Markets waver ahead of the stimulus package vote

Stock markets vacillated trying to figure out what to make out of the stimulus bill. Dow is down slightly while NAZ is even & advancers are 25% over decliners. S&P 500 FINANCIALS INDEX slipped 3.

The Alerian MLP Index continues on a tear, rising 2½ to the 205s:

Alerian MLP Index --- 2 weeks




REITs, junk bonds & even the VIX were weak but oil was strong (probably helping MLPs)

CLH09.NYM

...Crude Oil Mar 09

....35.96 1

... 1.98 .......(5.8%)

China's economy, 4th largest in the world, is showing signs of recovery after their enormous stimulus/recovery plan was announced in Nov. Their stock market has rocketed ahead in the last 3 months. In 2007, the Shanghai stock market virtually doubled only to lose those gains & more last year. Late last year, the Shanghai market was down to the 1700s (from a record high over 6K in 2007). Since then it has been moving up nicely. Today it closed up 72 to 2320, that's a partial recovery. Domestic growth may be giving them a lift, but export business must be soft.

•China's Economy Shows Signs of Recovery as Stimulus Package Takes Effect


Australia, like most of the other countries in Asia/Europe, has an economy that needs help. They just passed an enormous (for them) stimulus package to provide economic aid.

•Australian Senate Approves Rudd's $28 Billion Economic Stimulus Package


Toyota (TM), now the world's largest auto company, is facing the same issues as the US competitors, soft sales. In the US, they are using buyouts to lay off employees. Their Japanese business has already been hit hard between the forces of a weak local economy & high ¥ rates of exchange hurting export sales to a world in a severe recession. Their stock, however, has done much better than General Motors (GM). TM is down 1.28 today to the 66s (its all time high was in the 130s).

•Toyota Plans Wage Freeze, Buyouts in North America as Output Cuts Increase


The record spending stimulus package should be signed off this weekend. Legislators will be voting on a bill with several hundred pages written in bureaucratize (a language similar to English) after trying to assimilate its scope & meaning in just a few hours. All we can do is hope for the best. An agreement on bank bailout II still has to be reached, that will be even more complicated. Finance minister from around the world are meeting in Rome, looking to come up with solutions to the largest financial problems in history.

• Stocks waver as world's finance ministers meet- AP

Asia & Australian markets a little lower

Markets are pulling back in Asia/Australia, maybe that's better than lower prices in the US. Australian stocks are down over 2% led by lower resource shares, hurt by lower oil & commodity prices. Resources commodities are down typically 5+%. Hong Kong stocks are down 1.7%. HSBC after large loan write-offs causing profits to decline 29% is leading stocks lower. Taiwan stocks are also down 1%. However, Tokyo stocks, at lunch break, are up ¼% & Shanghai stocks are up slightly. Oil is down 1 to 120.

Following up on my Exxon comments, below are earnings estimates (courtesy of Yahoo) for a 76.60 stock:

Exxon Mobil Corp. (XOM)

..............................2008........,,...2009
Avg. Estimate__________9.76________10.37
No. of Analysts__________17___________17
Low Estimate__________8.60_________8.25
High Estimate_________11.21________15.64
Year Ago EPS__________7.28__________9.76

The stock doubled in the last 5 years, a nice story followed by the sell-off in the last 3 months:

Rally mode is limited

Markets in Asia/Australia are mixed to slightly higher. But there is no follow thru on the big gains in the US. The Tokyo market is most interesting, down ½% going into their lunch break. Their banks & autos (you know those names) are weak on negative news & guidance particularly from the US markets. Nintendo is down 8% after giving a weak outlook & Toshiba is lower after reporting its first quarterly loss in many years. Australian banks are down still feeling the effects of major write-offs at big banks. Oil declined 22¢.

No let-up in selling

Markets continue to slide in Asia/Australia. Each market is down 2-3%, very bleak. The announcement by Merrill Lynch after hours about needing more capital (after selling their Bloomberg stake for $4B a couple of days ago) & many prior announcements that they would not need more capital is being questioned in Asia trading. Merrill Lynch is taking another big write-off & will seek an additional $8½B. The end of the credit crisis does not look to be near.

Credit Crunch Continues

Another Australian major bank, ANZ, is taking a $1.2B (Australian) write-off on global loans, primarily in the US. The Australian market is down 0.6% led by lower banking shares, ANZ slumped 11%. On Fri, Australian banks sold off after NAB reported a similar $1B write-off. Tokyo & Korean markets are trading higher.

Two banks in the west failed on Fri, but there were no runs on them. FDIC is getting practice handling failed banks. These bring the total to 7 failures, starting with IndyMac 10 days ago. Also, this week preliminary GDP figures for Q2 will be reported, 2% is the expected annual rate. Since that is up, it will not signal a recession. Try telling that to housing & auto companies.

Markets selloff continues

Asian/Australian are following the lead of US markets, down. Most declined 1½-3½%. Australia leads decliners being impacted by NAB, a large Australian bank, which just wrote-off $830MM (Australian) related to losses in the US sub prime mortgages, off 11%. Their provisions are based on a worst case scenario. Samsung, huge electronics company in Korea which sells globally including to the US, is down 4.6% as earnings came in 10% under forecasts & they gave cautious guidance for the balance of the year. Their chip division was weak & business looks bleak for rest of the year. Their LCD division did well but they are forecasting slow business for the rest of the year. Tomorrow US markets may be starting with a downward bias.

Indecisive attitude drags on

Asian & Australian markets are weak to slightly up, nothing dramatic. Bank stocks are down 2-4%, profit taking after yesterday's big gains. Big stories include LG Electronics, a huge company, reporting excellent earnings yesterday but selling off today on worries about the global market going forward. They are also concerned about dreary earnings reported after hours by Apple (AAPL), Texas Instruments (TXN) & American Express (AXP), a Dow stock. AXP is the most disturbing as they have a good "feel" for the economy, Tomorrow, Wachovia (WB) & Washington Mutual (WM) will report. Also, IBM sold more shares in Lenova taking its interest below 5% meaning they will not have to report future stock sales.

Dow Jones futures are trading down 100 with NAZ & S&P 500 each down about 1%. The negative tone comes from after hours trading for AAPL - down 16, TXN - down 3¼ & AXP - down 3.65. Hang on tomorrow.

Positive start continues

Early gains in Asian/Australian markets are strong. Taiwan, Hong Kong & Australia are each up 3%, while Shanghai is only up fractionally & Tokyo is closed for a holiday. The financial/banking stocks are up 3-7% riding on what was perceived as favorable reports from Citigroup (C), JP Morgan (JPM) & Wells Fargo (WFC) last week. Oil was up pennies, even touching 130 at one point, on unfavorable talks in Geneva plus tracking the new storm tropical Dolly.

Gains last week were not evenly spread around. The beaten up stocks benefited the most with large gains. The Alerian MLP index declined to the 52 week low, Fri was the one year of the anniversary of reaching its record high 80 points above 262. REITs were only up a little & junk bond funds were ignored.

General stocks, other than greatly depressed ones, were more mixed with so-so gains at best. Kimberley Clark (KMB), after lowered guidance, suffered an immediate 4 point sell-off. Google (GOOG) & Microsoft (MSFT) also saw selling after reporting disappointing earnings. Reports this week which don't make investors happy will see selling.

Wild, wild week!

Stock markets, highlighted by financial stocks, just went thru a major sell-off followed by a sharp rally in the last few trading days. Financial stocks got the most attention, even more than energy & energy stocks. This year, they've gone from one new low to another with seemingly no end.

The S&P Financials Index, shown on Bloomberg (their symbol for it is S5FINL), went from a high of 510 in May 2007 to a low of 230 last week (more than a 50% decline) followed by a sharp rebound to 280 Fri. The moves are similar to Bank of America (BAC) stock performance even though its had more exaggerated moves, shown below (note high volume recently):

BAC stock has done well, from the 20s in the early part of the decade to the 50s last year. As a member of the S&P 500 Dividend Aristocrat list, BAC had yearly increases with a nice one 12 months ago. Since the peak in early 2007, it had a slow & then a sharp drop to last week's low of 18½ where the stock yielded almost 14% (for those who believed in the div). The 3 day rebound brought the stock back to the what had been a “new low” price reached a month ago. The rebound came on high volume as show below:

Banks have gone thru a lot, especially this year, mostly negative news stories. All major banks operate under a dark cloud which varies from one to the next, but each one has a cloud overhead. A week ago, the banking system had its first failure in what must be at least 20 years. There haven't been any (or many) because a large bank was always available to take over the weak one, then life went on. That concept is barely alive today. The FNM/FNM situation & confusion about their survivability during the credit crisis adds to uncertainty for financials. That's been a lot for investors, whether experienced or novices, to absorb causing wild swings on big volume.

Meanwhile, economic problems drone on. In 1980, the economy had to deal huge numbers for inflation & unemployment while contracting. The combination of events was called stagflation, all economic measures were going wrong. The world is not as ugly today. By comparison, inflation & unemployment are more moderate while the economy is eaking out growth. However, they're ugly enough to drag down markets this year & looks like these conditions will continue.

The depression in housing & autos affects a lot of businesses & workers. Masco (MAS), another member of S&P Dividend Aristocrat list, will eak out their 50th consecutive annual div increase this year (by one penny). If continued, Q4 will be above the prior year by that penny. But they indicate earnings will not cover the current div. Remaining on the list next year is unclear. It will be sad if they are forced to break their 50 year track record next year. While this is just one small story among a great many, it's indicative of tough times the economy is going thru causing stocks to sell off in 2008.

I haven't seen the extreme fraidy cat lately, the black one living most of his life under the futon or in a closet. Maybe that's his way of saying we should be cautious, at best, going forward. More earnings reports will be issued this week including BAC on Mon. By weekend, they will announce the next div (the one they traditionally increase). If earnings are less bad then dreaded, chances are they will have an increase even if it's limited. The earliest signals for this week are the New Zealand market opened higher & pre-trading for Australian stocks is showing a 1% increase suggesting markets will start on a positive note.

Rally continues, but subdued

Asian stocks are largely higher. Shanghai leads the pack with a gain of 2%, but they remain at depressed levels (down 40% this year). Other markets have fractional gains. Australian stocks are lower, partly because of the 1500 cutbacks Quantas (their national airline) announced. High oil prices are hurting many businesses, especially airlines. Asia markets are concerned about the large loss reported by Merrill Lynch (MER).

Oil is up pennies, still in the 129s. Oil sold off in recent days partially because of anticipated lower demand from a weak US economy. The thinking in Asia is that any reduced demand by the US will be picked up by strong demand from surging Asian economies. The Dow Jones futures in Asia are trading down 65, an early call on tomorrow's opening.