Taking Stock of Wall Street 2008-08-18

Dow went down by -180.51(-1.57%) to 11479.39
Nasdaq by -35.54 (-1.47%) to 2416.98
SP 500 by -19.60 (-1.53%) to 1278.60.

Rising stocks were out-maneuvered by falling stocks:

NYSE: only 888 stocks advanced against 2228 stocks declined Dec 2228
Nasdaq: only 880 stocks advanced against 1935 stocks declined.

But volumes were subdued with NYSE accounting for 984 millions and Nasdaq for 1.68 billion.

The only sectors that made some show of strength in today's session were gold, the utililites and the oil and gas explorers.

The main concern for the market was whether the mortgage biggies FeddieMac and FannieMae will be capitalized by the Fed government, though oil traded lower.

Because the short-term benefits of such a bail-out move is far out-weighed by the long-term adverse effects on financials, already on shaky foundation due to bank failures. Government's interim intervention before was soon forgotten as market responded half-heartedly with short rallies, only to be reversed soon.

And there is a regulatory sword already hanging over some of the finanacial institutions who have been accused by investors of duping them into buying risky investments. So any daily hiccup like the bail-out news is enough to shake the financials.

Thus, on a day when sellers overcame buyers convincingly, weaklings the financials were the obvious casualties. Stalwarts American Express (AXP), Bank of America (BAC), Citibank (C) and JPMorgan Chase (JPM) were all on the lower side today.

"What will happen to FannieMae and FreddieMac?" bothered the market to such a degree that benefits of a lower oil around $113/barrel was soon forgotten. Needless to say Fannie (FNM) anf Freddie (FRE) fell by the twenties of whatever is left from the previous bloodbath.

May be the initial euphoria about a falling oil soon evaporated as the problems of the mortgage insurers refused to go with government's prior patchwork. Instead, now it threatens to evolve into a storm.

Aiding the financials in the slide also were the technology stocks.

Looming dark clouds meant market players sold off for whatever little profits they can snatch. Thus, bullish stocks were in 800s while the bearish stocks accounted for than twice that in 2000s be it NYSE or the Nasdaq.

It was not all doom and gloom though. At least a few companies were able to show off positive performance:

Loew's (LOW), the home hardware retailer came off with a more than expected quarterly earnings per share but is not willing to paint rosy picture for the future. Actually the quarterly returns were lower than the last but it beat the reduced estimates of the street experts.

BHP Billington (BHP), the mining specialists returned better yearly profits of $15 bln,keeping up with the past five years and seem to be confident about keeping it up in the immediate future. With such stellar performance, BHP believes it should be the preferred "suitor" for Rio Tinto (RTP). Of course, if RTP is willing.

While oil can be held responsible for the early slide in the market, it was profit taking that sustained it. Oil did recede in the afternoon but the damage was already in place to take any advantage of oil denouement.

Notably, despite all this uncertain environment, neither financials nor the broader market have gone back to the major low of last month. Market seems to be range bound since then.

Is it fear or weariness? Low volume supports the latter. We will know that for sure only once the indices breach the ranges and moves up or down from there.