13 November, 2007

What a Difference a Day Makes, Markets rebound Tuesday

Four Days of heavy sell-offs for North American Markets were met with enthusiastic buying as earnings, financial executive appearances and economic data supported a more bullish tone. Technology led the rise with the Nasdaq gaining more than 3.5% while the Dow Jones and S&P followed with gains of 2.5-3%.

Earnings from Wal-Mart (WMT) pushed stocks higher at the open as the benchmark retailer said it was expected a solid Christmas shopping season. Investors applauded the earnings beat and forecast and sent shares up more than 6%.

In the financial sector, a day after E*Trade Financial (ETFC) plunged 59%, a somewhat rebuttal to the bankruptcy fears from another analyst sent E*Trade soaring back 40%. A swing trader's dream stock the last couple of days, but the risks with this company still remain. E*Trade has assured it is well capitalized to absorb loan write-down losses and that bankruptcy is not in its future. In other financial circles, Bank Of America (BAC) reported that it will write down $3Billion more in losses, while Goldman Sachs (GS) CEO Lloyd Blankfein spoke at a conference showing the street once gain how brilliant the business and trading side of Goldman is. The context of Blankfein's talk; Goldman will not be taking any more write-downs and is still shorting Sub-Prime sectors. I for one think that Goldman's earnings will once again be stellar and prove to Investors it is not only Best of Breed on the Street but seemingly in its own Pantheon of Investment Banking. Shares of GS rallied heavily today, up almost 9% coming back to $233/share.

Technology was a big winner, as the Nasdaq paced gains, with Apple (AAPL) up 10%, Baidu (BIDU) up 13%, VMWare (VMW) up 13%, Google (GOOG) up 5% and Research In Motion (RIMM) up 9% all regaining some lost ground. I said very recently (Link) that Technology would be back and investors should look for strong fundamentals to find winners during the panic-stricken sub-prime selling crisis. Now by no means does today mean that all that can be forgotten and momentum will continue but it does provide a foundation for bullish sentiment.

There are several economic measures coming, including two key metrics this week; Producer Price Index - (PPI), and Consumer Price Index - (CPI), Wednesday and Thursday respectively. Now although the housing indicator released today showed a slight percentage gain, compared to the estimated percentage loss, the outlook pointed to things indeed getting worse from here on out before they get better for the home building sector.

Disclosure: Author owns GS, BAC, AAPL, GOOG


Hansel said...

Daytraders in shangri-la these past few days, can you believe the E*Trade madness?! You're right to point out that ETFC has reiterated it will be capable of remaining solvent through these write-downs and long-term should remain steady (which is a sigh of relief for the Fund given its reliance on the ETFC systems). Out here on the west coast we also finally saw a rebound in Washington Mutual (WM) mentioned in an earlier WC article - with a current yield of nearly 11%, will the bank be cutting its dividend? If it follows the lead of its bigger brother Citi by maintaining its payout and pushes past the appraisal investigations, this could be one to watch. Also in the watch column are CSCO and AMZN, slowly recovering from sharp drops off recent highs. Best of luck to the longs!

Zeus said...

Your RSS feed gets cut off... I only get the first 4 lines. A fix would be much appreciated!

Chris Krasowski said...

As for the battered mortgage companies paying out dividends still. It's a risky play, these guys are laying off people left and right, Countrywide's a prime example. I'm not sure what WM has plans for its dividend but it wouldn't shock me if it was cut or even not paid out till things get under control.

These companies need cash for operations. NovaStar scrapped its dividend recently and withdrew form REIT status. Serious troubles there.

As for the RSS feed, that's an issue with Blogger, as I can only publish a short version or a full version of the feed. The short version only publishes a set number of characters.

While I realize this could be an inconvenience for now, I'm still at the stages with this blog that driving traffic and readership back here is a big priority.

Chris Krasowski