Considering the bad news greeting investors at the start of the week, the market was faring reasonably well midday Monday. After major stock proxies plunged to three-month lows last week, the question for sentiment watchers is whether enough negativity has been priced in the market to allow a tradeable bounce or even a fourth-quarter rally. By midday, the tepid momentum of stocks offered few clues, apart from an apparent willingness to stop the bleeding from last week, when the Dow Jones Industrial Average lost 2.6%, the S&P 500 dropped 2.7%, and the Nasdaq Composite fell 2.8%. After spending most of the morning in modestly positive territory, the Dow was recently down 0.1%, at 10,282.95. The S&P 500 was losing 0.4%, to 1191.46 and the Nasdaq was down 0.2%, at 2085.65. However, the modest declines could be considered a sign of resilience considering:
Delphi Automotive (DPH) filed for bankruptcy over the weekend, a move that may hit General Motors (GM) to the tune of $10 billion.
Dana (DCN) fell sharply after saying it would restate its earnings, while defense contractor Northrop Grumman (NOC) also warned.
There were also two high-profile profit-warnings in the tech sector Monday, from Xilinx (XLNX) and Unisys (UIS).
There were some factors offsetting the bad news, such as Lincoln National's ( LNC) $7.5 billion acquisition of Jefferson Pilot ( JP); an upgrade of IBM ( IBM) and; Wal-Mart ( WMT) reaffirmed its earnings guidance. Yet, overall action remained tilted toward selling, with declining issues outpacing gainers by 19 to 11 in recent Big Board trading and by 4 to 3 on the Nasdaq. And while the price of crude oil continued to drop Monday -- it was recently down 31 cents to $61.53 per barrel -- the overall impact on the broad market remains negative. A slide in energy stocks last week has weighed considerably on the major indices.
From Complacent to Panicked
As the third-quarter earnings season begins in earnest this week, the negative corporate announcements Monday morning could have provided more fodder to investors eager to continue last week's selling trend. But several strategists believe that the negativity seen last week and the resulting lower stock valuations provide a buying opportunity.