Here's to a better second half. We could use it.
You've heard the superlatives. The market has had its worst first half since 1970. Think men on the moon and bell bottoms, and GM shares trading higher than they are now. Ouch.
The Dow lost 14.4 percent; the S&P lost 12.8 percent and Nasdaq lost 13.5 percent so far this year. Dare we say it couldn't get much worse.
The second half looks to be more of the same but many strategists still think stocks will end the year higher. Just find a way to navigate those twin terrors of the credit crunch and rising oil prices.
Let's look first at the year's winners. Of course, one of the best - energy stocks, up 8 percent for the first half (17 percent for the quarter) and technology stocks, up 13 percent for the year but 2.3 percent for the quarter. Oil services were a big winner in the energy sector, up 17 percent for the year. Gold stocks in that period are up 13 percent.
Losers? You guessed it. The financial sector was the worst. It washed out with a 30 percent loss for the year so far, and it's still heading lower.
In Monday's market, rumors surrounded the financials, particularly Lehman and Wachovia. Lehman declined on takeover rumors but recovered slightly after Morgan Stanley came out and defended the stock late in the day.
For Tuesday, one of the big stories will be auto sales for June. The question is will Toyota finally overtake General Motors , as it continues to flounder. GM stock Monday hit a 54, yes, 54-year low, and Ford fell as Chrysler was the latest to announce production cuts.
Also on the agenda Tuesday is ISM manufacturing data, released at 10 a.m. Construction spending for May is also reported at that time.
Oil topped $143 per barrel Monday on more worries about tensions between Iran and Israel, but slipped back down to finish at $140. Year-to-date, oil is up 46 percent, and it's up 97 percent from a year ago.
CNBC Europe continues to cover the World Petroleum Congress in Madrid Tuesday. The event brings together governments and international oil companies to discuss the state of the oil market.
There's a lot of debate about whether there's a big blow off selling spree coming soon to the stock market. Traders have very mixed views about this.
I spoke to Art Cashin as he left the set of "Squawk Box" Monday. He says he's hoping to see capitulation in the near future - a big sell off on decent volume. "This is not death by stabbing. It's death by a million paper cuts," he said of the market's miserable performance.
Cashin, director of floor operations at UBS, said there are some real signs the market is over sold. The Dow 30 were below their 50 day moving average. He said 10 percent of the S&P 500 are making new lows and later Monday that number got even larger.
BlackRock's Chief Investment Officer Bob Doll released a mid-year outlook Monday. He said he expects stocks to "grind" higher. He says the U.S. stock market could outperform other developed markets this year, helped by global growth, stronger earnings, and moderating inflation. Doll says he sees the U.S. avoiding recession but a period of low growth will persist.
He says the worst of the credit crisis is behind us but not entirely and problem areas remain. He says while food and energy prices are rising, he expects inflationary pressures to diminish because the credit crunch and housing "bust" are deflationary forces. I will speak to Doll later in the week and share more of his views.
While Doll expects stocks to grind higher, traders have been telling me they see them grinding lower for the near future.
Andrew Burkly, a market technician with Brown Brothers said in a note Monday that he is moving his near term tactical outlook on stocks down to neutral because the S&P 500 may need to break its first quarter low before there's a buying opportunity. He said some of his indicators are showing oversold levels, equal to March or January, but all the components are not in place for a good buying opportunity.
"We firmly acknowledge the risk of abandoning our bullish call close to a low, but in the short-term, we believe downside risk and upside reward are roughly equal," he wrote. His expectation for the S&P 500 for the next one to three months is for it to stay range bound between 1350 on the upside and 1250 on the downside.
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