Small Caps lead move lower
Index & Sector performance 12/11/13
The Market:
Strong down day in the market with the S&P 500, Nasdaq and Russell 2000 closing down over 1%. The Russell 2000 has been leading the charge for the year but has underperformed of late including today posting the largest loss at 1.64%. After remaining relatively unchanged in overnight and early morning trading, the market started to slip in the pre-market about an hour before the open. Losses built the remainder of the day with the S&P 500 closing near the lows of the day and through the 20 Day SMA.
In economic news the 10 year auction receive a grade of “C-” from CNBC’s Rick Santelli. The auction priced at 2.82% when it was offered at 2.81% and the bid to cover was 2.61. As a reminder, November’s sale posted 2.75% with a 2.70 bid to cover. The Federal Budget Balance came in better than expected posting a -135.2B vs. -142.6B consensus.
Tomorrow we get Retail Sales and Initial Jobless claims which should both be of high importance. Last Week Jobless claims beat posting 298K when 328K was expected. This week we show 321K consensus.
Noteworthy News:
Scripps Networks (SNI) moved up 7.64% on takeover speculation. The rumored acquirer is Discovery Communications (DISCA).
MasterCard (MA) gave investors something to cheer about gaping to a new 52 week closing high today after announcing yesterday after the close that the now $790.57 per share company will enact a 10 for 1 stock split, raise the dividend over 80% and announced a $3.5B stock repurchase plan. MA closed up 3.53% and the news even trickled through to competitor Visa (V) which closed up 3.12%.
A notable loser in today’s session was Joy Global (JOY) which closed down 5.49% after reporting Q$ EPS which fell just shy of analyst expectations ($1.11 vs. $1.12) but more importantly the company guided well below expectations for full year 2014 noting EPS at $3-3.50 (consensus $3.68) on revenues of $3.6-3.8B (consensus $3.8B).
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: CIEN, CNSI, HOV
Analyst Comments:
Upgrades 12/11/13
Downgrades 12/11/13
Initiations 12/11/13
Price Target Changes 12/11/13
The Game Plan:
Last night the focus was on the top and bottom region that the S&P had crafted and that the market will likely trading within this region and even test each boundary before breaking and providing direction one way or the other. Today’s strong move lower still leaves us within that range but pressing dangerously to the downside. If the market cannot recover soon then there will likely be further downside targeting the 50 day SMA which closed today at $1758. Daily chart shows upcoming Full Moon 12/17/13.
Also a focus last night was 1806 in the emini S&P 500 (ES). We actually regained 1806 in overnight trading but lost it by the morning. We posted over at StockTwits pre-market that without regaining that level the market will be vulnerable to the downside and that is what we saw. What wasn’t expected was the strength of the decline which blew right through the target R2 pivot and headed 14 S&P points lower.
$1790-92 are key levels we would like to see the market regain on the upside to consider the move lower potentially finished. Even then it will only be the beginning of a recovery. Until then the market appears vulnerable to another 20-30 points lower in the S&P 500.
