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IBM and Taper Talk: Cause for real concern?

Kevin Cook

Experienced long-term investors and traders have learned it doesn't pay to give much weight to every market wiggle caused by news events, especially when solid bullish trends and forces are in charge.

But I find it interesting that the markets are struggling with these two things in particular:

1) More not-so-surprising taper talk from Fed officials

2) The IBM downgrade by Credit Suisse. The subsequent price break-down for IBM once again brings the stock to the $185-190 support zone that keeps attracting it like a magnet since July of last year. So far, as of 3pm ET, IBM is holding above $190, so maybe today's 2.5% hair cut is sufficient.

Sometimes in markets, all it takes is a shift in sentiment to start a bigger sell-off. So I have to wonder if large market players were really banking on "later taper" (like December) and if comments from the ultra-dove Charles Evans about "sooner taper" (like September) have them worried.

I really thought the market could get past all this worry, just accept a stronger economy as a good thing, and divorce from the idea that stocks need QE bond-buying?

Maybe that's naive. But I wouldn't be buying growth stocks with the S&P trading at roughly fair value (15X next year's $114 EPS estimates) if I thought that investors were going to turn tail and run over a taper we know is beginning in some form in the next six months.

What do you think has investors most worried today (of these 2 items or any others on your economy-earnings radar) and will it matter next week, or even tomorrow?


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