12:45pm (EST)
The markets is continuing its downward drift after a lower open and is testing the bottom of the trading ranges we mentioned in our morning update. The bulls have held ground, to some degree, and made a charge into positive territory before retreating. Tech continues to hold back any momentum the bulls gather and today’s earnings news hasn’t helped.
The latest economic news continues to paint a dismal picture for the housing recovery. With spring season here, many analysts thought there would be a pickup in activity but bad weather and a glut of inventory from the boom days continue to hamper any recovery. Housing Starts fell over 10% in April to 523,000 versus expectations for 575,000. Building Permits fell 4% to 551,000 while new construction, which accounts for nearly 75% of the housing market, fell over 5%, to 394,000.
In earnings news, Hewlett-Packard (HP, $36.11, down $3.69) is down nearly 9% after another disappointing quarter. The company reported profits of $2.3 billion, or $1.05 a share, versus $2.2 billion, or $0.91 a share, from the year ago quarter. Revenue came in at $31.6 billion.
Analysts were expecting $1.21 a share on revenue of $31.5 billion. Making matters worse, HP lowered guidance going forward and is now expecting current quarter profits to come in at $1.08 a share on revenue of $31.2 billion. Wall Street was looking for $1.23 on $31.9 billion in sales.
HP has been a company in transition since their former CEO scandal and departure and doesn’t seem to have a clear direction on where it wants to go. Their new CEO wrote an email to the top brass and asked them to run a tighter ship. The problem was the Wall Street Journal got a copy of the memo so the news was out last night that HP was going to miss their numbers and they reported this morning instead of Wednesday.
As far as the market, the Dow is down 117 points to 12,431 after falling through the 12,500 level. We said there was further support down to 12,350 today and the index has traded to a low 12,383.
The S&P 500 is off by 5 points to 1,324 after breaking below 1,325. The index has kissed a low of 1,318. There is further support at 1,300 but a break below this level could cause panic and a rush to the exits.
The Nasdaq is showing a decline of 11 points to 2,771 and is in danger of falling thru our downside target of 2,750. The index fell to a low of 2,759.
Both the S&P and Nasdaq have broken below their 50-day moving averages (MA) but we know they can get stretched before bouncing back. However, the bears are on the verge of cracking another layer of serious support and we have a feeling the final hour of trading could determine the bulls fate for the rest of the week.
If our aforementioned support levels do hold then we could see a bounce. If not, we will go over our next set of downside targets in tomorrow’s morning update. We have a lot to cover in our Members Area, including a couple of new ideas on our Watch List, so let’s get to the real action. Subscribers, check for the updates.
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