Markets Oversold, Traders Bearish

The market remains oversold and traders remain extremely bearish. Example: the Investors Intelligence survey of financial newsletter writers continues to drop, with Bulls down to 31.9 percent (vs. 33.7 last week) and the Bears at 44.7 bears (vs. 39.3 percent last week), the lowest readings since the market bottom in March.

The most important news this morning comes from Europe: Deutsche Bankis up 5 percent pre-open after staring they would make a profit in the second quarter and would not require more capital. Yesterday UBS also said it would not require more capital.

Also overseas, please note that the Nikkei is down 10 days in a row.


1) UnitedHealth Groupagain cut its earnings forecast, but they are up 5 percent as the stocks have already reflected the prior forecast cuts from them and other HMOs. The problem: the amounts they are charging are not in line with the costs they are incurring (margin squeeze).

2) Blockbusterhas withdrawn its bid for Circuit City, citing market conditions. Circuit City said its "announced exploration of strategic alternatives to enhance shareholder value is an active and ongoing process."

3) I mentioned yesterday that the hot IPO of the week was over at the NASDAQ--Energy Recovery (ERII) makes energy recovery devices for water desalination plants. It priced 14 m shares at $8.50 a share, toward the high end of the $7 to $9 estimated range.


--Meredith Whitney at Oppenheimer reduced estimates for Merrill Lynch (from a gain of $0.20 to a loss of $4.21!), saying they will likely do some form of capital raising in conjunction with the second quarter earnings release.

--Bernstein upgraded ExxonMobilto Outperform, saying that earnings revisions were coming.

--Finally, in the gee-thanks-for-that category: Merrill Lynch downgrades GM, reduces the price target for $7 from $28 (read that again: to $7 from $28) and adds we believe there is potential downside in the stock below $7 and "bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is not raised." GM down 4 percent.

Questions? Comments?