Can't Say I Saw That Coming...

Well I guess I was a little timid in my analysis this morning. Today the market was killed. The Dow, S&P and Nasdaq ended down 240, 23 and 46 points down, all around 2% on the day. As I expected, financials and airlines were hit, with the ^XAL declining 6.21% and the ^XLF dropping around 4% (although a lot worse than I anticipated). It is looking more and more like last weeks rally was a sucker's rally and we are going to be moving to new lows over the coming weeks. The VIX is also on the rise again, after bottoming last Wednesday. A few notable pieces of news today: Merrill Lynch announced plans to raise another $8.5B in stock, oil inched about 1% higher and the White House unveiled a record projected deficit of $482B. That represents a decline from a surplus of $128B in Bush's first year in office. That works out to the the surplus decreasing/the deficit increasing by just over $76B per year of Bush being in office. Wow. As if the United States isn't suffering from excess debt already.

Despite the awful day in the markets, I saw an interesting piece of analysis on the Business News Network which said that this earnings season, when financial stocks (which suffered heavily declining earnings) and energy stocks (which enjoyed large rises in earnings) are removed from the calculation, corporations reported a 3% increase in earnings over the last quarter. To me, that is very bullish and tells me that there is light at the end of the tunnel. Don't get me wrong, I am not saying that this piece is going to turn the market around, but I do feel that when the financials find a bottom, the market will find a bottom and a powerful rally will follow. That has been said numerous times by others, but I am now seeing concrete evidence.