EQUITIES FALL IN AFTERNOON SESSION AS TREASURIES CONTINUE RALLY, GENERAL ELECTRIC DEBT OUTLOOK CUT.
QUADRUPLE WITCHING DAY ON FRIDAY DECEMBER 19TH. EXPIRATION OF DECEMBER INDICES
U.S. Equities collapsed after quietly hiding in the shadows of another unprecedented rise in Treasury Bonds, as further recession and credit concerns renewed investor concern regarding any category of investment vehicle besides secured government debt. Treasuries have posted a year to date return that in the last decade has been the providence of the equity markets. Equities began to fail after S&P downgraded the debt outlook for General Electric, which caused the stock to drop nearly 8%. Energy stocks fell as crude oil prices plummeted to a 4 ½ year low on growing perception that OPEC production cuts will do little to slow the demand destruction for energies going into the 1st quarter of next year. Crude prices were also pressured as the January contract expired this session, causing a last minute scramble to cover long positions and pressure the overall market.
Auto stocks, whose influence is more psychological than monetary now, also led the markets lower on reports that the three U.S. automakers will close nearly 60 assembly plants until after the new year at the earliest, as the liability makers-correction-car makers, await the decision by the Federal government on whether a bailout of the industry is coming. One sector that gained was insurers- as some regulations regarding reserves for annuity holders may be loosened, allowing for recommitment of resources to seek out better than current market returns.
Technically, Dow and NASDAQ futures essentially remained range bound today and are likely to remain so for the rest of 2008. Dow Futures remain in the channel between 8600 and 8800, with breakouts above or below having the inability to hold. The sharp bounce off lows at the close of the session suggests that retracement back to the low end of 8600 is likely. Look for possible strong bounces off the 8550 level to a near term resistance of 8720. Expect increased market volatility (a new concept?) as Friday is quadruple witching day-expiration of equity futures, options on futures, options on stock futures
March Dow futures settled at 8631, down 47. S&P futures settled at 892.50, down 10.50. NASDAQ futures settled at 1225.50, down 3.00.
Rich Roscelli and Paul Brittain
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