Lots of technical talk this morning on yesterday's weakness. RBC Capital Markets, in a note to clients this morning, noted that "An inability to make new highs into late September would be a significant negative for stocks well into Q4."
For the technically inclined, the next level of support is the August 17th closing low of 979, about 20 points away.
Look for outperformance in defensive names (something lacking this summer).
1) BP up 4 percent, makes "giant" discovery in the Gulf of Mexico. Rare when the word "giant" is used, but that appears to be the case. This discovery, called Tiber, appears to contain at least 3 billion barrels of oil, and perhaps as much as 6 billion. Still, only one well has been drilled and further appraisal is needed.
BP is the operator and owns 62 percent of Tiber; Petrobras (PBR) and Conoco (COP) own the remaining 20 percent and 18 percent.
This will not start production until 2015. If they can share infrastrcuture with another large field that BP is already exploiting in the area (Kaskida) there may be significant cost savings.
2) Is the worst over in Europe? Jean-Claude Juncker, the chairman of Eurozone finance ministers, showed some optimism today, saying "the worst is over for the time being."
Q2 GDP for the 16 countries using the Euro fell 0.1 percent quarter-over-quarter. The decline was much smaller than the 2.5 percent contraction in the first quarter. Also encouraging, German and France - Europe's two biggest economies - saw GDP growing in the second quarter.
Yesterday, French Finance Minster Christine Lagarde said that the country's 2009 GDP forecast "might" be revised upwards, after better-than-expected Q2 expansion and expectations that Q3 GDP "will not be bad."
3) Walgreen (WAG) saw its August same-store sales rise a disappointing 1.9 percent, as a 3.8 percent rise in pharmacy sales offset a 1.3 decline in general merchandise sales at its stores.
4) Despite a small decline in interest rates, the Mortgage Bankers Association reported mortgage applications falling 2.2 percent. Loan applications for home purchases fell for the first time since early July, while a decline in refinancings snapped two consecutive weeks of gains.
5) Deja vu all over: A report by Jones Lang LaSalle says that the level of U.S. commercial real estate deals seen in the boom years of 2005 through 2007 may take a generation to return.
I would note this was also the thinking in 1990, when I was the real estate reporter for CNBC. Pundits confidently predicted that commercial real estate would not recover until at least 2000; in fact, the recovery was underway by 1994.
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