Battle Lines are Drawn

The battle lines are drawn between support around 800 – 805 and resistance around 850 – 860. Yesterday the Bulls had the upper hand as Obama promised a better financial system bailout plan. This morning, a dose of harsh reality has equities offered.

Microsoft (MSFT) suddenly and unexpectedly released poor earnings pre-market, catching everybody flat footed. (Now down 8%.)

U.S. Stock-Index Futures Fall on Earnings, Recession Concerns: “U.S. stock futures retreated as companies from EBay Inc. to Nokia Oyj reported falling profits and reports on housing starts and jobless claims signaled the recession is deepening.

EBay sank 8.1 percent in trading before the open of U.S. exchanges as fourth-quarter profit fell 31 percent and forecasts missed analysts’ estimates. Motorola Inc. slumped after Nokia, the world’s biggest mobile-phone maker, said industry sales may drop as much as 10 percent this year. The Standard & Poor’s 500 Index was poised to trim yesterday’s 4.4 percent rally after initial claims for unemployment benefits matched a 26-year high and housing starts slumped to a record low.

U.S. stocks yesterday surged the most since Dec. 16 as President Barack Obama’s plan to shore up lenders and Bank of America share purchases by company executives sent financial equities to their biggest rally in two months. The S&P 500 is still off to its second-worst start, surpassed only by last year’s 9.8 percent drop during the first 13 days of trading, as analysts cut earnings estimates by a record 83 percentage points.

“Corporate earnings are still bad,” said Claudio Meiger, who manages about $100 million at Basel, Switzerland-based CIC Schweiz AG. “The market is very news-driven, we take one step up on the good news and then we take two steps down again.””