Bank and Education Stocks Weigh on Stocks

The market side steps a distribution day consolidating recent gains.

New banking fears helped push stocks lower, but a late afternoon buying spree lifted stocks off the lows of the session. Today’s consolidation was not out of the ordinary considering the move in equity prices, but the late day buying did help ease any worry. Education stocks once again were hit hard after APOL had some tough news for the market to digest. Banks and education stocks were the leading cause of the equity decline today even as volume came in lower across the board. The market was able to avoid distribution with volume sliding lower on the day. A great day of consolidation for the market showing this uptrend is quite healthy.

The real story was in after-hours trading with GOOG stock jumping around 9% after the company reported its quarterly results. We can get into the positive news out of the company like a rise in paid per click but the true test will come when the stock trades tomorrow. Will the stock gap and run? Yesterday we saw a few stocks gap and reverse like JPM, IGTE, and ADTN. GOOG on other hand has been a stock beaten up after earnings reports as of late. The strong posting in earnings is a positive sign for technology stocks.

Once again our financial stocks have a new fear to get over. The foreclosure crisis is just another step in our banking system deleveraging a system riddled with fraud and illegal behavior. Removing the excess leverage in the system is uncovering many naughty secrets from the housing boom of the last decade. When the government swooped in and saved the banks it kicked the can down the road rather than dealing with everything up front. We can equate this to taking off a band-aid, when the government stepped in it essential was stopping the band-aid from being ripped off. Now, we are dealing with a slow wrenching pain. Regardless, banks continue to look weak and not a sector we’d entertain, but they do weigh on the overall market.

It is quite impressive given the education stock debacle and foreclosure crisis the market was able to avoid a day of distribution. Normal corrections during an uptrend are to be expected, but we are far from what is normal and to see the market shrug off this type of fear is good news.

This uptrend is very healthy and we continue to find more stocks breaking out of bases it is hard to think this market cannot go higher. Stay focused and enjoy the weekend!