Negative sentiment, corporate warnings and worse-than-expected jobs data have market bulls seeing red and further oversold conditions in Friday’s first half. As of 10:55 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are each off an additional “ruffly and tumbly” 1.20% on heavier levels of investor dissatisfaction.
“Yuck!”….depending on whom you ask. Bulls are likely saying “TGIF” and happy the stock market has yet to go 24/7. Precipitous declines from Thursday have tumbled further into the realm of grossly oversold conditions as investors’ flight-to-safety mechanism kicks in following additional doom and gloom offerings for the broader market.
Headlining for most investors, is a weaker-than-expected decline of 75K for August nonfarm payrolls delivered this morning. Making matters worse, the report included downward revisions to the prior two months of already weak data, unemployment cracked the 6% level versus estimates of 5.7% and the closely-watched manufacturing sector saw its share of jobs swoon by 61K. The net result, an existing weak premarket worsened into its current and worsened state of mind and price action.
Kicking things off in the premarket and I do mean kicking; two reports out of large cap tech got the proverbial ball rolling downfield Friday morning. Shares of Nokia (NOK) are off 9.25% at 20.25 after the company lowered its mobile device market share for the third quarter. Management cited weak consumer confidence as a primary catalyst for the warning. In part, the report has induced a bit of extra schnitzeling in peers Ericsson (ERIC), Motorola (MOT) and Texas Instruments (TXN).
Separately, shares of semi (SMH) National Semi (NSM) are off .30 at 19.17. The company missed by a penny on earnings of $0.33 per share on in-line sales, but issued revenue guidance of $470 - $480M that falls below Street views of $485M for its second quarter.
Elsewhere, a myriad of catalysts have acted as portfolio slimming devices for market bulls. A report out this morning has Moscow selling foreign currency reserves to defend its ailing ruble. Whispers have been heard that China’s central bank is looking to raise capital. And following this week’s Ospraie commodity debacle, fresh rumors on the hedge fund front have Atticus Capital being attacked. Grizzly bear types are proclaiming the $14.0B money manager is in trouble and secretly liquidating positions.
A bit of broker action hasn’t helped matters. In the Anchor Bankers (XLF), shares of Merrill (MER) are off 2.75% at 25.50 following a “Sell” from Goldie. Analysts also increased the size of the company’s estimated losses in the upcoming third quarter and FY08 to $5.75 and $11.55 per share respectively, based on anticipated writedowns to come. Trying to force bulls to hit the sell button but reversing early losses, AIG (AIG) is up .50 at 21.72 following a move to “Equal Weight” from “Overweight.” And in tech-land, Merrill has done some cutting of its own by downgrading both Advanced Micro (AMD) and Ciena (CIEN) to “Neutral.”
In other news, some potential M & A interest has popped up (again) in shares of memory chip manufacturer Sandisk (SNDK). Shares are up nearly 29% and back near prior rumor mill highs set three weeks back. In today’s gap fest, reports abound the company may be an appropriate buyout target for electronics giant Samsung. For its part, management at Sandisk stated opportunities between the two have been discussed as a matter of doing business, but the exact nature of those talks has yet to be determined.
And finally and also smoking the bears, shares of tobacco producer US Tobacco (UST) catapulted higher and are currently up 12 points at 66 following a report from the New York Times that the company is in advanced talks with Altria (MO). Exiting the lunchtime hour and with the broader market now closing in on the unchanged mark, bulls caught exiting on most all of the above concerning items meant to motivate, are also likely wondering just what it was they were smoking this morning. Enjoy the weekend.
Chris Tyler
Staff Writer & Options Strategist
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