Stocks have hit a wall, but it shouldn’t be a surprise to you. Since March 17th’s market bottom, the Dow has rallied about 1,500 points (13%). A ton of shorts (those betting stock prices will go down) were forced out of their positions when the Federal Reserve stepped in and this “short squeeze” helped stock prices rebound. Also, the dollar has strengthened against the other major foreign currencies. However, the one thing that has not reversed course is crude oil and this has caused many investors to become wary about the health of the consumer.
Oil hit another new record, but the energy-related stocks were surprisingly down. There was definitely some profit-taking in these names as they have seen a huge run up the last few weeks. Everyone is concerned about $120+ oil and how it will affect the consumer and that is why we saw stocks sell-off today.
Financial stocks were another laggard on the day. Citi announced a plan that calls for $400B worth of divestitures over the next three years. Basically, Citi will be selling many of its less profitable assets in order to improve its cash position. Also, AIG reported a quarterly net loss of $7.81B because of $15B+ in write-downs. AIG reported a loss of $1.41 per share while analysts were only looking for a $0.34 loss. The company also announced it needs to raise $12.5B in additional capital to improve its balance sheet. However, in a surprising move, AIG also raised its dividend 10% to $0.22 per share.
After the bell, FedEx said it will miss its Q4 profit forecast by $100M because of higher than expected fuel costs. The earnings per share estimate was lowered to $1.45-1.50 from $1.60-1.80. This news from FedEx is just another example of how rising gas and oil prices are negatively affecting the economy. If oil stays at its current levels, look for other companies to lowers profit estimates too.
DJIA 12,745.88 -120.90 (-0.94%)
Nasdaq 2,445.52 -5.72 (-0.23%)
S&P 500 1,388.28 -9.40 (-0.67%)
NYSE Volume 3,495,811,000
2-Yr Bond 2.25% unch
10-Yr Bond 3.77% -0.02
30-Yr Bond 4.53% +0.03
Crude Oil (June) 125.96 +2.27
Nat Gas (June) 11.537 +0.274
Gold (June) 885.80 +3.70
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