Market Summary: Wed. Jan. 21, 2009

We saw a relief rally from yesterday’s massive sell-off, although stocks are still down over the two-day period.  Stocks got a little over-sold yesterday (especially the financials), and investors went bargain hunting today to buy the stocks of good companies on the cheap.

Here’s the news: 

1)      FDIC Chairman Sheila Bair commented that “banks are solvent” and “well-capitalized overwhelmingly.”  Either she is lying to assuage Americans’ concerns or she does not know what she is talking about.  Banks are in desperate need of capital, especially the large institutions with lots of mortgage-related securities, as they are rapidly burning through the TARP funding that was just distributed.

2)      Talks of forced nationalization of UK banks continue to scare investors.  Barclays was down 19% and Lloyds was down 12.5%.  The UK government owns a 70% stake in Royal Bank of Scotland and a 43% stake in Lloyds.

3)      Financials led the market higher after news broke that several bank insiders purchased shares.  JPMorgan’s Jamie Dimon bought $11.5 million of stock, and Bank of America executives purchased about $3 million of stock.  Insider buying is considered a bullish sign for a stock.   

4)      Shares of Wal-Mart were downgraded because “the incremental benefit it realized from consumer trade-down in 2008 might not repeat itself in 2009.”  I agree with this analyst.  Wal-Mart has rallied significantly from its September 2007 lows even though its earning have not kept pace.  When the market turns Wal-Mart will be left behind along with many of the defensive stocks.

5)      Warren Buffett purchased another $272.2 million of Burlington Northern (BNI) shares.  Buffett’s 21.75% ownership in BNI makes him the company’s largest shareholder.

6)      US Bancorp reported quarterly profit of $0.15 per share, which fell short of the $0.18 estimate.  During the quarter the bank quintupled the amount set aside for loan losses.  Shares were down 20% in the morning, but actually finished the day in the green.  This is one financial company that actually made money in the fourth quarter.  Pretty impressive!

7)      Apple reported quarterly results after the bell that handily beat estimates.  Despite Steve Jobs’ illness, the company is still performing and remains a “buy.”  The company reported earnings of $1.78 per share.  Analysts were expecting $1.40.  Revenue also beat expectations and rose 5.8% year-over-year.  Quite impressive numbers given the state of the consumer and economy.

8)      Intel announced it may cut up to 6,000 jobs. 

9)      Hedge fund investors withdrew a record $152 billion in the fourth quarter of 2008.