Downgrades On Financials Weigh Heavily On The Market
The market is taking it on the chin this morning, after a bevy of downgrades in the financial sector. Its amazing that these downgrades still have as much impact as they do, given that the financial sector is already down -28% this year alone.
Goldman Sachs (GS) downgraded a host of finanacials, but singled out Citi (C), Merrill (MER), and GM as the weakest. The analyst is looking for more writedowns and dividend cuts.
There has also been some negative reactions to earnings reports this morning. Nike (NKE) and Oracle (ORCL) are lower after beating estimates, and Research In Motion (RIMM) is down -12% after missing estimates by a penny. They also offered conservative guidance. These selloffs can take some time to find a solid bottom, but it will likely be another good buying opportunity at some point.
Existing home sales were better than expected at +2%, and final Q1 GDP was revised upward to +1.0%, but no one seems to care this morning.
The dollar is weak vs. the Yen and the Euro, and gold and oil are both spiking. Oil once again looked like it might break down yesterday, but today is is back all they way above $138, near another record. The up/down day-to-day moves in oil has been breathtaking lately, with volatility at historical records.
On the sentiment front, the AAII survey showed more bears (52%) than bulls (31%) for the 3rd straight week. The VIX is up +10% to 23.3, and the ARMS Index is high at 1.82.
So the selling pressure is pretty severe, such that I would expect the market to pare its losses later in the day.