每日市場點評 --- July 2, 2008

The market sold off sharply on this Wednesday and sent both the Dow and the Nasdaq officially into the bear market territory, which is defined as a drop of more than 20% from the previous highs. Since 1962, the Dow experienced 11 bear markets, according to Birinyi Associates Inc. Declines averaged 29% and lasted 322 days. The biggest was a 45% drop during the 694-day period from January 1973 to December 1974. The S&P 500 was the only index among the big three that managed to stay above that magic line. But the cushion is as thin as a hair. The news on the economic front was mixed for the day. The ADP Employer Services reported a 79K drop in private sector jobs, which was larger than forecast and the largest since November 2002. It should be noted, however, historically the ADP report has little correlation with the more important nonfarm payroll report, which is scheduled to be published tomorrow morning. In a separate report, factory orders rose 0.6% in May following a revised 1.3% gain in the previous month. That was the third straight monthly gain and better than economists expected.

Basic materials and transportations were among the biggest losers for the session. As we pointed last week and again yesterday, there appeared some selling pressure from the previously hot commodity sector. Could it mean the commodity story is over? Odds are pretty good based on today’s action. However, it should be noted that even a sector is topping, it could still be very volatile for the next few weeks even months. Healthcares were again among the best performers in today’s session. The CRB commodity index, on the other hand, ignored actions in the stock market and closed at a fresh new high. Treasuries were sold off as typical flight to quality. The US dollar was lower against most major currencies ahead of ECB decision tomorrow, which is widely expected to raise its interest rate by 25bps. The VIX index finally shot up and closed at the highest level since March 17th. But we should expect to see a few more volatile sessions ahead. Finally, based on the latest survey results from Investor’s Intelligence, the Bull Ratio dropped under 42% this week due to a surge in bearishness. This is not only the lowest since the March low but also one of the lowest readings of the past decade.