The markets looked horrible until about 1pm. We were quickly approaching the January lows and many of the financial stocks broke through critical price levels. This sell-off was accelerated as we finally got a much needed pull-back in almost every major commodity. Gold and oil were down big, and subsequently the energy and agriculture stocks pulled back sharply. I have been mentioning lately that these commodities have gotten “too hot” and you should wait until a pull-back to get in…today was your chance to start a position. I added more shares of Monsanto after it was down 7% today.
Bad news from the financial sector also weighed on the markets. Citigroup was the main laggard after Merrill Lynch cut its earnings estimates and noted more write-downs are on the way. The analyst predicts there will be “$18 billion of credit write-downs related to the company's holdings of sub-prime mortgages, collateralized debt obligations, leveraged loans, consumer debt, real-estate loans and other investments…the analyst slashed his first-quarter estimate for Citigroup to a loss of $1.66 a share from a profit of 55 cents a share and his 2008 profit forecast to 24 cents a share from $2.74” (Source: Bloomberg.com). Goldman Sachs also cut estimates at Citigroup. Wachovia also cut estimates for Goldman, Bear Sterns, Lehman Brothers, and Morgan Stanley. Merrill also cut estimates at Bank of America and Wachovia. Also, the CEO of Dubai International said Citi may need to raise additional capital to offset more losses. CNBC talked about Citi laying off as many as 30,000 workers.
The market turned around at 1pm on news that Ambac’s recapitalization plan is making progress and Cisco’s CEO’s positive comment about the economy. John Chambers, Cisco’s CEO, said he is “even more comfortable” with his company’s long-term growth rate. Amazon also jumped after their CFO reiterated their ’08 revenue guidance (Source: CNNMoney.com).
Fed Chairman Ben Bernanke spoke to the Independent Community Bankers of America and he said that “delinquencies and foreclosures likely will continue to rise for a while longer…and further declines in house prices are likely” (Source: Bloomberg.com).
In other news…
Moody’s downgrades Sallie Mae.
Staples and Barnes & Noble both were down after reporting earnings. Staples offered poor guidance for 2008 and Barnes & Noble was downgraded to neutral.
Apple did not declare a dividend or a stock repurchase program. The company also reiterated its forecast of selling 10 million iPhones in 2008.
DJIA 12,213.80 -45.10 (-0.37%)
Nasdaq 2,260.28 +1.68 (+0.07%)
S&P 500 1,326.75 -4.59 (-0.34%)
NYSE Volume 4,710,605,000
2-Yr Bond 1.65% +0.04
10-Yr Bond 3.63% +0.09
30-Yr Bond 4.52% +0.10
Crude Oil (Apr) 99.96 -2.49
Gold (Apr) 966.20 -18.00
That is one speedy, good looking market summary, I like it.
ReplyDeleteBernanke also talked about giving more help to beaten down homeowners. He was referring to banks, in instances where they still have or know who has the mortgage, renegotiating either the principal amount, the interest rate or the timeframe with homeowners instead of just foreclosing. It is better to get some money than none from the bank's perspective.
ReplyDeleteBernanke's comments that Bellz mentioned were REAL downers. The economy can't start turning around until the housing market starts to turn. The housing market is several times the size of all the US Equity markets combined, the housing market's a huge problem.