Welcome to the World's Biggest Head Game

It was all about confidence Tuesday, and confidence remains the key to the market and to the economy in the immediate future. After the market withstood the Fed's "no confidence" vote last week and even rallied on Cisco's (CSCO Quote) less-than-wildly-bullish announcement Friday, its reaction to the modest decline in consumer confidence Tuesday illustrated just how fragile the market's technical underpinnings are these days. In fact, the data, ordinarily a less-than-critical metric, were really only as negative as Cisco's pronouncement that business is beginning to stabilize was positive.

Welcome to the world's largest and most important head game. And for an encore, Wednesday's first revision to second-quarter gross domestic product promises to carry more importance than it ever does in "normal" times. It's a given that GDP will be revised lower; the only things in question are whether the number is positive or negative and how a very thin market will digest the news. From my perch atop the world, it's hard to see how the data can possibly bring glad tidings and cheer. Then again, we're talkin' government numbers here, which sometimes prove to be mystical and unfathomable. Stay tuned. It could be a wild ride Wednesday morning.

Problems Ahead

Needless to say, stocks were lower in Euroland Wednesday morning, and the Nikkei made yet another new 17-year low, closing below the 11,000 mark as bank stocks were pounded. Bank stocks here at home also look vulnerable to further downside pressure as the domestic economy remains cloudy and consumers are barraged with news of massive layoffs on a daily basis. Gateway (GTW Quote) was the latest to announce that it's slashing its payroll, as it will dispose of 25% of its workforce. Bank of America (BAC Quote), which has significantly outperformed the Philadelphia Stock Exchange/KBW Bank Index since the July lows, appears to be particularly vulnerable technically, and further weakness in the financial sector bodes ill for the overall market. It's not Japan, but the outlook for profits isn't pretty either. ...