EARLY TRADE

Light M&A chatter and one retail delight are up against concerns over a faltering ‘profit engine', looming inflation data and a couple of other less-than-benevolent headlines in Tuesday's early going. As of 10:40 ET, the S&P500 ($SPX) and NASDAQ Composite ($COMPQ) are trading under slight pressure, down -.29% to -.36% on moderate and mixed levels of investor satisfaction.

According to analysts, whether Tuesday's headline wheelings and dealings prove truly heavenly for long-term investors is still open to debate. Nonetheless, more than a few nearsighted traders' efforts are countering some of the broader market's early profit-taking. Taking the spotlight, Sirius Satellite (SIRI) has agreed to buy rival radio broadcaster XM Satellite (XMSR) for a reported $13 billion stock swap. While regulatory hurdles related to a monopolistic hold on this niche media market look to keep the deal from being secure, both issues are finding a bid in today's session. Intraday, XMSR is up 12.50%, while suitor SIRI is up nearly 9%. Elsewhere, concrete producer Florida Rock (FRK) is being bought for $4.6 billion by Vulcan Materials (VMC). FRK is up nearly 20 points at 66.60 while VMC feels a pinch of investor concern over the deal, as it trades lower by 88 cents at 110.94.

Earnings news is centered on mixed results from ‘mega-tailers' Home Depot (HD) and Wal-Mart (WMT). The former came in light on both earnings and revenues while simultaneously seeing a slide of 28% from last year's fourth-quarter EPS results. The company cited a depressed housing market. Intraday, HD is off 10 cents at 41.34 after an early schnitzel from the stock's best levels in eight months. On the other hand, Wal-Mart, the world's largest discount retailer surprised investors with better-than-feared results of 62 cents per share and 9% above last year's figure. The stock has tacked on 1.30 to 49.78 after beating earnings on slightly disappointing sales, but offering upward guidance for Q1.  

Warmer weather, potentially bearish news regarding the nation's Strategic Petroleum Reserve, reduced geopolitical concerns and perhaps some pressure from the unwinding of the March crude contract are finding Black Gold aggressively lower. Intraday, the commodity is down -1.75 at 57.95. At the same time, the ‘oil patch profit engine' of the energy complex (XLE, OIH) is following suite and causing pressure on the broader averages. As the most heavily weighted sector in the S&P500, today's percentage decliners of roughly -1.30% for each sector proxy are contributing to weakness in the broader market. Aside from the decline in the underlying, some of today's investor response in the energy complex is being attributed to fresh concerns over the potential for decelerating earnings. Profit-taking in hard commodities is additional drag for the broader market. Silver (SLV) and Comex Gold (IAU, GLD) are down 1.50% to 1.70% respectively.

Not helping matters in the first half of trade is a two-pronged attack on the technology front. Friday evening, flash memory product maker SanDisk (SNDK) announced a glut of NAND inventory. As part of its warning the company said it expects to lower memory prices by 30% to 40% in Q1 on a sequential basis. Intraday, SNDK is down about 20 cents at 39.96, but well removed from an after hours dip to roughly $38 a share. Elsewhere, a downgrade of equipment manufacturers within the semiconductor group (SMH) is also impacting share prices. Credit Suisse reduced the space to "market weight" from "overweight." Heavyweights being influenced include Lam Research (LRCX), Kla-Tencor (KLAC) and Applied Materials (AMAT).

GROWTH & MOVERS COVERAGE

EARNINGS CALENDAR

Select reports scheduled after the market close and in the premarket:

REPORT CALENDAR

Economic releases scheduled for tomorrow:

INDICES & MARKET MOOD

Investor angst over mixed earnings news and decelerating growth, solid market gains not yet booked, weakness in commodities, a looming CPI and other fore mentioned catalysts has been quickly put aside in favor of upbeat testimony from Fed Head Susan Bies. Apparently, comments to the effect that the Fed isn't in tightening mode and reassurances about the housing and sub prime lending market have underpinned the current ‘noon balloon' and greenie sprouting up in the market.

Elsewhere, the very brief and shallow attempt at profit-taking does little to change the composite picture of a market still in need of corrective activity. It could very well keep rising to the occasion. The problem with aggressively riding that trend or entering anew is that on those days when the market doesn't recover before the proverbial ink dries. In those rare instances of the last few months, losses outside of the major indices are typically already much more severe and far removed from intoxicating headlines intent on feeding the bull at large. At a minimum, keeping to the softer and less hard-to-handle Delta decision provided with limited risk strategies keeps us rooting for the bull with a very grounded approach thought to be a smart choice.

Chris Tyler
Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.