Traders-Blog.com

Black Monday followed the Black Friday, with stocks slumping and the Dow industrials posting its biggest one-day percentage drop since July. Despite positive preliminary results from the holiday shopping season kickoff, investors eyed higher oil prices, a weaker dollar and a cautious outlook from Wal-Mart and decided to head for the exits. Additionally, jitters about the slew of economic news due later this week weighed as well, as did a sense that the recent rally was due for a pullback.

Today, the Dow Jones industrial average closed down 158.46 or 1.29% to 12,121.71, its biggest one-day point and percentage drop since July 13. The broader S&P 500 index closed down 19.05 or 1.36% to 1,381.90. The Nasdaq composite index closed down 54.34 or 2.21% to 2,405.92, its biggest one-day percentage decline since June 5.

Market breadth was negative. On the New York Stock Exchange, losers topped winners by more than four to one on volume of nearly 1.6 billion shares. On the Nasdaq, decliners beat advancers by a similar margin on volume of 1.97 billion shares.

While stocks were overdue for a correction, this was exacerbated by some negative news such as, a slide in the U.S. dollar to a 20-month low versus the euro, a nearly 2% jump in the price of oil, and a big run up in gold prices. A weak outlook from Wal-Mart Stores called into question the otherwise robust early reports on the start of the holiday shopping period. The sell-off was related to bulls taking a hiatus of sorts after the advance.

The initial positive reports from retailers on “Black Friday,” continued to flow, suggesting shoppers came out in droves, although it was unclear how this would impact retailers’ overall profits. The holiday shopping season is off to a running start. More than 140 million shoppers hit the stores, spending an average of $360.15, up 18.9% from last year’s $302.81. ShopperTrak estimated a 6% sales increase overall for Friday alone, to $8.9 billion.

Shares of Google closed down $20.25 or 4% to $484.75, after a report in Barron’s over the weekend said the stock - which recently surpassed $500 per share for the first time - may be too expensive relative to earnings.

Shares of Affiliated Computer Services Inc. lost almost 1% after the Dallas provider of information-technology solutions said its CEO and CFO resigned in the wake of an inquiry into the company’s stock-options accounting. “Certain conduct” of the two executives violated its code of ethics for senior officers, ACS said in a statement.

Shares of Wal-Mart closed down $1.29 or 2.7% to $46.61, after it forecast that November same store sales, would fall 0.1%. The forecast included the “Black Friday” results.

U.S. light crude oil for January delivery rose $1.08 to settle at $60.32 a barrel on the New York Stock Exchange. News that Saudi Arabia’s oil minister is open to supporting another cut in production at the December meeting of the OPEC sent the price Northwards.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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