The market is lower in early trading on relatively light news and probably a dose of profit taking. The big news overnight was the announcement out of China that they will target growth of 7.5%, which would mark the slowest growth since 2005.
China is struggling with the goal of increasing consumption and the domestic demand within its economy and trying to decrease the export and govt. investment side of the equation. Asian markets were lower overnight following the announcement.
In corporate news, AIG said it will sell its shares of AIA and use the expected proceeds of roughly $6 billion to reduce the balance it still owes the US Treasury Dept. In other news, BP has reached a settlement regarding the Gulf spill oil claims for $7.8 billion.
In economic news, the ISM Services Index rose to a very strong reading of 57.3 in February from 56.8 last month. This is a fairly strong datapoint, considering the services sector makes up roughly two-thirds of the economy.
Energy prices and materials stocks are lower following the China news. Oil prices are lower to $106.22 and gold prices have fallen back to $1700. Copper and silver prices are down as well.
The 10-year yield is hovering just below the psychological 2.00% level. And the VIX is spiking 8% higher this morning near 18.70. I am hearing options players in the VIX are increasing their bets that the recent rally is getting long in the tooth and a correction is near.
Trading comment: The consensus opinion seems to be that the market should experience a mild pullback and that such a pullback will be a buying opportunity. Since the consensus forecast rarely comes to fruition in the manner most are expecting, it is likley that either the market will continue to stair-step higher, or we will get a sharper correction than most expect and that will startle the conviction of the dip buyers who have been waiting for a pullback. Investor sentiment has yet to reach extreme bullish levels seen at prior market tops. As such, we are going to keep our focus on how our stocks are acting and not be overly concerned with taking our cues from the major averages.
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