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2 hr 11 min ago

[BRIEFING.COM] During what is becoming quite a regular theme for equities, global concerns about inflation, a slowing economy, and the Fed going too far with its rate hikes, especially heading into Wednesday's influential CPI report, continued to haunt the stock market. The indices' inability to find support near key technical levels also pushed the Dow and Russell 2000 into the red for the year and the Nasdaq lower for an eighth straight day. Above average volume, as nearly 2.0 bln shares were traded on the NYSE, lent even more conviction behind today's broad-based decline.

Adding to the prevailing sense of uncertainty as to when and where stocks will eventually form a technical bottom was another sell-off overseas, with about two thirds of the global markets reportedly in a technical correction of more than 10%. Japan's Nikkei plummeted 4.1%, recording its biggest one-day point decline since September 12, 2001, while Hong Kong's Hang Seng Index lost 2.5% and the European bourses all lost roughly 2.0% amid worries about rising interest rates in the U.S. choking off consumer demand for exports.

Before the bell, the Labor Dept. reported that core PPI rose 0.3% in May, a bit more than an expected 0.2% increase and reflective of building inflationary pressures at the wholesale level. Investors also got an update on the health of the consumer, but May retail sales (excluding autos) merely matching an expected 0.5% increase provided evidence of a modest slowdown in consumption and exacerbated the hesitation of investors to get back into buying mode.

Even though this morning's data didn't alter the Fed's perceptions, since tomorrow's more important report detailing prices paid by consumers, who account for about two-thirds of economic activity, the absence of good news on the inflation front combined with slowing growth kept buyers on the sidelines again in hopes that the CPI data will provide a more telling signal as to the direction of Fed policy.

Despite some more relief on the commodity price front, the absence of leadership from the Energy (-2.8%) and Materials (-2.0%) sectors -- last week's biggest laggards losing 6.2% and 6.7%, respectively, and today's worst performers -- continued to act as an offset. Gold fell below $600 for the first time in nearly two months and recorded its biggest drop in fifteen years, plunging 7.2% to close at $567.50/ounce as concerns that global central banks will raise interest rates and weaken worldwide economies prompted another sell-off across the metals complex. Crude oil prices plunged 2.5% to a three-week low ($68.57 per barrel, -$1.79) on concerns that Wednesday's weekly inventory data may show there is plenty of gasoline to meet summer driving demand.

Another thorn in the market's side was a 1.9% drubbing in the influential Financials sector, which slipped into negative territory for 2006. Regardless of another blowout quarter from Goldman Sachs (GS 139.05 -5.95), which plays into our favorable outlook for Investment Banks and Brokers, concerns as to whether or not it can sustain such strong profit growth in a rising interest rate environment prompted investors to take profits. The AMEX Securities Broker/Dealer Index (XBD) more than erased its entire 3.3% year-to-date advance after plummeting 4.8%.

Upside Q3 EPS and sales guidance from Qualcomm (QCOM 41.75 +0.56), and bargain hunters believing the worst is over for Intel Corp (INTC 17.13 +0.27) at three-year lows, helped renew some early enthusiasm for Technology. However, Jabil Circuit (JLB 24.87 -7.55) losing nearly 25% of its value after slashing Q3 profit guidance was just one of many reasons behind the year's worst performing sector's (-9.5%) inability to cling even to a small gain.
NYSE Adv/Dec 785/2500...Nasdaq Adv/Dec 810/2280