Banks had one of their worst days in history as banks around the world reported enormous losses. Speculation about survival of the largest banks has been called into question. Banks that were only lightly affected by the negative news dropped 10+%, others did much worse.
The S&P 500 FINANCIALS INDEX plunged setting another multi year low.
| Value 108.33 | Change -21.77 | % Change -16.7% |
MLPs, REITs & junk bonds also suffered badly. The Alerian MLP Index finally broke thru the 190 floor, closing at 186 down 6+. This move worries the technical guys. The Dow Jones REIT Index plunged an enormous 15+ to 119, again looks like it will test the sub 100 low recently set. Junk bonds slipped modestly, although Barclays Capital High Yield Bond ETF dropped 4% to 31 (with its 14% yield). VIX had one of its biggest days, up 10 to 56 on higher worries in the markets.
Dow Jones REIT Index --- 3 months
VIX --- 3 months
Oil ignored all the dreary news on banks, having one of its best days in some time. The Feb future contract rose $2, prices further out are even higher showing how traders feel about the direction of oil prices.
| CLG09.NYM | ..Crude Oil Feb 09 | ...38.74 | .. 2.23 ......(6.1%) |
Goldman Sachs said that Q4 of 2008 for the S&P 500 will be awful & 2009 will be worse than anticipated. Their strategist forecasted S&P 500 earned $55 per share in 2008 (11% below the average analyst estimate) & S&P EPS is forecasted to be $53 next year. That puts S&P 500 at 15½ times 2009 earnings
•Goldman Says S&P 500 Profit in '09 Will Drop More Than Wall Street Average
The ugly news from banks is alarming. Bank of America (BAC) is selling at 25 year lows as its impressive dividend record going back to the 1970s was shattered over the weekend. Citigroup, HSBC, Royal Bank of Scotland, etc. look like they're all coming apart! Until the banking mess gets fixed, stocks will be on defense. Dow is at 7949. The recent low of 7500 may be tested shortly & it looks like the test will not be successful!
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