There are some things money can't buy. . . Semiconductor stocks were not the leaders on the downside this morning, even though the Sox was down 3 percent in the first couple of hours. The lead sled dogs today were none other than the financials, paced by a pasting in credit card stocks -- Household International (HI), MBNA Corp (KRB), Capital One (COF) and Providian (PVN) all got smacked hard for no proximate cause that I could see, other than rumors about a couple of brokerage houses having problems in the junk-bond market (1987 redux?).
There were a couple of dead-fish downgrades that didn't strike me as very insightful, so it's quite likely something is wrong in the credit card, junk bond or asset-backed area, which should come as no surprise to anyone. Given all the hot money that piled into these, once they broke, they got sold pretty hard. My suspicion is that there's something fundamental going on there -- we just don't know what it is yet.
In addition to the fact that they were trying to buy ahead of the hoped-for rally from the unemployment report, there was also an early morning tech conference call by Goldman, Sachs to try to defend those stocks yet again. For those keeping score at home, this is the second Goldman tech defense call this week. But it didn't work much better than the earlier one did.
I heard stories that margin calls were being sent out, which may have an impact on Monday. Given the drubbing of late and the fact that we've only seen a small drop in total margin debt, it would not be even slightly surprising if this ends up being confirmed. Once again we've had weak prices across a broad front and margin debt is still quite high, as is consumer installment debt. A lot of key stocks in a lot of portfolios have been hit rather dramatically.
As I mentioned earlier in the week, a decline like this has all the look of something that could get even uglier and almost certainly can only end in violent panic selling, something we have not seen yet. So far, believe it or not, the selling has been pretty orderly. Next week will be most interesting as the earnings reports start to come in -- along with some warnings, I would expect.
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