The market tumbled in the final session of the week with the S&P 500 posting a loss of 1.2%. For the week, the S&P 500 also posted a loss while the Dow was fractionally lower. Almost one-third through the earnings season, no one can argue the current earnings season is probably the best they can expect. 118 out of 138 companies in the S&P 500 that reported results this week beat the average analyst estimate. In some cases, the beat was quite significant. Yet, the market is still lower for the week, showing once-again the tiredness after running up for seven straight months. Even a good economic report from the housing front failed to improve investors’ sentiment. Sales of existing homes surged 9.4% in September as first-time buyers rushed to take advantage of a tax credit that is set to expire next month. Economists were looking for a modest increase of around 5%. The news initially sent the Dow higher by around 30 points when it was released at 10 am in the morning. But sellers soon took control and drove the market lower throughout the remaining trading session.

All 10 major sectors finished the session lower led by transportation and energy. The CRB commodity index dropped 0.8%. The US dollar was higher against most major currencies. Treasury yields rose. The three-month US LIBOR was unchanged at 28 bps. The VIX index rose more than 1 point. The market breath was negative on both NYSE and Nasdaq. The volume was a little lighter compared to the previous session.

The market rallied smartly on this Thursday with the Dow registering a gain of 130 points. Earnings results are simply too good. All five Dow components reporting today handily beat expectations. In some instances, the beat is quite significant. It shows once again the ability of the US corporations to handle economic recessions. That’s what I called “intangibles” in calculating the long-term return for equities, which is the sum of global GDP growth rate, global inflation rate and “intangibles” such as synergies and economy of scale. Although most companies still posted year-over-year revenue decline due to broad economic conditions, some truly outstanding firms actually showed year-over-year revenue growth. Companies like Google, Apple and Amazon all belong to this group. If a company can grow in a severe recession, imagine where it will be when the condition returns to normal. Those companies are all focusing on changing the consumer behaviour while maintaining a strong lead in their respective industries. Apple, for example, gives music fans a cool feeling of an innovated device. Like Dell did in 1990s, shareholders of Apple are rewarded with on average 60% annualized returns since the beginning of this decade. Unlike 1990s, however, the broad market basically moves nowhere in the current decade.  

We had some mixed economic news in today’s trading. Initial jobless claims came in at 531K, higher than 515K expected. Continuing claims fell to 5.92 million. The index of leading economic indicators, meanwhile, rose a greater-than-expected 1%, extending its gain to a six-month streak. Over the past six months, the index has been up 11.8% at an annual rate, the biggest gain since 1983.

Most major sectors finished the session higher led by financial and industrial. The CRB commodity index dropped 0.6%. The US dollar was higher against most major currencies. Treasury was little changed. The three-month US LIBOR was unchanged at 28 bps. The VIX index dropped more than 1 point. The market breath was positive on both NYSE and Nasdaq. The volume was a little lighter compared to the previous session.

The market dropped for the second time in a row. Most of the selling came at the final hour of trading and some attributed it to a downgrade in Wells Fargo by Rochdale analyst Dick Bove. However, I don’t think that’s the real reason behind today’s drop. The market has shown clear signs of tiredness since late last week as most companies posted better-than-expected results while still being sold off. The problem is very clear – expectations are simply too high heading into this quarter. With the market having already gained seven months in a row, investors are rational to take a pause and ask themselves “what’s next”. It is no doubt that economy will enjoy strong rebound between now and Q1 2010. But recent data raised questions about whether we are going to see another wave of dropping in housing prices. We should always remember that it is the housing bubble that led us to the current financial crisis. If the housing recovery turns out to be non-sustainable, we may re-think about the shape of the upcoming recovery. Finally, it should be worth noting that volume picked up dramatically when the selling started at around 3:15pm, not a good sign for the short-term performance.

Most major sectors finished the session lower led by financial and transportation. The CRB commodity index rose 2.1%. The US dollar was lower against most major currencies. Treasury dropped with the yields rising. The three-month US LIBOR was unchanged at 28 bps. The VIX index increased more than 1 point. The market breath was negative on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market declined modestly on this Tuesday with all three major indexes giving up around 0.5% from the previous close. It should be noted that volume is heavier compared to yesterday. Earnings continue to dominate today’s trading activities. Most reporting companies beat on both top and bottom lines. But they still face selling pressure unless the companies beat by a wide margin. For example, several Dow components including Pfizer and Du Pont handily beat both estimations but their shares still finish the session below yesterday’s close. In the case of another Dow component Caterpiller, which beat earnings expectation by an eye-popping 700%, the stock finished more than 2% below where it started this morning. Clearly, investor expectations for the quarter are much higher compared to the last quarter.

We had some mixed economic data in today’s session. The PPI for September unexpectedly showed a month-over-month drop of 0.6% and the core PPI also fell a surprise 0.1%. Housing starts for September came in at an annualized rate of 590K, below consensus of 610K. It is widely expected that the first-time buyer credit, which is set to expire at the end of November, will be extended by the Congress.

The market rallied strongly in the first trading session of the new week. All three major indexes are now sitting at fresh highs of the year. Volume, however, is on the light side. The market shows several typical patterns of a bull market. First, it continues to move up despite negative news. Earnings results from the last two days of the previous week were not particularly strong. Yet, the market simply ignored them. Second, any pullback is viewed as a good entry point and as a result, the pullbacks are shallow. So far we haven’t had a pullback in excess of 10% since the current bull market started in early March. Third, the rally is broad and many companies are sitting at or near their new 52-week highs. That being said, the market does face some real challenge in the short term. This week is going to be the first busy week for the earnings season with 25% of the S&P 500 companies scheduled to report. It is quite clear by now that expectations are set very high heading into the earnings season. Therefore, merely beating the bottom lines won’t be enough. In addition, starting from tomorrow we are going to get the latest figures on several key economic indicators. One month ago, the market dropped swiftly when some data suggested a temporary slowdown in recovery. And investors are eager to figure out whether it is truly a one-time thing or not.

For the week ending on Oct 16, most major indexes continued to show bullish stances. The bull market is clearly under way. Sectorwise, Chinese new media, hedge funds and tankers were among the best performers while semiconductor, flat panel makers and mobile phone makers were doing the worst.

All 10 major sectors finished the session higher led by consumer cyclical and industrial. The CRB commodity index rose 1.3%. The US dollar was lower against most major currencies. Treasury was mixed. The three-month US LIBOR was unchanged at 28 bps. The VIX index dropped slightly. The market breath was positive on both NYSE and Nasdaq. The volume was lighter compared to the previous session.