Will Obama's Address Tonight Trigger a Massive Sell-Off?

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Despite fears that tonight's State of the Union address will trigger a broad sell-off tomorrow, stocks are moving higher in afternoon trading. Roughly an hour before the closing bell, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up by 62 points, or 0.45%.

Will Obama trigger a sell-off?
It's hard to argue that stocks haven't performed well this year. According to the free stock-screener at, all 30 of the Dow's individual components are higher this year, with shares of Hewlett-Packard leading the way, up by more than 18%. And the blue-chip index itself is higher by more than 4%.

All this could come to a screeching halt tomorrow, however, if one analyst's premonitions come true. Earlier today, Jeff Saut, the chief investment strategist at Raymond James, predicted that President Obama's speech tonight could trigger a 5% to 7% sell-off in stocks.

Speaking on Yahoo! Finance's Breakout, Saut said: "I think investors are going to interpret the State of the Union as a more intransigent president. And I think some of the topics he's going to bring up are going to continue to emphasize what I would term somewhat class warfare."

While anything could happen, including an asteroid potentially grazing the planet, predictions like these are entirely meaningless. It's worth noting that the Dow gained on the first trading day after the President's inaugural speech, which likely fit Saut's preconceived notions about the contents of tonight's state of the union speech.

How individual stocks are faring
In terms of individual stocks, shares of Bank of America (NYSE: BAC  ) are leading the Dow higher, followed by the index's other banking component, JPMorgan Chase (NYSE: JPM  ) . Earlier today, the consumer credit company TransUnion released data estimating that mortgage delinquencies in the fourth quarter fell by 14% on a year-over-year basis.

According to the company's group vice president of housing, Tim Martin, "The national mortgage delinquency rate experienced its largest yearly decline since the conclusion of the recession, though we still remain far above normal levels."

For the three months ended Dec. 31, the rate fell to 5.19%, down from 5.41% in the third quarter.

Conversely, shares of Coca-Cola (NYSE: KO  ) are sharply lower in midafternoon trading following the company's fourth-quarter financial results. As my colleague Dan Caplinger noted earlier today, the beverage giant's earnings grew an impressive 13%, while its global sales volume increased by 3%.

Triggering the sell-off, however, was the fact that its soda volume continued its decline. As Dan observed, this trend "reinforced concerns that Coke's namesake segment may have seen its best days."

At the time of writing, shares in the company are down 3%.

Learn how to protect your portfolio
Are you at ease...or nervous? It's been a great five-year run for investors, with the Dow and S&P at or near all-time highs. Yet fears abound. When will the next downturn hit? Will political gridlock lead to portfolio-killing inflation? To learn how to protect your portfolio, click here for free guidance from the Motley Fool Pro Academy!


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 12, 2013, at 3:41 PM, RWPope wrote:

    When tax rates were lowered over the years no one spoke of "class warfare". The "trickle downers", of course, would claim that by raising taxes on the wealthy we would stiffle investment. Perhaps they should consider that middle and lower income families have a higher propensity to consume, or should I simply say SPEND. By shifting a greater burden back to the wealthy consumption should increase overall, thus stimulating the economy. The Chicago School of ecomonics grads of course wish that government and its regulations should simply "go away" and all will be well. Of course our experiences with "purer enterprise" would dispute such assumptions. One thing is certain, the "trickle down" model has been very effective in funneling a greater share of wealth to the fortunate few, and who can question "self interest"?

  • Report this Comment On February 12, 2013, at 3:46 PM, RFN98 wrote:

    I am a fan of Jeff Saut, I find his comments and outlook to be measured and for the most part accurate. (I have a bond fund managed by RJ so I get regular updates),

    That said, I think he is completely off base on this

  • Report this Comment On February 12, 2013, at 6:15 PM, TulipSpeculator1 wrote:

    "... 7 percent sell off in stocks"

    To provide a reference, this would mean nearly a thousand point drop in the Dow. The Dow lost only 504 when Lehman went bankrupt and only 777 when the bailout package was initially rejected. Obama reiterating or even expanding on his publicly known positions is not even in the same league as the events beginning the financial meltdown we are still digging out of. And unlike the financial events, the market has known for a long time that Obama would give a State of the Union address. It would be unreasonable to think everyone will head for the exits because the expected to happen, happened.

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