Reply #78: here's the cryin'

[UpInArms]

4:25 pm : The weekend couldn't come soon enough for weary market participants who witnessed another tumultuous day of trading on Friday.

Bothered by both rumors and truths surrounding more write-downs for the financial sector and disappointing guidance from another large-cap technology company, the market took a dive in early action. At their lows of the morning, the Dow, Nasdaq and S&P were down 249, 71 and 26 points, respectively.

The tech sector led the retreat, falling as much as 3.0% in the wake of Qualcomm (QCOM 38.10, -1.66) providing earnings guidance for its fiscal first quarter and the fiscal year that was below consensus estimates due to lower handset demand. The indication reignited concerns, which were sparked on Thursday by Cisco's relatively disappointing second quarter outlook, that the tech stocks, and specifically the large-cap tech stocks, had gotten ahead of themselves.

The financial sector followed close behind, falling 2.6% at its worst levels. That decline was driven by an announcement from Wachovia (WB 40.65, +0.35) that its loan loss provision for the fourth quarter would be between $500 million and $600 million in excess of charge-offs. Additionally, Wachovia indicated that the value of its asset-backed CDOs had declined approximately $1.1 billion pre-tax in the month of October alone.

Wachovia's news was accompanied by a disappointing earnings report from Fannie Mae (FNM 49.00, -0.80) and rumors that Barclays (BCS 39.86, -1.48) was going to announce a $10 billion write-down. Barclays denounced the rumors as having no substance.

Strikingly, the financial sector made a spirited rally effort throughout the afternoon. At one point, the financial sector was up 2.4% for the session. The rally was forged in the face of subsequent warnings from JPMorgan Chase (JPM 42.31, -0.30) and Bank of America (BAC 43.98, +0.48) that potential write-downs would most likely pressure their fourth quarter results.

The turn in the financial sector helped the broader market pare its losses by a significant margin. However, the rally try was rudely interrupted by an aggressive wave of selling in the last half hour of trading that pushed the major indices back toward their worst levels for the day. The financial sector (+0.1%) ended the session basically flat.

The late selling, presumably, was driven by a growing sense of uneasiness in holding positions over the weekend as traders remained cognizant that the headline risk surrounding the financial sector remains high.

In any event, it seemed to be a fitting end to a week that was governed by a negative tone.

Dow component Merck (MRK 55.90, +1.13) managed to buck the broader selling trend as the company's announcement that it would be settling a significant portion of the Vioxx lawsuits for $4.85 billion was viewed by investors with a sense of relief.

Friday's economic data included a report on import prices that was higher than expected, a September trade deficit of $56.5 billion that was better than expected, and a preliminary reading on consumer sentiment for November from the University of Michigan that was measured at 75.0, the lowest level since October 2005.

On balance, the data didn't do much to help the stock market, which stayed preoccupied with the fallout in the financial and technology sectors, and the continued weakness in the dollar.

The Treasury market, once again, was a beneficiary of the stock market's struggle as it was bid higher in a flight-to-safety trade. The 10-year noted ended up 18 ticks, bringing its yield down to 4.21%. DJ30 -223.55 NASDAQ -68.06 SP500 -21.07 NASDAQ Dec/Adv/Vol 1988/1025/2.98 bln NYSE Dec/Adv/Vol 2397/885/1.83 bln