EQUITY FUTURES COLLAPSE ON DISMAL RETAIL SALES. SHAKEUPS IN THE FINANCIAL SECTORS
US Equities markets were left reeling on Wednesday as a barrage of negative corporate and -economic news battered already fragile investor ¬sentiment. Retail stocks were pummeled by the Armageddon like holiday shopping season which culminated in US December Retail Sales posting nearly double the losses forecast. (-2.7% vs. -1.5% exp). The Blue Christmas sentiment continued into the financial sector as Citigroup shares also came under renewed pressure from concerns regarding its capital needs. The firm has moved up its earnings announcement to Friday in the wake of its planned spinoff of its retail brokerage business to Morgan Stanley. The deal calls for Morgan to gain a 61% stake in the company paying approx $2.1 billion. It would appear that Citigroup's dream/nightmare of being a financial one stop shop has finally come to an end.
Nortel Networks – North America's leading maker of telephone equipment – filed for bankruptcy in the early session. Energy companies came under pressure as crude oil stages another fall off in the wake of a greater than expected build in refined products (gasoline & distillates). Concerns regarding General Electric profit warnings and earnings outlook continued to weigh on the over sentiment of the market as well. Equities, in particular the technology sector, will have a sleepless night tonight & additional concerns tomorrow in the wake of the announcement of Apple CEO & entrepreneurial bellwether Steve Jobs taking a leave of absence for medical reasons. Looks like the financial powers that be have finished playing out the Murphy's Law scenarios.
Technically, the markets have broken through significant levels of support and could be setting up to make a retest for lows that were reached in November. Markets near term upside looks to be limited to the 8220 level. This level could be used as a possible short position initiation. Support for the contract should be at the 8000 level, with a break seen as a significant indicator of a setup to test the 7500 November 2008 lows.