For the second time in less than a week the Dow posted a loss of more than 200 points as earnings season continues to disappoint. Most of the damage was done overnight, but the market was unable to bounce at all during the session, a troubling sign in what had been a resilient market over the last several months. Analysts warned of the potential for the weakest earnings season in the past few years, and traders wondered how much of that expectation was already priced in. It appears that the results have been even worse than expected. In addition, pundits pointed to concerns about Spain and chatter that Ben Bernanke may not continue on for another term no matter who is elected as additional reasons for today's decline.
The Dow was the hardest hit index, falling 1.82%, following disappointing results from Dupont (DD), which fell short on EPS and announced it would lay off 1,500 workers. DD finished the day down 9.06%, opening lower and fading during the entire session. Another Dow component, 3M (MMM) fell 4.11% after lowering its full year outlook. These reports come on the heels of the likes of McDonald's (MCD), FedEx (FDX) and IBM (IBM) issuing disappointing results in recent days and warning about noticeably slowing economic growth.
Apple (AAPL), whose steep climb yesterday gave some hope to bulls, also weighed on the market today surrounding the release of its iPad Mini. As is so often the case with AAPL news, this was a "sell the news" event. The new, smaller 7.9" tablet was priced higher than expected at $329, and will not directly compete with the smaller 7" tablets currently on the market at under $200. AAPL finished the day 3.26% lower heading into Thursday's earnings report, which will either confirm or allay fears about supply issues for the iPhone 5 this quarter. AAPL's decline weighed heavily on the Nasdaq, which closed below 3,000 for the first time since early August.
Commodities also closed sharply lower, highlighted by a steep drop in crude prices. Oil declined to levels not seen since June, as the United States Oil Fund ETF (USO) fell 2.83%.
The most notable earnings reports after the close today have brought mixed results. Netflix's (NFLX) demise continues after another discouraging quarter. The stock is off around 16% after hours. On the flip side, Facebook (FB) shares are 10% higher after the company reported a 36% jump in advertising revenue.
Healthy markets do not see the types of steep declines we saw Friday and now today. Indices will need time to repair their charts before traders will likely look for anything more than short-term cash flow longs. In a volatile environment like this one, there is ample opportunity but also elevated risk, so if you are not comfortable in this setting do not hesitate to sit on the sidelines and wait for more calculated set-ups. However, the T3 team will, as always, be present in the Virtual Trading Floor(R) to attempt to guide the community through this tumultuous period in the market.
*DISCLOSURES: Evan Lazarus has no positions. Scott Redler has no positions
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