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Reminders Of Just How Bad Things Are

Wednesday, 23 Jul 2008 | 4:06 PM ET

We had a couple reminders midday about how poor economic conditions are:

1) the Fed Beige Book describes the economy as having 'slowed;"

2) JD Power cut their outlook for auto sales, projecting a 12 percent dip in sales for 2008 compared to 2007 (to 14.2 million cars and trucks), which would be the lowest level since 1993

Still, a number of factors helped stocks today:

1) housing bill near passage in the House of Representatives
2) commodities decline
3) dollar up
4) bonds downs
5) earnings affirmations from companies like Pfizerand Whirlpool
6) FDIC Chairperson Sheila Bair saying she did not see another IndyMac-size bank failure

However, there is considerable debate about the financial rally that began last week. There are bulls and bears here, but here is the consensus:

--a floor is in, but financial stocks are now overbought
--the 6-day rally is running out of steam
--fundamentals for financials are still poor, sideways trading is likely for the next several months

Home builder Pulte reports after the bell; MMM, Ford and Potash report tomorrow before the bell.

Update: I noted that there was considerable debate today about where financials might be going. Most agree that they are overbought short term. After the close, here’s what Birinyi had to say:

“Six days ago we highlighted the fact that the financial sector was the most oversold since the Crash of 1987 (the second most oversold ever). While the sector is technically not overbought, at just .65% above its 50-day average, (overbought would require a reading of approximately +15%) we would caution that the sector has just had its greatest six trading day change ever at +30.79%.”


Questions? Comments? tradertalk@cnbc.com

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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