After yesterday’s rally, I wasn’t too surprised the markets took kind of a breather. Tomorrow will be a very important day, even more so given today’s lackluster performance. Everyone always talks about “follow-through” and we didn’t have that today. Basically, a one-day rally doesn’t mean much, especially in this kind of volatile market.
The main reason we were down today was because some of the big banks came out and said the Fed’s $200B plan might not help them that much (Source: CNBC.com). This news sparked selling in the financials and the market followed. Bonds had a huge rally as the Dollar hit another all-time low. Many people are worried this Fed plan won’t work and investors continued to pour their money into safer investments than stocks – right now, one of them is crude oil. Today, crude oil passed $110 and there seems to be no end in sight. As long as the Dollar continues to lose ground everyday, a barrel of oil will looker cheaper and cheaper to foreign investors. Today’s inventory report showed a larger than expected build, but prices did not seem to be affected by this usually-bearish news. I’m getting a little cautious at these levels because a lot of this move is due to speculation and oil is not trading on its fundamentals anymore – supply and demand. Many, though, will argue that oil hasn’t been trading on its fundaments for the last year (Source: Bloomberg.com).
In other news, Caterpillar reaffirmed their earnings estimates for 2008, but they did not raise guidance for 2008 (Source). The stock was up 3.64% on the day. The airline stocks have been getting crushed lately because of high oil prices, and it was no different today. On CNBC, an analyst reported that regardless of how the economy does over the next year, the airlines will not record a profit. JPMorgan also lowered its earnings estimates for many of the companies. Southwest (LUV) was forced to ground 41 plans because of inspections (Source: Marketplace).
The healthcare group was under lots of pressure again today. Yesterday, WellPoint got crushed after lowering its guidance, and today, Humana cut its FY2008 profit by about 25%. HUM finished the day down almost 14% (Source: CNNMoney.com).
Tomorrow is jam-packed with economic news. February import and export prices will be announced (today, the Treasury Budget deficit was reported at $175.6B), initial jobless claims and retail sales will also be reported.
There are no big earnings reports tomorrow – just a bunch of smaller companies like Jamba Juice, Aeropostale, and Eddie Bauer.
DJIA 12,110.24 -46.57 (-0.38%)
Nasdaq 2,243.87 -11.89 (-0.53%)
S&P 500 1,308.77 -11.88 (-0.90%)
NYSE Volume 4,399,095,000
2-Yr Bond 1.63% -0.11
10-Yr Bond 3.49% -0.11
30-Yr Bond 4.40% -0.13
Crude Oil (Apr) 109.92 +1.17
Nat Gas (Apr) 10.011 +0.011
Gold (Apr) 980.50 +4.50
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