Good day! In the early-morning hours of trading in the futures market, the index futures found themselves retesting Tuesday's highs. The Dow Jones Ind. Ave. futures did so with slightly higher highs. These highs held into 2:00 a.m. ET when trading overseas shifted the market bias. Reversals are quite common at this time and a steady selloff began to take hold. Around 5:30 a.m. ET the futures found support and the market congested over the course of the next several hours. Once the premarket earnings began to roll in, however, the selloff resumed and gained momentum.
Dow Jones Industrial Average (Figure 1)
IBM (IBM) and Apple (AAPL) both had strong earnings, but it was not enough to keep the week's rally going. By the end of the day the S&P 500 and Nasdaq-100 had fallen off the year's highs hit on Tuesday and returned to the lower end of the monthly support at their 10-day moving averages. The materials, financials, and energy shares led the decliners. The stand-outs included Goldman Sachs (GS) and Wells Fargo (WFC). Goldman Sachs fell more than 4% after it posted a 53% decline in its quarterly profit. Wells Fargo managed to meet estimates, but weakness in the overall sector weight heavily on it and it still shed more than 2%.
The housing market was also once again in focus on Wednesday. Housing starts in December fell 4.3% to a seasonally adjusted annual rate of 529,000. This was the third-lowest ever and overall starts for 2010 were the second-lowest since records began in 1959. Building permits, however, rose 16.7%. The home builders ended the session lower, but most, such as DHI, PHM, LEN, and BZH were already testing strong resistance levels heading into the session.
S&P 500 (Figure 2)