Monday, December 7, 2009

Market Wrap - stocks mostly flat, Fed Ex raises guidance after the bell ...

Friday's mixed finish was extended into today’s action as the Dow Jones Industrial Average ended up a mere 1 point to close at 10,390.  The SP 500 ended the session down close to 3 points to close at 1,103 while the tech heavy NASDAQ closed at 2,189, down close to 5 points.

While the overall market lacked direction the financials were noticeably weak for the majority of the trading day and finished off down - 1.6%. The financial sector was weighed down by weakness in shares of banks (-1.6%) and diversified financial services companies (-1.8%). Though last week's news that Bank of America (BAC) plans to repay its $45 billion TARP loan helped win temporary favor for financials, today we saw the reverse as news CitiGroup (C) would as well caused concern not excitement.

Federal Chairman Ben Bernanke again weighed on the recovery suggesting that the economy faces “formidable headwinds,” including a weak labor market and tight credit that are likely to produce a “moderate” pace of expansion.  Speaking at the Economic Club of Washington Bernanke stated, "The economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate,” Additionally he said  inflation remains “subdued” and is likely to move lower. 

In news after the bell … Fed Ex Corp. (FDX), boosted its earnings-per-share outlook for the second quarter.  FDX announced it expects to earn $1.10 per share in the quarter. While this marks a 30% decrease from the year-ago period, the revision was well above earlier estimates.  This news from Fed Ex is likely to take the market out of its quiet range trade tomorrow. 

That said the FDX news will be a good litmus test to see where the markets psyche stands. Does it bid up shares on good news or does the market sell off on this news ? Clearly the former would be bullish and the latter bearish.

As we always say it is not the news that is important but rather how the market reacts to it.   So keep your eyes and ears open as the "Message of the Markets" will be in full force in tomorrow’s trading.

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