Sam Collins

Stay Long For Now

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Despite solid earnings from IBM (IBM), Coach (COH), Wells Fargo (WFC), US Bancorp (USB) and State Street (STT), stocks fell in a broad sell-off yesterday. The angst that caused the selling was not the expectation of poor earnings by U.S. stocks, but a move by China to curb lending by several of its key banks. 

The rumors of a Chinese move to tighten credit surfaced on Monday, but the restriction on the banks was the first overt move in that direction. And what concerns the market most is that if the move leads to a full-fledged policy of tight money, with the resultant slowdown in the Chinese economy, that could jeopardize the global economic recovery.

And not all earnings were better than expected. Morgan Stanley (MS) reported 14 cents versus an expected 36 cents, and Bank of America (BAC) reported a loss of 60 cents instead of an expected loss of 53 cents.

On the NYSE most of the larger losses were confined to the big international companies. IBM fell 2.9% and scored the biggest percentage decline of the Dow 30 stocks. Alcoa (AA), Chevron (CVX), Microsoft (MSFT) and Caterpillar (CAT) also fell, and each has a large stake in international operations.

Energy stocks were down the most, off 1.7%, and commodities fell as well, but the U.S. dollar gained 1.1% versus a basket of foreign currencies.

At the close, the Dow Jones Industrial Average (DJI) was down 122 points to 10,603, the S&P 500 (SPX) lost 12 points at 1,138, and the Nasdaq (NASD) was off 29 points at 2,291. 

The NYSE traded just over 1 billion shares with decliners ahead of decliners by 11-to-4. The Nasdaq traded 705 million shares and decliners there were ahead by almost 3-to-1.

February crude oil fell $1.40 to $77.62 a barrel, and the Energy Select Sector SPDR (XLE) fell 93 cents to $58.87. 

February gold fell $27.40 to settle at $1,112.60 an ounce, and the PHLX Gold/Silver Sector Index (XAU) fell $6.61 to $167.29.

What the Markets Are Saying

The Street has many sayings and some carry valuable insights. One oldie-but-goodie is: "Buy on strike news, sell on settlement." We haven't seen many strikes lately, but another old-timer, "Buy the rumor, sell the news," often has impact, and yesterday was one of those days.