Most times we see a bounce from these levels but if it does not happen here, you are prone to a more "panic" type of selling which takes the oscillator down to readings at or near -90.
Ironically, Caterpillar - a company very exposed to both China and emerging markets - reported this morning with shares popping after the mining and construction equipment maker''s CEO noted "signs of improvement in the world economy." However some of that benefit in its financials was due to cost cutting. Oberhelman said Caterpillar would continue "to take additional actions in 2014" to cut costs. He characterized the moves as "tough decisions necessary to better position us down the road when economic conditions improve and our sales rebound." The company reported a fourth-quarter profit of $1 billion, or $1.54 a share, up from $697 million, or $1.04 a share, in the fourth quarter of 2012. Revenue fell 10 percent to $14.4 billion. Analysts expected Caterpillar to post a profit of $1.28 a share on sales of $13.6 billion.
After the close Apple (AAPL) reported and the Street is none too happy as the stock is down over 8% to just over $500 (not reflect in the chart below). Apple is a very heavy weight in the NASDAQ so will certainly have impact on that index if the stock doesn't recover tomorrow morning.
Apple posted quarterly results that beat estimates Monday, but reported weak iPhone sales and handed in a current-quarter revenue forecast that underwhelmed. The company posted earnings of $14.50 a share on sales of $57.59 billion, surpassing expectations for $14.07 a share on sales of $57.46 billion. During the quarter, Apple said it sold 51 million iPhones, fewer than the 55-million estimate expected by Wall Street analysts. Additionally, the company sold 26 million iPads and 4.8 million Mac. Apple CFO Peter Oppenheimer said the company's iPad sales in mainland China more than doubled during the holiday quarter and saw strong growth in emerging markets like Latin America and Russia.
Turning away from individual stocks it is worth noting some key "growth" sectors are taking big hits the past few days; industrials and consumer discretionary. Industrials were helped by Caterpillar today but you can see the recent weakness below.
You can also see a very high volume selloff today in the key biotech sector. It has paid investors to buy these dips constantly for this specific sector through the past year+, but generally one does not want to see such volume accompany selling.
We have a Fed meeting starting tomorrow so it should be an interesting next few days.