Stocks Tank on EU Downgrades & Goldman Testimony


Tuesday, April 27, 2010
Market Commentary:

Stocks tanked after S&P Rating Services lowered Greek’s debt to junk and cut Portugal’s rating. This sent many European stock market’s plunging to their worst single day declines since November as fear spread that other nations will default on their debt. Volume totals on Tuesday were reported higher compared to Monday’s totals which marked another distribution day for the major averages. Decliners trumped advancers by over a 4-to-1 ratio on both major exchanges. Meanwhile, new 52-week highs easily trumped new 52-week lows. There were 28 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, lower than the 91 issues that appeared on the prior session. A healthy crop of new leaders making new highs bodes well for any market rally.

EU Downgrades Shake Confidence:

Stocks got smacked as concern spread that other European nations may default on their debt. So far, Greece, Portugal, Spain and Ireland are the weakest nations in the EU. The news sent the dollar surging which invariably put pressure on dollar denominated assets: mainly stocks and commodities.

Goldman Executives Testify On Capital Hill:

On the homefront, the much anticipated Goldman Sachs (GS) testimony began on Capital Hill. Several Goldman executives, including Fabrice Tourre the young trader at the center of the investigation, spent their day testifying on Capital Hill. Mr. Tourre defended himself and read a prepared statement on his role marketing the Abacus collateralized debt obligation (CDO).

Market Action- Rally Under Pressure:

It is important to note that the major averages have been steadily rallying since early February and a pullback of some sort should be expected. Tuesday marked the latest distribution day since the rally was confirmed on the March 1, 2010 follow-through day (FTD). According to the paper, there are 7 distribution days for the NYSE, 6 for the S&P 500, 5 for the Dow, and 2 for the Nasdaq. This puts subtle pressure on this 9-week rally.

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