On Friday, world markets fell sharply when China signaled that
it might tighten its monetary policy in order to counter inflation.
U.S. stocks pulled back as well, with the Dow falling to its lowest
levels since Nov. 22, giving back all of the gains made since the
midterm elections. But while the Dow fell 0.8%, the Shanghai
Composite fell 5.2%. Materials stocks, which could take a direct
hit from the Chinese decision, led the sectors of the S&P 500
In Europe, stocks fell again on fears of another bailout of
In corporate news,
The Boeing Company
) fell 3.5% following a downgrade by Bernstein Research.
The Walt Disney Company
) was up 5.1% on rising bookings at their theme parks.
) rose 1.4% following a dividend increase of 15%.
) jumped 5.2% after beating Q3 estimates, and
) was strong, up 9.7% on much higher Q3 earnings than expected and
a strong profit margin.
The yield on the 10-year Treasury note rose to a new two-month
high - 2.754% from 2.538% a week ago. And the greenback rose 2%
against a basket of currencies. But the euro held its own, being
quoted late on Friday at $1.3693 compared with $1.3659 on
At Friday's close, the Dow Jones Industrial Average fell 91
points to 11,193, the S&P 500 fell 14 points to 1,199, and the
Nasdaq was off 37 points at 2,518. The NYSE traded just over 1
billion shares with decliners ahead of advancers by 4.8-to-1. The
Nasdaq traded 613 million shares with decliners ahead by 4-to-1.
For the week, the Dow was off 2.2%, the S&P 500 lost 2.2%, and
the Nasdaq fell 2.4%.
Crude oil for December delivery fell $3.12 to $84.69 a barrel,
Energy Select Sector SPDR
) fell 94 cents to $62.94. December gold fell $37.80 to $1,365.50
an ounce on moves by China to curb inflation. The
PHLX Gold/Silver Sector Index
) fell 5.93 points to 216.1.
What the Markets Are Saying
While Thursday's pullback could be attributed to just one
stock's bad day -
Cisco Systems, Inc.
) - Friday's continued selling is more troublesome. On Friday, each
major index fell through its near-term support and continued deep
into the next support zone.
For example, the S&P 500 drove to an intraday low of 1,194
and into the wide zone of 1,174 to 1,210. It and the Dow spent most
of Friday afternoon gaining against early losses, and perhaps that
momentum will carry through today. The bright spot is that the
S&P found support at its 20-day moving average at 1,195. And
the NYSE Composite and Nasdaq also bounced from their 20-day moving
But the Dow Industrials failed to hold at the 20-day moving
average, so its near-term trend is down while the other indices are
Moving Average Convergence/Divergence (MACD)
on all of the indices has signaled that a pullback is coming and
could last for several weeks as the market tests the major support
lines at Dow 11,000 and S&P 1,174.
The upside goal of 1,200 to 1,220 is still our target, but
before buyers return, the enormous gains of October will most
likely result in a two-to-four-week consolidation that began
following the election. Day traders may want to short into any
quick rallies, while longer-term investors should hold cash and
wait for the next buying opportunity.
For one ETF you can use to take advantage of a pullback, see the
Trade of the Day
Today's Trading Landscape
To see a list of the companies reporting earnings today,
For a list of this week's economic reports due out,
If you have questions or comments for Sam Collins, please
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