26 November, 2007

Markets Start Post-Thanksgiving with Monday Afternoon Slide

The day started with promise after a Friday market session that had stocks broadly up. Some concerns over consumer spending were eased as reports came out estimating the number of shoppers in the US over the holiday weekend actually increased against last year. The markets were battered later after more credit concerns in the banking world came to light. Specifically from Citigroup (C).

The retail shopping data provided an early boost as a tracking data point (of approximately 50,000 stores) showed a 7% year over year increase in consumer spending. The fears that the credit crunch would curtail spending seemed to be forgotten for the time being. The positive vibe of the market was erased in the afternoon as more bad news poured out of the financial sector.

Citigroup announced some cost-cutting plans effective immediately, which led to speculation of job cuts and further write-downs. The major bank may have to include an over $8Billion write-down next quarter. This bad news trickled throughout most of the financial sector and Citigroup shares fell under $30. This company is surely in bad shape these days and a recovery effort will be a bitter pill to swallow for investors but may be a necessity before the $40s are seen again.

The major averages were all down around 2% Monday, with the Dow losing almost 240 points. The S&P benchmark with today's loss dropped into the negatives on the year and as it is the tracking average for most mutual funds Investors will surely be disappointed in their next statements.

I think there's some hope here for a recovery but the time-frames are shifting every month that's filled with continued bad news. We've heard it several times, that things will get worse before they get better, but investors can't shake off bad news with the fragile state the financial sector is in right now. It's got to be a holding pattern investment-wise until someone, somewhere shines a light on the sector.

Disclosure: Author owns C

No comments: