Stocks retreated Friday after a record drop in retail sales and some dismal fourth-quarter forecasts.
This comes on the heels of a rollercoaster session that saw the Dow swing more than 900 points from low to high and drop below 8,000 intraday before ending up 552.59 at 8835.25.
“It was terrific,” Art Cashin, head of floor operations for UBS, said of Thursday’s retest of recent lows and subsequent rally. “It was as close to capitulation as you probably want to come,” he said on CNBC this morning.
One of the most troublesome aspects of this market for some analysts is that the intense volatility has returned. This morning, the VIX was back above 60.
But Oppenheimer’s Carter Worth said he thinks the market's violent moves are actually optimistic signs.
“The market is in the throws of pricing in all the bad news that’s coming," Worth said. "It’s in a process of stabilizing and healing."
Still, other market pros said don't trust yesterday's rally.
On Friday, the Commerce Department reported that retail sales dropped by a record 2.8 percentto a seasonally adjusted $363.7 billion in October, more than the 2 percent economists had expected and the largest decline since the series started in 1992. Excluding autos, retail sales fell 2.2 percent.
Among the morning's other economic news, the University of Michigan/Reuters gauge of consumer sentiment unexpectedly rose to 57.9in a mid-November reading, following a record drop at the end of October, as falling gasoline prices helped offset worries about the economy.
Import prices fell 4.7 percent last month, the biggest one-month drop since 1988, amid the sharp drop in oil prices. Export prices slipped 1.9 percent, the biggest drop since the gauge was first recorded in 1988.
Crude prices remained below $60 a barrel. One industry executive said oil could test $40 a barrelin the near termbut the firm will post a record profit no matter what.
A slew of fourth-quarter warnings quashed any potential for an opening-bell rally.
American depositary shares of Nokia dropped about 10 percent in heavy trading after the Finnish handset maker slashed its fourth-quarter guidance citing the "sharp pullback in global consumer spending."
And Sun Microsystems said it would be laying off up to 6,000 workers, or 18 percent of its global staff, as a slump in the sale of high-end servers has hammered the company.
JCPenney reported this morning that its profit declined as same-store sales dropped 10 percent. The department-store operator also delivered a fourth-quarter forecast that was well off analysts' estimates and said that challenging conditions would persist through 2009.
It's no surprise that retailers are seeing double-digit percentage drops in sales but what is a little unsettling is how far off the forecasts were from the four retailers that reported last night and this morning — the other three being Nordstrom , Kohl's and Abercrombie & Fitch — compared with analysts' forecasts. There was anywhere from a 30 percent to 50 percent disparity.
Morning tone could be dictated by comments from Federal Reserve Chairman Ben Bernanke, who speaks at a conference in Frankfurt, Germany at 8:30 am New York time, along with European Central Bank President Jean-Claude Trichet.
Government responses to the financial crisis will also continue to have an effect on trading.
Ahead of the G20 economic summit, outgoing President George W. Bush defended the free market system, but acknowledged reforms were needed.
The proposed auto-industry bailout got backing from U.S. Treasury Secretary Henry Paulson on Thursday as he urged Congress to help the likes of General Motors, Ford and Chrysler. But the money should not come from government's $700 billion bailout fund, Paulson said.
GM shares gained about 3 percent, while Ford declined.
Citigroup shares rebounded amid news that the bank may cut up to 10,000 jobs, according to the Wall Street Journal. On Thursday, the stock slumped to its lowest level in 13 years, putting mounting pressure on management. One analyst told CNBC that Citi shares are set for more declines after falling below a "critical and vital" support level.
The Federal Reserve's role in the credit crisis will be the topic of discussion when Cleveland Fed President Sandra Pianalto speaks in Cleveland, Ohio at 12:30 pm.