Stocks hold up as big names keep guidance intact

An employee works on an engine at the assembly line of a car factory in Qingdao, China.
STR | AFP | Getty Images

Several big Industrials and Materials reported today. Caterpillar, DuPont, and United Technologies all beat on earnings, implied they were cautious, but none of them took steps to lower earnings. That's why they are all trading up today. 3M is the only one trading down. They didn't lower earnings, but just slightly lowered sales growth guidance.

The fears that global Industrials would use China, or Brexit, to "walk down" second-half earnings estimates are not happening. That's the good news. The bad news is that oil near $40 may still throw a monkey wrench into the "improving earnings" scenario.

One thing to be wary of: "air pockets" on summer days. We saw it this morning. Just before 11 a.m. ET, the S&P 500 dropped 6 points in about a minute. Predictably, I got the usual "What happened?" messages.

The answer is not much. There appears to have been a sell program that came through involving futures contracts (there was talk it involved $3 billion to $4 billion), but there was no macro event around it.

In other words, somebody sold futures contracts into a very thinly traded market, and the markets dropped.

How thin is trading? On a normal day, the S&P 500 ETF would trade 120 million shares. Yesterday, it traded 55 million — less than half of the normal volume!

On a normal day, the market will trade roughly $300 billion to $400 billion in stock, so the sale of $3 billion in E-Mini contracts, even over a short period, would not be an enormous amount.

But with volumes this light, any dumping of stock is a guaranteed market dropper.

When you sell stock with no obvious event around it, the market will usually begin to recover, and that is exactly what happened. Within an hour, the S&P was back to where it was before the drop, and has since been meandering in a narrow range.