US stock sold off sharply in the morning but held strong and bounced in the afternoon to limit the damage following S&P's downgrade of France. The S&P finished down only 0.5%. In a blow to the Eurozone, S&P finally followed through with the much-ballyhooed downgrade of France, one notch from AAA to AA, while several other downgrades are expected. Germany, however, is reportedly not one of them.
Talk of the downgrade started pre-market, helping to add to the market's woes this morning after JP Morgan (JPM) disappointed with its 4th quarter '11 earnings. The company saw its revenue fall 18% and miss analyst expectations. The bank stocks had been strong over the past few weeks, perhaps expecting a turnaround in bank profits, but it will not be JPM that catapults the sector from the doldrums. The damage was contained, though, as JPM rallied most of the day and closed on its highs, down 2.5% after opening down more than 4%.
While the market showed its most significant weakness of 2012 and the Euro sold off hard, today can be seen as a moral victory for the bulls. The JPM earnings miss and France downgrade bombshell were significant blows, and the market still rallied in the afternoon into the close. The SPY closed above yesterday's low and kept the recent mini upper-level consolidation intact.
*DISCLOSURES: Scott Redler is long SPY, POT, WYNN, NFLX, QCOM, OIH, CSCO, GOOG calls. Short DIA. Evan Lazarus is short LULU.
