Good morning. Some buying interest has developed this morning after the S&P has fallen a little over
-3% so far this month.
Strength in overseas markets, a few better-than-expected earnings reports, some positive analyst commentary, and no additional bad news from the financial sector have provided the positive bias. Like usual, we also have rising expectations for another rate cut as losses from the subprime-mortgage defaults grow. Meanwhile, higher oil and gold prices and the falling dollar also remain in focus this morning especially since there's nothing of interest on the economic calendar for today.
Premarket gainers: DIVX, GTXI, FSLR, XFML, EFUT, GSOL, JSDA, AIXG, DROOY, QMAR, ASTI, BSMD, ESLR, HOLX, BLDP, FSTR, CMGID, TONE, FSTR, GLNG, CSUN, SEED, WOLF, DRYS, SOLF, MEOH, SWHC, JASO, CPSL, MPEL, VPHM, CHL, ERIC, MLNM, ORCL, WCG, AMLY, MICC, VSEA, and CROX.
Premarket losers: MNTA, BLTI, CTSH, HLEX, FTEK, WRNC, CBAK, LOCM, WFMI, CCRT, CUTR, ASEI, and AOB.
According to Thomson Financial, 80% of S&P 500 companies have reported earnings and the expectation for 3Q earnings (i.e., actual results combined with expectations for the remaining companies to report) is now -1.6%. In comparison, that is down quite a bit from the expectation of +3.9% as of Oct 1 and +6.2% on July 1. Meanwhile, analysts currently project earnings growth to be in the 9% range over the next three quarters. Either that expectation is too high or the economy is doing a lot better now. Along with rising oil prices, the lower dollar, the subprime debacle, etc. - keep an eye on overall earnings trends even as we move past the earnings reporting season. Without strong earnings, the market will have an uphill battle unless it grows in confidence that the economy has already bottomed out. Remember, the market is a forward looking animal so it looking for reasons to believe that the worst is already behind us.
In the short-term, it's all about perception. Traders will be watching for oversold bounces in the beaten-up areas (especially financials and homebuilders) as a green light to put money to work in expectation for a typical 4Q rally into the close of the year.
Hard to believe that we have only 37 trading days left in 2007. Let's make them count!
