Stocks decline after reality check

Markets plunged on the opening & couldn't get a head of steam going for the rest of the day. Dow fell 186, decliners over advancers almost 7-1 & NAZ dropped 54. The popular averages closed essentially at their lows. Banks have been leaders in this year's market rally, led on the way down & again closed pennies from the low. When the Financial Index loses 10 in a day, that's a very significant drop.

S&P 500 FINANCIALS INDEX

Value 183.42

Change -8.16

% Change -4.3%

S5FINL:IND





The story for the high yield sectors was pretty much the same as for the broad averages, weak at the opening followed by a buyer boycott. The Alerian MLP Index fell 5½ & the Dow Jones REIT Index nosedived 8½. Junk bond funds were weak all day while the VIX jumped 3½. Money sought safety, the 10 year Treasury bond yield dropped 7 basis points to 3.49%

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




10-Year Treasury Yld Index - 2 weeks




Oil participated in the decline but PM buying trimmed to losses to less than $1 a barrel.

CLU09.NYM

..Crude Oil Sep 09

..66.65

.. 0.86 ......(1.3%)

Lowe's (LOW) Q2 earnings fell 19% on weaker-than-expected sales. The stock tumbled along with the markets, down 2.46 (worst performing stock in S&P 500) on worries that consumers remain tight with spending habits. The weak results follows an indicator that consumer sentiment fell significantly short of expectations for the first part of Aug. Same-store-sales fell 9½%. Q2 results were a stark contrast to Q1, when LOW saw fresh signs of a consumer resurgence, Q2 results showed continued consumer weakness.

"Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter," Robert A. Niblock, Lowe's chairman and CEO, said. Same second-quarter results likely do not signal a shift in consumer behavior. Rather, weather was unseasonably cool and wet in the Northeast and fiscal-stimulus checks a year ago aided sales more than the company expected, Niblock said. The cool weather also seriously crimped air conditioner sales, but due to a hotter Aug, air conditioners are now selling "at a pretty good clip." LOW lowered guidance for Q3 & 2009 results.

• Lowe's 2Q profit falls 19 pct; shares fallAP(Mon 2:33pm)

Lowe's --- 1 year

This could prove to be a turning point for the markets. Stocks have soared in the last 5 months, Dow has risen 45% almost non-stop from the lows in early Mar. Everybody agrees that the free-fall period for the recession is over. But the pace of the recovery is being debated. Housing remains mired in its worst recession since the Great Depression. The auto industry is muddling along, if that. Retail sales continue soggy. Meanwhile unemployment is at levels not seen since the recession of the dreary early 80s & is forecasted to rise further, going over 10%. It seems logical the markets need a chance to rest.

Dow Jones Industrials --- 2 weeks