Shanghai Stock Market

Asian stocks are weak today (Wed AM). Hong Kong is down a little, but Shanghai is down 1% bringing the index near 3K. Shanghai banks are down 4% today, their reserve requirements were just raised. Inflation is causing big problems for China. Fuel is subsidized, food is the largest component & it affects everybody. The chart below shows the last 12 months for their stock market. It almost doubled last year, but those gains were given up in the last 8 months. The rebound in recent months was lost in May, the index sunk back to 3K (more than 50% below its recent high). China sells a lot to the US, their stock market weakness may be another drag on US stock markets.

Mixed signals, mixed markets

Mixed signals produced mixed markets today. Everybody is talking about Bernanke's comments about (maybe) raising interest rates. Also there are important meetings in Europe where they will try go figure out what central banks should do next to help troubled financial markets. The averages ended mixed today but decliners led advancers 2-1, again on only 1.3B volume. Financials rallied from an oversold position (2 up days in the last 8). The volume is above the low numbers from earlier this year, but remains below average. Oil pulled back 3 to 131 as they are trying to price in reduced demand from the extremely high prices. Adding to oil price weakness, the dollar has been very strong in recent days with the yen going to 107 (from the low 100s) & the Euro falling to 1.54½. This might be good for the stock markets, although influence on individual companies will vary. The gov raised its forecast for higher oil prices in 2008. The Alerian MLP index pulled back 3, to test the 290 support level. It's been in a sideways 290-300 band all year (except for 2 quick spikes down). If 290 doesn't hold, there could be another spike down. However, the MLPs I follow closely having been doing well this year.

High oil prices & credit crunch issues are expected to be major drivers for the stock markets in the next few months. Whatever is decided in Europe this week, these problems will drag on for some time. Expect a bumpy, if not down, ride ahead for stocks.

Higher oil sends stocks lower

Higher oil prices sent stocks lower. Dow started down 100 but rallied to near break even. Decliners lead advancers 3-1 & NAZ is 18 points lower. Tough to explain Dow's better performance but Coca Cola (KO) is the big the big winner, up 1.68. Exxon (XOM) & Chevron (CVX) both slipped back on higher oil prices. Oil rose 3 to top 137 on the usual worries, higher global demand & supply concerns. The president of the Boston FED reserve said higher energy & food prices are trickling through into inflation numbers. The slowing economy may cause prices to trend down, but that was amended with a "maybe." FED Reserve Chairman Ben Bernanke hinted that the FED might have to raise interest rates to fight inflation. From zero on the radar screen of traders, that has risen to a 50% chance.

Kirk Kerkorian's offer to buy 20MM Ford (F) shares drew an overwhelming response. More than 1B shares (nearly half of all shares) were tendered, easily allowing him to buy all the shares he wants. Today Ford is 6.08, down 28¢. At the big picture level, I think this tells a lot about today's markets.

Lehman problems worry markets

Lehman (LEH), down 2.81, problems continued to be a drag on the markets. Dow was up 70, but decliners outnumbered advancers 2-1 & NAZ was down 15 on 1.35B volume (a little below average). Dow was helped by McDonalds, Alcoa & the 2 oils (Chevron & Exxon). Oil was down 4 to 134, but at these levels the decline didn't have a major influence on the markets. Financials were weak, check BAC & USB on the right. Timothy Geithner, FED Reserve Bank of NY President, said there is need for more regulation of the largest banks & investment banks. Read the attached summary of his comments, the markets sold off while he was speaking. Meanwhile the Alerian MLP index only pulled back ½ a point, not bad. It's getting a lot of support just above 290, probably helped by the high oil prices even though their effect if anything might be negative for pipeline companies.

This was a very disappointing day for the bulls. Instead of the sharp sell-off, markets remained soggy. They largely had an off day, the kind which may be repeated. Banks are getting hammered & hard. For the brave, the high yields will be attractive. The trick is to separate the wheat from the chaff in the bank stocks.

Lehman raises $6B

Lehman (LEH), down 2.40, raised $6B in financing after reporting a 2.8B Q2 loss, larger than expected. They need the capital to help get thru the credit crisis. Also oil was also a couple dollars lower, but these moves did not shake markets. Dow is up 74 (below earlier highs), advancers & decliners are about equal while NAZ is down 20. Oil, subject to profit taking, fell back 2 while AAA reported gas reached 4.02 yesterday (check my AAA button on the right). CIT (CIT), a commercial finance company, up 1.07, will get $3B in financing from Goldman Sachs (GS). Times are tough, expect more such deals.

McDonalds (MCD), a Dow stock, reported May same store sales grew 7.7% including 4.3% growth by US stores. MCD was up 2.24, contributing to the Dow's big gain.

For the bulls, trading this AM was a big disappointment. They would have liked a huge sell-off following buy a nice rally later in the day. That would signal sellers bailed out, leaving buyers to take charge (especially after the LEH news). But it didn't happen. Dow is still stuck kicking around the 12Ks, if anything it's on defense.

Markets tumble in Asia

Asian markets, following NY markets on Fri, tumbled sharply in early Mon trading. Most are down 2%. China & Hong Kong are closed for a local holiday, saving damage in these markets. Mon could could an interesting day in NY, especially if it begins with a huge sell-off in the early minutes. Given problems out there, instead I'm looking for just more bleeding,

Below is a picture of the fraidy cat, but she's not afraid of me any more. In the markets, this is not the time to be a fraidy cat. Instead prepare for better times in the future.

Stocks tumble on oil gusher

Oil prices shot up above 139, before pulling back a few cents to close at 138.87 up 11.08 (18 in 2 days). This was plenty, causing the markets to have a mild crash. Dow tumbled 394, decliners ahead of advancers 4½ to 1 & NAZ down 75. Wheww!!! All this activity on just 1.2B shares. That low level of volume is not the climactic sell-off bulls bulls would like to see signaling the end of selling. Oil is living in it's own world as speculators have taken charge, but the analyst forecast about reaching 150 by July 4 lit a fire under speculators in the last 2 days. In this sell-off, even Chevron (CVX) & Exxon Mobil (XOM) fell. Banks were punished badly, check BAC & USB in the right column. However, the Alerian MLP index help up pretty well, falling less than 1 to 293½, near the low end of a trading range where it has lived for much of the year. Boring pipelines with high yields looked attractive!

Not much to say. The weekend will be good time to check prices & valuations, preparing for buying opportunities at lower levels.

Gloomy Friday

Negative unemployment news & sharply higher oil sinks stocks. Dow was down 276, decliners ahead of advancers 4-1 & NAZ was down 43. This is shaping up as another ugly day on the news stories. The unemployment rate rose ½% in May to 5.5%, the biggest monthly rise in 22 years. Oil shot up 7 to near 135 on prediction it may reach 150 by July 4. This brings the 2 day gain to 12. Can you spell, uh-oh?

S&P reported that the number of companies around the world on credit watch in May was at a record level, 738. These companies are facing credit downgrades because of worsening financial conditions. Much of their problems come from the housing & financial sectors. American International Group (AIG), a troubled Dow stock, is facing an SEC investigation over whether it may have overstated complicated financial productions related to sub-prime investments. The stock is down 2.27 to it's lowest level in over 10 years. The US economy remains soft, getting clobbered by credit issue problems & higher priced oil.