Market Summary: Tues. Jan. 20, 2009

As I said in my last post, as the financials go so does the market.  Stocks finished the day down 5.3% and the financials (XLF) were down 16.5% (when I say stocks I am referring to the S&P 500).  Today’s news simply reiterated the fact that all financial institutions are in trouble (at home and abroad) and remain a “sell.”  They are simply not investable.  How are they going to make money in the future?  Will they even be public companies?

 The big losers:

-         State Street Corp  -59.04%

-         Barclays  -42.62%

-         PNC Financial Services  -41.40%

-         Bank of America  -28.97%

-         Regions Financial  -24.22%

-         Wells Fargo  -23.82%

-         JPMorgan  -20.73%

-         Citigroup  -20.00%

-         Goldman Sachs  -18.96%

European banks have been under pressure too.  Concerns are mounting that Royal Bank of Scotland may be nationalized by the British government.  The company lost $41 billion in 2008 and the British government is exchanging its preferred shares of common shares that could give it 70% ownership in the bank.  Because of this news the British Pound was crushed today.  It trades at its lowest level versus the Dollar in almost eight years. 

The U.S. government is way ahead of European governments in terms of financial aid and bailouts.  Look for weakness in Europe, specifically Britain, to continue.  

-         Fiat is in talks to acquire a 35% stake in Chrysler.  There is no cash involved with this transaction, and it is not a merger.  The companies would get access to each other’s plants and technology. 

-         Meredith Whitney explained what is going wrong at Citigroup.  Its “core problem is that it simply doesn’t make money in any of its businesses except Smith Barney, which it is in the process of selling.”  After the bell, Citigroup announced it is cutting its dividend to $0.01 from $0.16.  

-         Here is a good article that discusses the oil market.  There is an estimated 80 million barrels of oil being held on offshore tankers in order to take advantage of the steep crude curve.  That is, buying cheap crude today (spot market), storing it on these tankers, and then selling it in the future at a higher price. 

-         After hours, IBM reported earnings that beat estimates.  Shares are up 4% in after hours trading.

-         Obama took office today.  But guess what?  Nothing changed about our economy.  It still stinks!

-         The government has given Citigroup $45 billion in loans, but the company’s market cap is only $15.3 billion.  The government should just buy the company outright, do what it wants with the good and bad assets, and avoid all the added uncertainty and fear that is plaguing the financial markets.