Monday, March 02, 2009

Monday Morning Musings

Continued concerns that large financials, like AIG, will need more government assistance is trumping some positive economic reports this morning and dragging the markets lower.

The S&P 500 has broken below its November lows, which likely opened the door to further technical selling. Interestingly, the Nasdaq is still above those November lows.

AIG posted a huge 4th quarter loss, and indicated that it will need more money from the government. This is pressuring the bank index to the tune of -4.9% this morning.

In economic news, January personal spending rose +0.6% vs. +0.4% expected. Personal income rose +0.4% vs. consensus of -0.2% decline. Also, the February ISM Manufacturing Index rose slightly to 35.8 vs. 33.8 consensus. It's nice to see a small uptick in personal spending at a time when all you hear about is the consumer retrenching and retail sales dropping.

In overseas news, Asian markets fell sharply overnight, except for China which bucked the weakness. The FT is reporting the the Bank of England is set to begin "printing money", in a quantitative easing effort to combat declining asset values and spark some reflation.

The dollar is mixed this morning; the 10-year yield is lower to 2.92%; oil and gold are both trading lower, weighing on the energy and materials stocks; and the VIX is +6.8% higher to 49.50, but still below levels it hit during the last several market selloffs-- a slight positive divergence.

Trading comment: I talked about wanting to get more defensive as the indexes broke their November lows. I still have on some of my etf hedges, but have not added to them yet. The market is very oversold here, and I am mindful of the potential for a sharp, snapback rally. I would prefer to use any such rally to add to my hedges.


At 9:52 PM, Blogger Unknown said...

There was some talk about the S and P being fairly priced due to dismal 2009 earnings. Any thoughts on these statements?

Also, is the next logical stop 6k dow?

At 9:22 AM, Blogger J. Kahn said...

2009 earnings are really what they call "trough" earnings. I think it makes sense to start thinking about what 2010 earnings might look like, and on that measure, the market looks undervalued.


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