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Daily Blog -01/13/09- 3:35 P.M.

Another Round of Bad Earnings News

The first fruits for the Q4 earnings season are rotten. Negative earnings news from multiple sectors have pushed the major indices toward support. This is an important test for the DJIA and S&P 500. A breakdown from here could spell a retest of the 2008 lows.

Dow-component Alcoa (AA) officially started earnings season with its results last night. Analysts were looking for a loss of 10 cents a share. AA reported a loss of 28 cents. The stock lost another 5.8% and is trading at $9.46. CSX, the railroad giant, issued a preliminary fourth quarter report last night. CSX expects to earn 63 cents a share versus estimates set at $1.00. This news pushed CSX to a 3% loss with shares nearing their 2008 lows around $31.

The tech sector got their own serving of bad news from KLAC, a semiconductor company. The semis have been suffering from negative sentiment for a while and investors didn't react too badly when KLAC issued a revenue warning for the quarter. The stock is only down 1.4% at $21.16. Printer and ink producer Lexmark (LXK) also issued an earnings warning with an announcement that revenues would fall 17%. The stock is being crushed with a 12.4% loss. Meanwhile General Electric (GE), once a proxy for the U.S. stock market, is plunging 5.7% and breaking down under round-number support at $15.00 after some negative analyst comments this morning.

Chart of GE

Oil made headlines again this morning and the price rallied sharply at the open. News that Saudi Arabia, OPEC's largest and most influential member, said it might cut production even further to strength the commodity's price. Oil has been hammered in the last several days with a 23% drop. Today oil is getting a minor boost with a 1.4% gain at $38.10 a barrel.

Traders need to be careful here. The Dow Jones Industrial Average and the S&P 500 index have pulled back to support. This is where they should bounce. My personal opinion is if the market does bounce it will roll over in a few days.

Chart of the DJIA:

Chart of the S&P 500:

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