Monday, January 12, 2009

Energy & banks weigh down the Dow

Stocks retreated on bearish news for energy & financials. Major decliners (down more than 1 in the Dow were: Citigroup (C), Bank of America (BAC), JP Morgan (JPM), Exxon (XOM), Chevron (CVX) & Caterpillar (CAT). OK, there was one industrial in there. Dow fell 125, decliners over advancers 3½ to 1 & NAZ declined 32.

This is the start of earnings season & thoughts of reality are in the minds of traders. Lower oil prices & what could be another terrible reporting period for financials is weighing heavily on the stocks. Banks were hit hard as S&P 500 FINANCIALS INDEX looks like it's heading for its recent lows. Less than 2 years ago this index was at 500:

Value
146.91
Change
-8.88
% Change
-5.7%


Oil fell sharply on greater worries about demand destruction from the global recession.

CLG09.NYM..Crude Oil Feb 09...37.72 ..Down 3.11
......(7.6%)



The Alerian MLP Index (energy related) dropped 4, the Dow Jones REIT Index dropped 8, Barclays Capital High Yield Bond fell 1% (losing a few of its recent new friends) while the VIX was up 3¼ (fear is on the rise).

Citigroup (C), a Dow stock, is trying to sell most of its brokerage business to Morgan Stanley (MS), but traders were not impressed. C dropped 1.15, it's a $5 stock once again.

A sense of reality is biting traders hard. Earnings reports may pinch stocks. The stimulus package is in the wind & it already has critics from both parties. One safe bet, it will be close to $1T requiring gov to borrow substantially more.

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