Portable Alpha Daily: Mid-Week Alpha

The U. S. Markets eked out small gains early in the week only to give them back and more yesterday as fear and uncertainty moved the markets into negative territory for the week. Investors just couldn't shake their bond and energy afflictions Wednesday, and the major indexes each ended down more than 1%.

Stocks were dragged lower as the price of crude oil fell from a nine-month high. Further exacerbating the decline is the concern that rising rates will slow down the buyout boom that has propelled the market this year, as acquirers will have to fund acquisitions with higher-cost capital. Additionally, investors fear that rising rates will further damage the already battered housing market, crimp consumer spending and slow corporate borrowing, all of which have fueled the rise in stocks prices.

The news of the pending demise of the two leveraged hedge funds carrying the Bear Sterns name which focus on collateralized mortgage backed securities added to the already choppy session. Questions surrounding the amount of leverage used in these investment partnerships, which focus to a large extent on the use of derivatives to accomplish the partnership goals, loom large for the markets.

On a sector basis, all were down for the session lead by Energy, specifically oil and natural gas stocks. Only the Consumer Service and Consumer Goods sectors showed any signs of optimism today and that came from the Automobiles and Airlines categories.

Short-Term Technical Indicators