Stock Market Update -Mar 30th

The week started off well with a strong rally on Monday following the rally on Friday, but then the market dropped every day for the rest of the week -this is what happens in a bear market. Note that the market has been down now for the last 2 quarters. (click image to enlarge)


There are lingering concerns about the credit markets, and the banks and brokerage houses. In the news, JP Morgan this week changed their buyout bid for Bear Stearns from $2 to $10 per share. Also Oil rebounded this week, while the US Dollar tumbled again after a brief rally the previous week when the FED dropped interest rates; the Fed also offered $100 Billion More to Commercial Banks on Friday (when will it end?).

In case you didn't notice, the markets in China have also lost considerable ground since last October. Other high fliers GOOG and AAPL have also lost considerable ground, while one of the few stocks that has been rising in this bear market has been WMT.

Next week: Monday we will hear the proposal for new regulations in the financial markets. Also Fed chairman Bernake will testify before the Joint Economic Committee on Wednesday, and on Friday we get the much anticipated jobs report. Expect more volatility -and remember, we are still in a downtrend.

News stories:
Paulson to propose financial market overhaul
Credit crunch 'at $1.2 trillion'
U.S. home prices plunge 10.7% in past year: S&P
NOT NEAR A BOTTOM
Ten Days That Changed Capitalism
US Death Toll in Iraq War Hits 4,000
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Stock Market Update -Mar 23rd

Another wild week in the markets. The Fed dropped interest rates on Tuesday causing the DOW to rally 420 points, but then it fell 293 points the following day, then it was back up 261 points the day after -extreme volatility! The chart pattern however is showing 'higher lows' since March 10th on the DOW so maybe this short-term uptrend will continue; the longer-term trendline however still shows a downtrend. Commodities also collapsed this week as the US Dollar rose. (click image to enlarge)


The news this week included the Bear Stearns collapse, the Visa IPO (largest IPO in US history, despite all the market turmoil), and the big brokerage firms reporting earnings with no major surprises. This week we also had a big selloff in the Commodity markets, with Oil dropping to around $101 and Gold dropping about $90 in two days!

Other news included more Fed attempts to fix the credit markets and the stock markets (is this a new function for the FED? seems like they react to every market move) -they helped engineer the Bear Stearns bailout on Sunday, they now allow securities firms to borrow from the Fed (formally available only to banks), they dropped interest rates .75 points on Tuesday, and they cut the discount rate by .25 points on Sunday -all this in one week, plus all the other panic moves they have done in recent weeks.

Regulators also cut the capital requirements for Fannie and Freddie from 30% to 20%, providing an additional $200 billion in purchasing power -these are the same firms that reported 'accounting errors' of over $11 billion in recent years! We also saw a big rise in the US Dollar after the Fed cut interest rates -normally the Dollar falls on a rate cut!

Meanwhile the 3 month Treasury yield dropped to almost ZERO (a 50 year low) -it's been an interesting week.

What will next week bring? I think we will continue to see more choppy action -remember we are still in a big downtrend that started last October, and that many have tried unsuccessfully so far to pick a bottom in this market, so be cautious.

News Stories:
Fed cutting. Stocks sinking. What gives?
Fed acts Sunday to prevent global bank run Monday
Is the worst over, or just beginning?
Their Bear Stearns, your money
Goldman, Lehman outlooks cut to "negative" by S&P
European Banks Try to Inject a Bit of Calm
Financial Market Turmoil Raises Worries
Treasury 3-Month Bill Rates Drop to Lowest Since At Least 1954

Fannie, Freddie Surplus Capital Requirement Is Eased
Rubin Calls for Urgent Government Action to Stem Foreclosures
Woes in Condo Market Build as New Supply Floods Cities
JPMorgan Chase makes $1B-plus on Visa IPO
Why Boom in Commodities Has Suddenly Cooled Off
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Weekly Market Update -Mar 16th

The markets continued to challenge investors this past week with more see-saw action and lots of news driven events.


On Monday the DOW fell about 150 points, on Tuesday it skyrocketed over 400 points after the Fed offered $200 billion to banks to help ease the credit crisis, then on Friday the DOW dropped almost 200 points again after news of an emergency bailout for Bear Sterns, the nation's 5th largest investment bank. We also got news of the collapse of Carlyle Capital after that fund defaulted on more than $16 billion in assets. Not helping matters was news of higher foreclosure rates in February, Oil prices hitting $110 per barrel, Gold topping $1000, and the US Dollar continuing to plunge. After all this volatility the week basically ended close to where it started !

Next week: The Fed meets again on Tuesday and it is widely expected that interest rates will be cut again by at least .50 points. This could trigger another selloff in the US Dollar. We will also get a slew of earnings reports from the brokerage firms including Bear Stearns, Goldman Sachs, Morgan Stanley, and Lehman Brothers -it will be an interesting week! The markets will be closed on Good Friday.

There is also talk of the world's Central Banks possibly intervening to stop the fall of the dollar.

Late breaking news: JP Morgan will buy Bear Stearns for $2 a share -how sad! This stock traded at around $170 per share early last year, and dropped from $57 to $30 on Friday.

News Stories:
*** JPMorgan to Buy Bear for $2 a Share
Bear Stearns' Big Bailout
Dollar Falls to 12-Year Low of 100 Yen on Carlyle Fund Failure
Fed to Lend $200 Billion, Accept Mortgage Securities
Fed takes boldest action since the Depression to rescue US mortgage industry
Fed set to slash U.S. rates as credit turmoil rages

Fannie May Fail - Barron's
US Foreclosure Activity Rose in February
Foreclosure rate doubles for Countrywide
Carlyle Capital in default, on brink of collapse
Financial markets' biggest test since 1930s
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Weekly Market Update -Mar 8

Lots of action in the markets this week. We broke out of the recent trading range to the downside as concerns about the economy continue to dog this market.


We got a worse than expected monthly 'jobs' number on Friday, Oil topped $106 per barrel, news of more mortgage lenders on the brink of failure (TMA, FMT -ugly charts!), a gloomy outlook from the Fed chairman, and continued concerns about the credit markets all contributed to the selloff this week.

Also the US Dollar continued to sink this week, helping to drive up the price of oil and gold. The 10yr Treasury Note shot up as well (flight to quality?) -I don't expect it to stay there very long!

Next week: I suspect we will see the indexes back at the low of Jan 23rd. With any luck, we will get a bounce up from that level. Many people are looking for a bounce from the financials -XLF is a good Exchange Traded Fund for that sector; so far it has not shown any sign of a rebound though (remember we got a rebound on Jan 22nd, only to give it all back!).

The big picture -where we are now in relation to the 2000 market top:


News stories:
Job losses: Worst in 5 years
OPEC president says U.S. to blame for oil price
Countrywide may face more credit woes
Thornburg says can't meet $610 mln of margin calls
Mortgage market needs $1 trillion, FBR estimates
Record foreclosures in fourth quarter (March 2007)
U.S. home foreclosures at record high last quarter (March 2008!)

HSBC in $17bn credit crisis loss
Citigroup CEO Starts To Shed Bank Branches
Fed boosts auction size in surprise action
New Spasm Jolts Credit Markets
Aversion to Risk Deepens Credit Woes
The World's Billionaires 2008
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Weekly Market Update -Mar 2nd

We continue to be in a trading range as the markets rose early in the week only to give up those gains as the week progressed. As you can see below, this past month we have been stuck in a trading range.


IBM got a big boost as it announced more stock buybacks, while Dell fell as they reported less than stellar earnings this week.

Oil finally closed the 'week' over $100 per barrel, while Gold continued to move higher closing the week around $975 per ounce -looks like we will see $1000 soon! The US Dollar lost more ground again this week!

In case you missed it, last month the DOW got 2 new additions and 2 removals: Bank of America and Chevron were added, as Altria (formerly Phillip Morris) and Honeywell were removed -I guess they are no longer relevant for the DOW index!

Next week: We can probably expect more of the same choppy action. Friday's monthly payroll report may give the market a jolt in one direction or the other. Continue to be cautious here.

News Stories:
Brutal selloff on Wall Street
Home prices post first yearly drop in 16 years
Home prices plunge at record rate in 2007: S&P
One in 10 home loans is under water
More Pain for Fannie and Freddie?
AIG posts $5.3B loss in 4Q

11 reasons Bernanke's recession lasts till 2011
Financial Firms Face $600 Billion of Losses, UBS Says
Digging out from under debt mountain
Market's rally is really a trap
Dollar Sinks to New Low Against Euro
Oil Hits Record $102 As Dollar Tumbles
Gold hits new record of $975 on dollar's tumble
Brazil becomes world's biggest emerging market
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Stock Market Update -Feb 24th

More of the same choppy action this week with no clear sense of direction yet. The market was down all day Thursday and Friday, then suddenly shot upward in the last half hour on Friday!



HP was one of the few stocks rising this week on good earnings news. However we are still in an overall down trend from last October.


The latest in the housing debacle is that some banks are having a hard time foreclosing on properties because they can't find the paperwork! Mortgages have been re-sold and re-packaged so many times that the paperwork gets lost in the shuffle (see story below -Banks lose...).

The British government finally took over Northern Rock, the London bank that had a run last year when customers started pulling their money out (story below).

Oil made headlines again this week, closing over $100 per barrel for the first time but ending the week around $98. Gold gained almost $50 to close just above $940 per ounce. Food commodities also continued to rise.

Next week: we have a number of economic reports due that will probably influence the market direction one way or the other -still no clear short-term direction.

News Stories:
Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish
Fannie, Freddie Expected to Post Big Losses
After subprime debacle, U.S. wrestles with question of bank bailouts
Wall St. Banks Confront a String of Write-Downs
Stocks Rally on Word of Ambac Bailout
GMAC Barrels Downhill
Dollar Falls to 3-Week Low Against Euro on Recession Concern
Leveraged Loans Loom Large
Qatar Buys Credit Suisse Shares, Prime Minister Says
U.K. government to nationalize Northern Rock
Earnings previews: Lowe's and Home Depot
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Weekly Market Update -Feb 16th

This week we saw more of the same choppy action in the markets, with little clue of where it might be headed. The action on January 23rd might have signalled a reversal to the up-side, but we haven't seen enough follow-through yet. We are basically still in an overall downtrend.

The Bond insurers continue making news this week, with talks of splitting up into different companies. Warren Buffet also offered to take over the 'good' portions of the bond insurers' business -no takers though.

Oil prices continue the up-trend from last week and is now over $95 per barrel.
Gold retreated a bit, but Platinum soared past $2000!
Commodities continue rising with the index hitting record highs!

Next week the market might give us a better indication of direction. Right now we are still in a downtrend, with an undecided short term direction.

News Stories
Banks at Risk of $203 Billion in Writedowns, Says UBS
Stocks Sink after Bernanke Testimony
Apple Shares Rolling Downhill
GM Report Losses Of $38.7 BILLION in 2007!
Bond insurer FGIC to split business to save itself
AIG says potential derivatives loss not material
AIG's Explanation of Losses Doesn't Ring True: Jonathan Weil
Dollar Has Biggest Weekly Loss in 2008 on Signs Growth Slowing
As Recession Fears Rise Consumer Confidence Falls
Venezuela Cuts Off Oil Shipments to Exxon Mobil
Zimbabwe inflation now 66,000 percent
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Weekly Market Update -Feb 9th

Another negative week in the markets as the selling continues. Stocks gave back most of the gains that were achieved with the two recent interest rate cut announcements!

Cisco shares fell after their earnings announcement.

Oil prices recovered and is back over $90 per barrel again.
Gold also closed higher around $923 on Friday.
Commodity prices continue to rise -see my Commodity Blog for details.

The US Dollar regained some strength as the Euro and British Pound lost ground. We could see the Dollar continue to move up in the near term.

Next week the market could move anywhere! It is in one of those unpredictable areas again. If it breaks down below the mid-January lows, we could continue to see more selling pressure. On the other hand, that level might provide good support for a short term rally. Also note that this is an Option expiration week.

News Stories:
World equity markets lose $5.2 trillion in January
Global Economy Faces `Persisting' Risks, Paulson Says
The Fed isn't fooling anyone
Ambac and MBIA: Bonds, Jane's Bonds
Bush's proposed $3 trillion budget is biggest
Yahoo board to spurn $44B Microsoft bid
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.