Markets start to the fourth quarter isn’t the worst in history, but definitely up there

We're not in the panic zone yet 
The chase by Frances Horodelski:

There are lots of news items to focus on this morning, the first is the market. Yesterday’s weak start to the fourth quarter isn’t the worst in history, but definitely up there. According to Bespoke, yesterday’s 1.32% decline in the S&P 500 was the 10th worst back to 1928. This morning, we’re not seeing much follow through, although Europe is mixed. U.S. futures are higher. This could change when the ECB announces its rates decision (no change) and as well any additional colour on its balance sheet expansion intentions at the press conference.

What I’m watching: The percentage of stocks above the 50-day (20.5%) and the 200-day (43%) are both at levels last seen in November 2012. Sentiment which has deteriorated recently but isn’t in panic zone, although CNN’s fear/greed indicator is 8 – at levels worse than during the financial crisis. Many of the RSI indicators aren’t as oversold as one would like to see – but they are getting there. Yesterday’s decline, while painful, felt orderly with everything marked down, although volume has picked up. It is when it isn’t orderly that we get concerned and accidents happen.

The news calendar is filling up. First, Sears Holding is doing a rights offering to distribute 40 million of its 51.957M shares of Sears Canada. Eddie Lambert controlling shareholder in Sears Holdings will be exercising his rights and Fairholme Capital will also be doing so. The rights and shares of Sears Canada will be listed on the Nasdaq. A bit of shuffling deck chairs but in the end, SHLD is looking to raise an additional $380 million dollars from SHLD shareholders (or those own are looking to exercise the rights) to reduce its position in SCC from 51% to just under 12%.

Second, Agrium is out with a statement this morning highlighting its Q3 outlook which is substantially below the street estimate (45-55 cents vs. 68 cents expected) and a Q4 which is expected to be flat with last year’s adjusted 84 cents versus the street at $1.03. The stock is down 6%+ in the pre-market.

Third, the street is reacting to CP’s outlook. “Surprisingly strong” says CanaccordGenuity (rates the stock Hold); “Guidance in line with expectatons; revenue growth targets in focus today” from RBC note (rates the stock sector peform); “Four-year financial targets supportive of significant share price upside”, BMO with an outperform rating. The investor day continues today.

Fourth, an interesting item from yesterday that Adidas is taking advantage of ridiculously low interest rates and doing a major share buyback to appease shareholders. Who is next to do this in Europe?

Fifth, oil is a focus as it drops below $90 after Saudi Arabia cuts prices more than expected. JPMorgan wonders whether they may be setting up for a market share battle.

Finally, we’re waiting for tomorrow’s jobs numbers, Brazilian elections on the weekend, next week’s earnings kick-off and hopefully a reduction in the tensions and worries related to Hong Kong, Ebola and even Ukraine/Russia. With the Fed nearing the end of its bond buying purchases, the key will be if the U.S. economy can stand on its own two feet. We’ll see. 

The NYSE Composite is down 4.5% from its September high knocking just less than $1 trillion off the total market cap of $21.6 trillion. The margin man might be calling today which can oftentimes put in a bottom.

On a different note, there are only 84 days until Christmas.