It was a very bloody day for stocks. We had intense selling all day and nothing much was left unscathed. For the first time in a while, the bulls couldn't even mount the standard late-day spike that we have seen so often lately. Breadth was terrible with only defensive sectors gold and pharmaceuticals showing any life.
What can really make days like today tough is that the action under the surface is often even worse than indicated by the major indices. Momentum stocks were just plain destroyed. The stuff that has been running up as traders chased them crashed back to earth today. Plenty of small momentum stocks saw corrections of 10% or more.
As I've been discussing for the last few days, there was some signs that momentum was cooling off, but today things really kicked into reverse and it got very ugly very fast.
The big issue now is whether this is just the pause that refreshes before the new bull market continues or is this the beginning of the end of an aggressive bear market bounce. I've never embraced the idea that the bear market is over but I do think we have the possibility of some better trading ahead of us.
That doesn't mean we don't downtrend some more but the recent speculative action has the capacity to keep traders engaged. For a while the hot money just disappeared but it came back and hopefully will stay focused on some good stock picking.
It won't be easy, but it never is and that is what makes this job so potentially rewarding. Stay fleet and flexible; pullbacks like we had today hold the seeds of opportunity. We just have to keep working to find them.
Going into the gory details, sellers obviously controlled the session. A broad-based selling effort weighed on stocks for the entire session and sent buyers recoiling as more than 90% of the companies in the S&P 500 finished lower, which resulted in the S&P 500's third consecutive loss... A negative bias loomed in premarket trading as sellers prepared to continue their efforts amid weakness among major foreign indices. Their cause was strengthened by an unexpected decline in advance retail sales data for April, which was released ahead of the opening bell and supported the notion that consumers aren't completely ready to lead an economic turnaround... According to the data, April total retail sales decreased 0.4%, and sales less autos decreased 0.5%. The April figures failed to meet the consensus forecast, which called for total sales to be flat and sales excluding autos to increase 0.2%. However, the decline wasn't as sharp as what was seen in March, when total sales slid 1.3%, and sales less autos declined 1.2%... Shares of retailers slid 3.3%. Retail giant WMT also finished with a loss, but outperformed the broader market on a relative basis. The company is scheduled to announce its latest quarterly results tomorrow morning, ahead of the opening bell... Financials dropped 5.2%, more than any other major sector, and extended their week-to-date decline to more than 13%. While financials logged the worst loss of any sector this session, sellers weren't entirely focused on financial stocks. Cyclical plays also saw outsized losses as materials stocks (-4.5%) and industrials stocks (-4.0%) sank. Small-cap and mid-cap stocks were also strongly out of favor as the Russell 2000 Small-Cap Index sank -4.7% and the S&P 400 Mid-Cap Index made a 4.4% drop... Large-cap tech had showed relative weakness in the early going, but managed to firm up a bit. INTC was a relative leader among its peers after stating that the second quarter is going better than the company had expected. That overshadowed news that Intel has been hit by the European Commission with a $1.45 billion fine for breaking antitrust laws. The fine represents nearly 14% of Intel's cash and short-term investments... IBM attempted to drum up support by stating that earnings for fiscal 2009 will be least $9.20 per share, which is above the current consensus estimate of $9.11 per share... Energy stocks finished 3.0% lower amid the broader market's downward bias and a downturn in crude oil prices. Crude oil contracts finished 1.4% lower at $58.02 per barrel after surrendering solid gains that were bolstered by bullish inventory data midmorning. Enthusiasm was partly capped by a lowered demand forecast from OPEC... All 10 major sectors finished the session lower amid relatively high trading volume (approx. 1.8 bln shares on NYSE). Even health care, which had spent most of the session as the only sector in positive territory, buckled in late trading. Health care closed 0.1% lower, though pharmaceuticals were able to finish 0.7% higher... The latest business inventory data had no real impact on this session's trading. Nonetheless, March data showed a 1.0% decrease in inventories, which was largely in-line with expectations. Tomorrow's economic data carries a bit more weight and will be in closer focus; both the April Producer Price Index and weekly initial jobless claims data are due at 8:30 AM tomorrow.
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