Wall St. Less Enthusiastic Than Main St. On Inauguration Day

The mall in Washington is packed as the nation awaits the inauguration of Obama. Main St. is optimistic that the new Administration will push through a large stimulus package, and get the economy back on track.

Unfortunately, there is less enthusiasm on Wall St. this morning. Ongoing concerns about the European financial system are hitting our bank sector as well, driving the bank index down a sharp -12% so far.

Royal Bank of Scotland (RBS) said it could see a record loss of more than $40 billion. The British govt. may convert its preferred shares in RBS to common stock, which would give the govt. a near 70% stake. That has common shareholders worried, and RBS stock plummeted -65%.

State Street (STT) topped earnings estimates, but disclosed it is looking at a $5.5 billion loss. The stock has fallen as much as -50%.

The WSJ is also reporting that the U.S. govt may be looking at creating a bank that will purchase troubled assets from other banks, or guarantee against further losses. All of the above are leading to increased concern for stockholders, and that is why the banks and financial services stocks are all getting hit.

Oil was trading lower, but has since reversed and is how a bit higher to $37. The dollar is up, mostly due to a big dip in the Euro. The 10-year yield is also higher to 2.47%. And the VIX is up +13% to 52.

Trading comment: The market has now moved back into oversold territory, and should be in a position to rally. It will be difficult for the rally to make much headway without the participation of the financials, so let's hope we hear some news that calms investors fears regarding the TARP plan, etc. We also have some big earnings reports this week in the tech sector (AAPL, IBM, GOOG, MSFT, etc). I am still holding some of my long ETFs that I added recently-- for now.

long AAPL, GOOG