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Time for Markets to Rest?

Time for a rest? S&P futures were largely unchanged Wednesday morning and the Dow opened slightly higher after GDP revisions. How much more can you expect? True, December historically has been one of the most profitable months, with average returns of 1.8 percent since 1928, according to ISI. But this December the S&P is up 6 percent, well above the 81 year average.

  • Video: Rick Santelli and Steve Liesman Dissect GDP

The weekly Investors Intelligence poll of financial newsletter writers had bulls at 58.8 percent, an increase of two percentage points and the highest level since October 2007. Just seventeen weeks ago the bulls were only 29.4 percent. This is a contrarian sentiment indictor: extreme levels of bullishness are usually associated with at least short-term market tops. At the last extreme reading in October 2007 bullish sentiment hit its high one week after the S&P 500 hit its all time record high close of 1565.

Elsewhere:

1) Another sell on the news earnings report: like CarMax yesterday, Nike is down 6 percent pre-open following its Q2 earnings. Although the shoemaker reported better than expected earnings ($0.94 vs. $0.88 consensus), shares are falling as a result of a disappointing 11 percent rise in future orders, a deceleration from the 13 percent increase in its Q1. However, the company reaffirmed its full-year sales forecast, but continued to warn that margins may be pressured in the second half due to rising costs, particularly in cotton.

Prior to its earnings report, Nike's stock had been trading at a historic high, rising 40 percent this year.

2) Walgreen jumps 7 percent after its Q1 earnings easily surpassed Wall Street estimates ($0.62 vs. $0.54 consensus). Margins expanded significantly as they were helped by effective promotions and better pricing. Pharmacy comps led the way, rising 0.9 percent on strong flu shot demand and as its prescriptions filled outpaced the industry growth rate. General merchandise comps rose 0.4 percent.

3) Hovnanian reported a significantly greater-than-expected Q4 loss (loss of $1.68 vs. loss of $0.66 consensus). Demand remained a problem for the homebuilder. Revenues dropped 19 percent and new contracts fell a sharp 13 percent. CEO Ara Hovnanian commented that "the current housing market remains quite challenging" as "a lackluster job market and high foreclosure activity is clearly having a dampening effect."

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