213 Points Down

It’s all my fault. I thought I’d take it easy today, maybe a post or two. The weather’s so nice out, what’s the worst that could happen?
213 points. That’s what could happen.
Obviously, the market can’t live without me. I’ve always suspected as much, and now I have proof. Today, the Dow gave us its first 200 point drop in nearly three years. Ugh.
The S&P 500 fell 1.83% which was its biggest fall since September 24, 2003. The Nasdaq dropped 2.35% and erased all its gains for the year. Remember that Google (GOOG) stock? It lost 8.5% today—its worst day ever—and fell below $400 a share. Last Wednesday, the stock was at $475.
Today, energy stocks led the charge and tech stocks got whacked the most. Concerns about the nuts running Iran, and the reappearance OBL sent oil up $1.52 to $68.35 a barrel. I think it’s interesting that oil is climbing on potential news, not news itself. This is a typical pattern. Oil rallies on fears, but falls on news.
Most people forget that the hurricanes didn’t cause oil to rally. Oil peaked on the day Katrina made landfall. The price of oil fell in the aftermath. That’s now how many people have remembered it. We’re not experiencing inflation. This is just scared oil traders.
The Oil Service Holders ETF (OIH) has become very popular with traders, and it shined today. That ETF tracks the Dow Oil Equipment and Services Index (^DJUSOI) which rose 2.56%. That was the single best industry group of all 100 sectors. Of the stocks in that index, Schlumberger (SLB) rose 6.4% and Halliburton (HAL) rose 5.2%. This energy rally is starting to depart from reality. It’s as if Google isn’t falling, it’s just being replaced. Same crazniness, different stocks.
On the tech side, the Dow Jones U.S. Technology Total Return Index (^DJUSTCT) dropped 3.16%. That doesn’t shock me so much.
Twenty-nine of the 30 Dow stocks lost value. Every single stock on our Buy List fell today. Combined, the Buy List fell 2.12%. Our biggest losers were Respironics (RESP) which lost 4.30% and UnitedHealth (UNH) which lost 3.24%. There wasn’t major news with either stock. Unlike the Dow and Nasdaq, we’re still up for the year (0.167% woo!).
General Electric (GE) made a lot of news by reporting earnings that matched estimates, but sales were weak. The stock fell 3.8%. That’s about $13 billion. Citigroup (C) fell 4.7% as it missed its earnings by two cents a share.
Today the market clearly said that it’s worried about the economy. Stocks move to earnigns and interest rates. Since long-term rates fell, that must mean its earnings. Here’s our proof: The Cyclical Index (^CYC) fell 2.41% today, but the Consumer Index (^CMR) only fell 1.31%. That’s a pretty wide spread for one day.
One curious thing today is that investors didn’t seek safety in Treasury bills. The three-month yield rose today to 4.25%. Investors did seek comfort in longer term Treasuries. The 10-year yield fell to 4.36%. Also, gold fell today. That wouldn’t happen if people were really scared.
I’m not concerned by today’s sell-off. I had said before that too much of the recent rally has been skewed to tech and energy. That couldn’t keep up. I was glad to see tech come down some, but energy look at risky as ever.
More of our stocks will report earnings next week, and I think our Buy List looks as good as ever. It should be a good week for us.
Here’s today’s damage:
dow.bmp

Posted by on January 20th, 2006 at 5:54 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.