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[Siforus]

Worries about banks drag stock market lower
By SARA LEPRO and TIM PARADIS (AP) – 1 hour ago

NEW YORK — A stock market ripe for a big pullback succumbed Tuesday, plunging when rumors of a bank failure revived investors' anxiety about the banking industry and the economy as a whole.

A batch of economic reports that just weren't good enough added to the mix as the major indexes all fell about 2 percent and the Dow Jones industrials slid 185 points. Treasury prices, usually the beneficiary of a slide in stocks, ended only moderately higher.

A break in the market's six-month rally was widely expected after investors showed a growing inclination to sell for some time. While the major indexes finished August with respectable gains, including a 3.4 percent rise in the Standard & Poor's 500, trading was erratic and the advances had a half-hearted feeling. Analysts warned that investors were doubting whether they should have bid stocks so high in the rally that began in early March.

So it wasn't surprising that, after the Dow was up 60 points in response to a seemingly better-than-expected reading on manufacturing, something like a rumor about a possible bank failure could take the market down.
"Some time midmorning, rumors came out that a large bank could be in trouble," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "That's all it takes to spook this market."

The rumors were never substantiated.

The Dow's drop virtually equaled a 186-point slide two weeks ago that the market later recovered from, sending stocks to their highest levels in almost 10 months. Dan Deming, a trader with Strutland Equities in Chicago, said it didn't appear much had changed in the market since then, but investors have grown more nervous as stocks have pushed higher and that was enough to tip off heavy selling.

"It's really more psychological right now than anything. The first day of September — the market shows some weakness and then it just kind of starts to feed on itself," he said. "Everybody is kind of looking over their shoulder."

Deming referred to the fact that many investors had some fear of what might happen in September, which historically has been the worst month for stocks. Many analysts said the change in calendar was one of many factors that created a critical mass of sorts for the market and fueled Tuesday's drop.

Banks and insurance companies were among the most notable losers amid the fears of bank failures, but they also had been pumped up the most in the rally that lifted the market more than 50 percent since hitting 12-year lows in March. With the government reporting last week that 400 banks were in trouble during the second quarter, investors' anxiety about the health of the financial industry was heightened and so rumors that investors might shrug off in less fractious times became powerful enough to cause sustained losses.

The plunge in stocks came even as the Institute for Supply Management reported that U.S. manufacturing grew in August for the first time since January 2008. The market also shrugged off another positive economic report, the sixth straight monthly increase in pending home sales.

On the surface, the day's economic numbers were good. A deeper look at the data gave some cause for concern.

Analysts said both the manufacturing and housing reports got a boost from government stimulus efforts, including the Cash for Clunkers program that has since expired, which means the recovery in those industries may not continue at the same pace.

"In both cases it seems headlines overstate details by a touch," said Tom di Galoma, head of U.S. rates trading at Guggenheim Capital Markets LLC. "People reviewed the numbers and said this type of demand is just not sustainable."

Investors were also uneasy ahead of Friday's employment report from the government, which could reveal more bad news about the job market, one of the worst remaining problem areas in the U.S. economy.

The Dow dropped 185.68, or 2 percent, to 9,310.60. The index is down 270 points, or 2.8 percent, since Friday, its biggest drop over three days since July 7, when it lost 341 points.
The S&P 500 fell 22.58, or 2.2 percent, to 998.04, while the Nasdaq composite index fell 40.17, or 2 percent, to 1,968.89.

The day's retreat was broad:
_ Of the 30 stocks that make up the Dow industrials, only Wal-Mart Stores Inc. rose.
_ Five stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 7 billion shares compared with a light 5.3 billion Monday.
_ The Chicago Board Options Exchange's Volatility Index, known as the market's fear index, surged 12.1 percent, its biggest jump since Aug. 17. The VIX stands at 29.2 and is down 27 percent in 2009 and its historical average is 18-20. It hit a record 89.5 in October at the height of the financial crisis.
In other trading, the Russell 2000 index of smaller companies fell 14.01, or 2.5 percent, to 558.06.
Bond prices turned mostly higher after stocks began to fall and investors went in search of safer assets. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.36 percent from 3.40 percent late Monday.

Among financial stocks, Bank of America Corp. fell $1.13, or 6.4 percent, to $16.46, while JPMorgan Chase & Co. dropped $1.79, or 4.1 percent, to $41.67. Citigroup Inc. fell 46 cents, or 9.2 percent, to $4.54.

There was one gainer in the Dow: Wal-Mart Stores Inc. rose 10 cents to $50.97.
While the pullback in stocks Tuesday was significant, even with the drop, stocks have risen so much that only one of the roughly 3,100 stocks traded on the NYSE hit a new annual low. And, 53 carved new highs.

Copyright © 2009 The Associated Press. All rights reserved.

[Longshot]

Originally Posted by Siforus [ "Some time midmorning, rumors came out that a large bank could be in trouble," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "That's all it takes to spook this market." The rumors were never substantiated.

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I wondered why that drop happened (in the 1day). Thanks for the post Siforus.

[andre3k1]

what is everyone hoping to sell at or are you all playing this long term?

And those "unsubstantiated rumors" pshh

[teenwolf41]

I want to get back into Citigroup, but completely agree with the correction. The S&P closed below 1000 today. Probably will see the DOW head back near 8800 and the S&P back to 950 then all the banks look interesting again.

[pdtpatrick]

Like the other two - i wouldn't buy C - well not now at least. If you plan on holding long then i guess it wouldn't matter much (except you can get more shares if it goes down a bit).

I do believe we are going to see a bit of a pullback before taking off so if you plan on flipping then maybe wait a bit and buy on the cheapies.

[multiowner]

Interesting

[andre3k1]

quick sketch up. It could happen, c'mon C!

notice the trend channels. everything in white I drew in to give an idea of what I'm hoping will happen. Can anyone interpret my drawings and decide whether or not they are at all feasible? we will see today.

note: each candlestick represents a day, chart shows 3 months

[NashuA]

Don't Trust The Rally - Forbes.com

Good article I find ... especially the part where they say that the gov money has to be paid back at some point.

[Siforus]

If anyone has the second page that would be cool as I'm not a subscriber to Barron's..
Stocks Slip 1% as Financials Flounder - Barrons.com

Home > Markets > Markets Page > The Trader
MONDAY, SEPTEMBER 7, 2009
THE TRADER

Stocks Slip 1% as Financials Flounder
By BILL ALPERT | MORE ARTICLES BY AUTHOR
Anxiety about banks and economy dents the rally.
Article
New Comments (1)


FINANCIAL MARKETS ARE EXHIBITING SYMPTOMS of anxiety disorder, after six months in recovery. Financial shares led a sharp retreat by stocks on Tuesday. Treasury yields are up, while gold is spurting ahead of other commodities.

Early week concerns, focused on how West Coast banks such as Wells Fargo (ticker: WFC) and Bank of America (BOA) intend to finance their way out of the federal Troubled Assets Relief Program (TARP), left stocks at a modest loss for the week. On the week, the Dow Jones Industrial Average slid 1.1%, or 103 points, to 9441. For the Standard & Poor's 500, the week's loss was 1.2%, with a 12-point retreat to 1016. The Nasdaq Composite slipped 0.5%, or 10 points, to 2019.


No need for Xanax. Stocks have come far, fast, from their March 9 despond, with average gains of 45% to 60%, depending on the index you use. The market remains some 15% to 20% below its level a year ago, and a third below the manic highs of 2007.

And if you believe that the mind of the market must reside in a sound body, well, the economy continues to mend. Last week's employment numbers were poor by any historical standard, but better than expected. The count of non-farm jobs lost in August, at 216,000, was lower than the July number of 276,000. Job-loss trends in the current quarter are improving from the terrible levels of the past three quarters. The Institute for Supply Management's manufacturing index -- a widely followed measure of the health of that industrialized 12% of our gross domestic product -- ticked up to 53 last week, crossing into the range that's considered expansionary. The overall rate of unemployment rose to the horrid level of 9.7%, but there's hope that a recovery will put those folks to work.

IF THE ECONOMY CONTINUES IMPROVING by bits and pieces, the September-quarter earnings of S&P 500 stocks may end up better than the sequentially flat forecast of analysts surveyed by Thomson Reuters. But with the market already up by half since its March nadir, is there a stock play for the investor who wants to bet on better-than-expected third-quarter earnings? One such idea occurred to JPMorgan equity strategist Thomas J. Lee while he was reading the short-interest tables in his favorite weekly stock-market tabloid (yours, too, we trust). Lee suggests buying the shares of some large businesses that are heavily shorted. Among those names: Citigroup (C), Bank of America , EMC (EMC), and Las Vegas Sands (LVS).

It's been a good year to bet against big short positions. As the Morgan strategist reported in a Thursday note to clients, in each month since March, the 10 stocks with the largest monthly jumps in short interest have gone on to outpace the S&P 500 in the subsequent month by an average of 8%. Measured over three months, these highly shorted stocks outperformed by 19%.

[Siforus]

I finally pulled out yesterday with just a little change for profit.
Don't want to go that long.
Bye Bye c