Am I seeing things, or does it look like we are bottoming? I know yesterday (Thursday) was a mess, and Greece is a constant issue, but we hit the bottom last week right around the options expiration. The Morgan Stanley Cyclical Index (CYC) has picked up since then, while the Consumer Index (CMR) has lagged.
Brief flurry of activity in Italian banks this morning, as UniCredit and Intesa Sanpaolo were briefly halted in Italy on concerns that they may have significant exposure to Greece, or may not pass stress tests and may be forced to raise more capital. Both of these are not unreasonable concerns. UniCredit down 3 percent in Italy.
1) Russell rebalancing today. Once a year, typically on the last Friday in June, the Russell indexes rebalance. The Russell indexes are market cap weighted, but those weightings are adjusted yearly only on this one day. There is migration to and from the Russell 1000 (large cap index) and to and from the Russell 2000 (small cap index) as some companies have increased or decreased their market cap and migrate into a different index. The cutoff last year for inclusion in the Russell 1000, for example, was a market cap of $1.7 billion, and $112 million for the Russell 2000.
Index managers who are directly or indirectly tracking the Russell indexes will need to rebalance their portfolios at the end of the day, which always causes a spike in trading activity near the close. During the rebalancing at this time last year, about 7.5 billion shares were executed just in NYSE-listed stocks, 50 percent higher than the daily average of 5.4 billion.
2) Oracle falls 4 percent despite beating earnings estimates ($0.75 vs. $0.71 consensus). Although overall sales were inline with Street expectations, the stock is taking a hit on disappointing computer hardware sales, which declined over 6 percent.
3) More weakness in tech: Micron plunges 10 percent after significantly missing estimates ($0.07 vs. $0.16 consensus) amid a big top line miss as well. Poor volumes for the memory chipmaker caused a 7 percent decline in DRAM and a 5 percent drop in NAND flash memory sales.
According to Mark Adams, Micron's VP of Worldwide Sales, hurting the company was "a softening of the desktop and notebook PC climate." The stock is reflecting those ongoing concerns, as prior to today's drop, shares had already plunged 26 percent since the market's high on April 29.
4 ) Southern Union jumps 15 percent after receiving a rival bid from Williams . Williams offers $39/share in cash for the natural gas pipeline firm, or about $4.9 billion plus the assumption of $3.7 billion in debt. That bid goes up against the previously-accepted $4.1 billion stock offer (or $33/share) from Energy Transfer Equity (ETE) last week.
4) Marathon Oil is fractionally higher after S&P announced that refiner Marathon Petroleum will replace RadioShack in the S&P 500 following its forthcoming spinoff from Marathon Oil after the close on June 30. Marathon Oil, which will be focused on upstream operations (exploration and production), will also remain a member of the S&P 500.
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