After a strong start to the day, equities quickly reversed course and gave up most of their early gains following a much worse than expected consumer confidence reading. The broader market has since bounced off its lows, but it remains well off the early highs (Dow is now +149, SPX +11, Nasdaq Comp +15). Notably, the financials showed relative weakness in early trading, with sharp losses earlier in the day in MS (now -13%) and GS (now -6%) weighing on the group, although both stocks have since recovered from their lows. While there wasn't any news out on either co, weakness in MS was linked to continued concerns about yesterday's news that Mitsubishi UFJ (MTU) will raise capital, while weakness in GS was attributed to rumors of potential losses stemming from the spike in Volkswagen shares. Specifically, MS traded down as much as 26% this morning with concerns that the co (which recently sold a stake to Mitsubishi) may not have as much access to Mitsubishi's balance sheet as some previously thought, due to Mitsubishi's own need for capital now. GS dropped as much as 11%, with David Faber on CNBC noting that rumors were circulating suggesting the co may have been on the wrong side of the massive short squeeze in Volkswagen shares. GS has since recovered a good portion of its losses after Faber said he is hearing from sources inside GS that the firm has no significant losses stemming from Volkswagen. Earlier he had noted that many hedge funds were short the ordinary Volkswagen shares and long the preference shares or Porsche shares, hoping they would converge. But instead of converging, it went the other way as brokers raised margin rates and short sellers covered... Bloomberg reported that credit default swaps rose on each company, with GS credit default swaps rising 26 bps to 335 bp and MS credit default swaps rising 31 bps to 448 bps... Other than GS and MS it is relatively quiet, although there are a few other names showing notable weakness on no apparent news, including LM (-19%), ING (-17%), FIG (-12%). Note that LM reports earnings tomorrow morning... Other major stocks in the group are performing as follows: JPM -1.9%, USB -0.2%, BAC +0.8%, WFC +1.2%, UBS +5.1%, BK +5.4%; XLF +1.2%, KRE +0.7%.
Says there are a lot of rumors out there about people suffering from this trade; says one of the reasons GS is down is because people were speculating that GS was also in on this trade, says he's not sure if there is any truth to this.
Market volatility has moved higher this week with the major equity averages experiencing another volatile week (average daily swing in the Dow of ~460 points) and set to end lower. The primary volatility indices spiked to multi-year highs today, with the VIX reaching 89.53 and VXN reaching 86.52, as stocks opened sharply lower after futures traded limit down in the premarket. The VXO (the old calculation of the VIX) rose to 86.15, but this is still below the Oct 10 high of 103.41 and well below the historic high of ~172 in Oct 1987... Over the course of the week the VIX has increased 10% to 77.46, while the tech-focused VXN has increased 9% to 77.80. The major averages are off their lows of the week, but still down with the Dow (-3.8%) faring better than the S&P 500 (-5.5%) and the Nasdaq is (-8.0%)... The CBOE put/call ratio is currently at 1.30, indicating higher put trading than call trading.
With futures limit down -- Dow -550, Nasdaq -85, S&P -60 -- the stock market opened dramatically lower this morning after overseas markets plunged. It began in Asia overnight following poor earnings/guidance from Sony (SNE), Samsung and Toyota (TM), as the yen surged to a 13-year high against the dollar and a 6-year high against the euro, and after the Reserve Bank of India decided to keep all its key rates unchanged. The weakness quickly transferred to Europe, helped by a weaker than expected Q3 GDP figure in the UK (-0.5% vs. -0.3% consensus) and a weaker than expected Eurozone PMI (44.6 vs. 45.4 consensus). However, the Dow and S&P only modestly extended yesterday's lows at the open, while remaining well above their 5-year lows from Oct 10 (the Nasdaq made a fresh 5-year low yesterday). All three indices slowly trended higher over the first two hours of the session amid choppy trade. Helping them at 10:00ET was a better than expected Existing Homes Sales figure for September (5.18 mln vs. 4.95 mln consensus). The major averages hit their morning highs just after 11:30ET, but have been slowly trending lower since that point... From a technical perspective: The major indices are still pressed sharply lower at midday, but price holds well above the dramatic, gap down opening lows. The INDU & SPX indexes are the only to major averages to not breach the Oct. 10 52 week/five year lows today, having not even come close to a crucial retest @ 7882/840 respectively. Intra day recovery bounces in the SPX & COMPQ continue to meet sharp resistance at the downward sloping 100 period SMA's seen on the 5 min. charts. TRIN levels on both major exchanges are running just North of 1.0, but at levels not to severe, while the A/D line on NYSE stands @ -2120 & @ -1660 on NASDAQ... The bond market has been knocked back off from its best levels, but still maintaining a bid, with stocks un-improving and safety plays sought. The session has been running better for most of the day with volume comparatively better and headlines helping to bounce things about with news like the fact Treasury rescue money is starting to fuel acquisitions, lessening concerns over weaker players... In commodities, Dec crude ($64.62 -$3.22) made session lows, following the open of the equity markets, at $62.65. This is the lowest level crude has seen since May 2007. After setting these lows, however, crude has managed to stage a modest move upward to levels seen in overnight trade. It is chopping around these levels heading into the afternoon. After selling off in early morning trade, Nov natural gas ($6.28 -$0.139) has done relatively little. It set lows at $6.39 and is moving sideways around those levels with the approach of afternoon trade... In Europe, with investors rattled by official data that showed that Europe's economy was plunging into a recession. Investors around the world looked away from Wall Street's solid closing overnight to the renewed heavy selling in Asia. FTSE closed -5.0%; DAX closed -5.0%; CAC closed -3.5%, RTS -14%... In Asia, the Hang Seng closed -8.3%, the Sensex closed -11.0%, the Nikkei was -9.6%, and the Kospi was -10.6%... On the earnings calendar, 1 co is confirmed to report today after the close. On Monday, before the open, 28 cos are confirmed to report including VZ and ACI... On the economic calendar, nothing remains on the schedule for today. On Monday, new home sales are scheduled to be released at 10:00ET.
Noted intraday resistance for the S&P at 878 and 881 in the 10:02 update and we saw the index stall at 877.49. A modest pullback that remained 5 points above the opening low followed with the index working back toward the rebound high again in recent trade. The next short term level of interest if able to stage a sustained break is at 888 followed by 894/985.