After showing a substantial decline over the course of morning trading on Monday, stocks are continuing to show considerable weakness during the mid-afternoon. While selling pressure has waned from earlier in the session, the major averages remain firmly in negative territory.
In an interview with RTT News, Jim Awad, managing director of Zephyr Management explained the market's sharp sell-off despite better than expected earnings from Bank of America (BAC) and several M&A deals.
Awad said the market has gotten a little bit too greedy in a short period of time and suggested it should remain in a trading range between Friday's high and the March low for the next couple of months.
Commenting on the decline by shares of Bank of America despite its better than expected results, Awad said that while the financial giant's top line appeared strong, a lot of its core metrics actually got worse. Awad also stressed that Bank of America and Citigroup are both still a work in progress.
Bank of America released its first-quarter results before the market open. While the company posted a better earnings figure than analysts had expected, a significant increase in loan loss protection made investors wary of holding onto the stock.
After paying preferred dividends, Bank of America earned $0.44 per share, up from $0.23 per share a year ago and well above analyst estimates of $0.04 per share. At the same time, the company also took a substantial $13.4 billion provision for loan losses.
In merger news, Sun Microsystems (JAVA) agreed to be acquired by Oracle (ORCL) for $9.50 per share in cash. The offer represents a 42 percent premium to Sun's closing price on Friday.
Oracle expects the acquisition to be accretive to its earnings by at least $0.15 per share on a non-GAAP basis in the first full year after closing.
Additionally, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) are showing strong upward moves after PepsiCo (PEP) offered to acquire both bottlers for about $6 billion.
On the economic front, the Conference Board said its leading economic index fell 0.3 percent in March following a revised 0.2 percent decrease in February. The agency noted that the index has not risen in the past nine months.
The major averages have been rangebound in recent trading, stuck well below the unchanged, near their lows for the session. The Dow is currently down 253.36 at 7,877.97, the Nasdaq is down 55.87 at 1,617.20 and the S&P 500 is down 32.03 at 837.57.
All thirty of the Dow components are currently trading in negative territory, contributing to the substantial loss being shown by the blue chip index. Bank of America is helping to lead the way lower, falling 20.7 percent.
With the negative reaction to Bank of America's quarterly results, other financial stocks within the Dow are also under pressure. Shares of Citigroup (C) are currently down 18.6 percent, pulling back further off a recent, nearly three-month closing high.
General Motors (GM), Alcoa (AA), and General Electric (GE) are among the other Dow components that are showing notable declines.
At the same time, while all of the Dow components are currently trading in the red, Kraft (KFT) and IBM (IBM) are posting relatively modest losses, down 0.4 percent and 0.7 percent, respectively.
While banking and steel stocks continue to lead the broader markets lower, real estate stocks are also posting notable losses on the day. The Morgan Stanley REIT Index is down 9 percent, pulling back off the more than two-month closing high it set on Friday.
Housing, airline, and oil services stocks are also posting considerable losses on the day, with the Philadelphia Housing Index down 7.5 percent, while the Amex Airline Index and the Philadelphia Oil Services Index down 6.7 percent and 6.5 percent, respectively.
At the other end of the spectrum, gold stocks continue to buck the downtrend by the broader markets, resulting in a 5.4 percent gain by Amex Gold Bugs Index. The strength in the sector comes as gold for June delivery closed up $19.60 at $887.50 an ounce.
Following the lead of Sun Microsystems, a few computer hardware stocks are showing gains. With Sun Micro up 36.8 percent, the Amex Computer Hardware Index is up 2.2 percent.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Monday, with Chinese stocks showing notable strength due in part to the Chinese premier's upbeat assessment that the economy is doing better than expected.
Meanwhile, the major European markets closed just off their lows of the day. The U.K.'s FTSE 100 Index finished the session down 2.5 percent, while the French CAC 40 Index and the German DAX Index posted losses of 4 percent and 4.1 percent, respectively.
In the bond market, treasuries remain near their intraday highs, firmly in positive territory. Subsequently, the yield on the benchmark 10-year note is down 7.9 basis points at 2.851 percent.
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