Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22
AI Tech Stocks Current State, Is AMAZON a Dying Tech Giant? - 20th June 22
Gold/Gold miners fundamental checkup - 20th June 22
Personal Finance Tips: How To Get Out Of A Tough Financial Situation - 20th June 22
UK House Prices Relative to GDP Growth - 19th June 22
Will Global Markets Be Pushed Deeper Into Crisis Event By The US Fed? - 19th June 22
Useful Things You Need To Know About Tweezer Top Candlestick Pattern - 19th June 22
UK House Prices Real Terms Sustainable Trend - 17th June 22
Why I’m buying the “new” value stocks… - 17th June 22
Optimize Benefits from R&D in Software Product Development with an R&D Tax Credit Software - 17th June 22
Want To Save On Your Business Energy? Here Are Some Helpful Tips - 17th June 22
State of the Stocks Bear Market - 15th June 22
The Gold Market Is Getting Ready for Another Interest Rate Hike - 15th June 22
The Dow Industrials’ Big 8-Wave Cycle is Incomplete - 15th June 22
7 Things You Need to Know About Finances - 15th June 22
Dow Stocks Bear Market Forecast Trend Trajectory - 13th June 22
Why Putin has KILLED Russia - 12th June 22
Trading the Calm Before the Stock Market Storm – Consider Putting On A Long Strangle - 12th June 22
Shrinkflation! - 12th June 22
6 Useful Tips To Help You Create A Good Marketing Strategy - 12th June 22
Big Inflation Will Spur Gold Price - 11th June 22
Economic "Hurricane": Here's a Take on a Bank CEO's Warning - 11th June 22
Axie Infinity (AXS)Mmade a lot of People Rich… Temporarily, What We Learned - 11th June 22
The CRACK UP BOOM! Implications for Stocks, Housing. and Commodities, Silver Potential - 10th June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Breaks Psychological 700 Level on S&P Index

Stock-Markets / Financial Markets 2009 Mar 04, 2009 - 04:38 AM GMT

By: PaddyPowerTrader

Stock-Markets Best Financial Markets Analysis ArticleAfter a big fall in the previous sessions, traders sometimes look for a turnaround of up to 50% of the previous days drop or even a dead cat bounce. But despite the five day drubbing there was no such relief yesterday as the Dow Jones lost another 0.55%.

Tarnished conglomerate GE was the biggest drag, down 7.8%, as CDS (credit default swaps) spreads on their massive debt widened. They require money down upfront now and not just an annual premium due to the perceived heightened risk of default. Swiss bank UBS also put out a note earlier in the day saying they may need to raise what would be expensive additional capital. Other factors weighing on the market sentiment included Bernanke's sobering downbeat testimony, yet more dire housing data (pending homes sales at a record low) and awful car (wreck) sales (at a 17 year low). S&P cut Bank of America's credit rating by a notch to A and left them on negative outlook while, after hours, Google CEO described the economic situation as “pretty dire”. On the positive side, American Express climbed 6.9%, amid hopes that the TALF plan will help ease the credit-card company's pain.

Today's Market Moving Stories

  • More Budget Blues on the way so put another zero on it. The Chairwoman of the FDIC (Federal Deposit Insurance Corp) Shelia Bair has warned that “the deposit insurance fund may become insolvent this year” due the sharp increase in bank failures. The invisible man, US Treasury Secretary Tim Geithner , warned that the bank rescue program may cost more than the $700bn Congress has approved.
  • Some good news from China overnight. The manufacturing PMI in February rose to 49 from 45.3, the third consecutive increase, sustained by solid gains in output and new orders. Both are now above the 50-threshold. This is of course if one believes the official figures. Separately the country's PM Wen Jiabao will announce new stimulus measures tomorrow . Together with a further weakening of the Yen, this has allowed regional Asian markets to push ahead overnight. Japanese press reports that China, via the CIC, is mulling over whether to buy commodities and crude oil as a hedge by diversifying some reserves away from US government Treasury bonds. They are also said to be increasing their stakes in banks which may party explain the surge in Chinese equities overnight (up 6%). We may see some spill over joy in European stocks this morning. Indeed Rio Tinto and BHP Billiton are opening up on these stories.
  • The Markit iTraxx Crossover Index , a closely watched gauge of sentiment in the credit markets, hit the highest level in its five-year history , implying that a record number of sub-investment grade companies in Europe are edging towards being unable to meet debt obligations.
  • Northern Rock revealed that 170,000 of its 590,000 customers were in negative equity by the end of 2008, a statistic likely to have worsened over the last two months.
  • Irish life and Permanent net profit was down 89% year on year to €49m with weaker investment income and bad loan provisions (€204m of provisions includes €122m with respect to Icelandic exposure / Lehman's. They also took a €170m goodwill impairment charge from the TSB Bank acquisition back in 2001.) They expect 2009 to be profitable, albeit with credit impairments expected to double from 2008 level and sales volumes in life insurance to decline again. Overall, a poor set of numbers.
  • Glanbia's results came out in line with expectations but they remain (wisely) very cautious about the outlook with EPS growth in the low single digits. They need a good performance in Optimum Nutritions (Seltzer) to drive cashflows in 2009 and beyond, as the troublesome milk sector is at 30 year lows in terms of returns.

UK To Start Quantitative Easing Tomorrow
The Bank of England MPC begins its two-day monetary policy meeting today. There are probably written letters going back and forth between the central bank and Treasury on the subject of quantitative easing (QE). As well as voting on the level of interest rates (expectations are broadly for 50bp cut), the MPC will also be voting for the first time on the implementation of QE. I suspect with rate cuts nearly over that there should not be much resistance on the committee towards QE.

Judging from governor King's comments last week, I don't think the Bank of England are targeting a specific gilt (UK government bond ) yield or mortgage rate, but rather wants to get cash into the banking system to free up lending while it also continues to credit ease through it's Asset Purchase Programme. I think QE would be easiest to implement by buying front-end gilts , at least from an unwinding perspective further down the road. This logic could partially explain yesterday's strong three year gilt auction. The time for caution seems to be well and truly over. They need to throw the kitchen sink at it now.

Note even the ECB is catching the bug as Trichet is quoted as saying yesterday that they can at any time apply “non standard measures if appropriate”. One only wishes he'd put his money where his mouth is before it's too late for the PIIGS.

Data And Earnings Today
Today's main source of scheduled newsflow is the US ADP employment number at 13.15 which serves as a precursor to Friday's biggie, the non-farm payrolls release. It should confirm further deterioration in the US labour market, with consensus for employment to fall by 630k. The ISM non-manufacturing figure is expected to remain at around recessionary levels of 41.0 at 15.00. At 19.00 we get the Federal Reserve Beige Book which is an anecdotal survey of the 12 districts and should make for more grim, grey and gloomy reading.

UK prime minister Gordon Brown will address a joint session of Congress this afternoon.

Earnings today from BJ's (expected EPS $0.86c), Costco ($0.59) and Toll Bros ($-0.53).

Zero Dollars

And Finally… Legendary Trader Jim Rodgers Advises To Get Into Farming

Disclosures = None

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in