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Dow Industrial Average

Key Statistics: Oct 30

Open: 9961.52

High: 9962.13

Low: 9684.54

Close: 9706.53

Change: -249.85(-2.5%)

RSI: 43.97

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Snapshot:

·         A weak consumer sentiment data for the month drags down the sentiment in market, leading to broad losses.

·         Dow shrugs off more than 2.5%, which ensured that the Dow ended on a flat note for the entire month.

·         S&P retraces from Thursday’s crucial level of 1065 points to end up with 2.7% loss.

·         Disappointing results from Chevron

·         All the 30 constituents of Dow shrugged off with small losses.

·         Financials dragged the index, as JP Morgan, Bank of America and Citigroup registered losses

Strategy

Traders and investors should remain cautious at this stage, at any negative economic data appears to be fuelling already tired market. They should take fresh long positions only on further declines, on a stock specific basis only on finding compelling valuations.

 Market Commentary

The entire rally fuelled by a strong report on initial GDP growth estimates of 3.5% on Thursday, faded out on Friday. The fall in consumer spending and outlay for October left traders with doubts on the strength of GDP growth, particularly in light of the low base for previous year.

The widespread losses came on the street came in the wake of government data, which suggested that the consumer sentiment for the last month dropped by 0.5% in last month. Even the final reading for consumer sentiment slipped to a little above 70 in October from 73.5 in September.

Almost like  Exxon Mobil, Chevron also announced a disappointing quarter for September, with a 51% drop in earnings on a year-on year basis. The stock ended with 1.81% loss on the street.

Even the stocks, in whose cases the companies had come out with improved set of earnings, could not show much long-lived gains, and faded out a day when the entire market remain subdued.

Sony also announced a Q3 losses, but cut down its forecasts for the full year losses.

Stocks fell sharply on Friday in a broad-based decline, as Dow dropped by 249.85 points, or 2.5 percent, to close at 9,712.73. This was worst decline noticed on Dow since July, and the NASDAQ shed 2.5 percent and the S&P 500 lost 2.8 percent on Friday. The plunge in all indices came following a brave face put up by all these indices on the previous day, which also happened to be the best day for Oct.

All the 30 components of Dow ended up with sharp losses, and main culprits to drag down the Dow were Bank of America ($14.58) with a 7.31% loss, JP Morgan ($41.77) with a 5.8% loss and Alcoa, which was one of the top gainers on the previous day.

 It was also widely in air that CIT Group may still have to file for bankruptcy in near future, despite of another $1 billion credit infusion agreement it reached on Friday. The same came after CIT Group’s agreement with Goldman Sachs to amend terms for its $3 billion loan.

The Day Ahead (Monday)

·         Pending home sale data for the month.

·         ISM manufacturing data

·         Construction spending