Fear over Financials drags Markets lower Wednesday

North American markets were broadly lower Wednesday as investor fear in the Financials and further credit crisis write-downs caused massive selling. Major indices across America were off between 2 and 3%, with the biggest loser being the S&P 500.

The US Dollar continued to weaken against other major currencies setting a new record low against the Euro. For us Canucks (Canadians, for those not from North of the border), we saw our Loonie hit $1.10 before settling back to $1.07 and change. Great if you're planning a loot shopping session in Buffalo on the weekend, not so nice if you're holding American investments.

The Financials were the biggest victims, whether they deserved it or not. Fear of further write-downs and losses spurred selling that carried throughout the entire day.

The list of victims is as follows:
Citigroup (C) - Down 4.5%
Bank Of America (BAC) - Down 5%
Wachovia (WB) - Down 6.5%
JP Morgan (JPM) - Down 4.25%
Morgan Stanley (MS) - Down 6%
Goldman Sachs (GS) - Down 4%
Lehman Brothers (LEH) - Down 5.75%
Novastar Financial (NFI) - Down 2.75%
Washington Mutual (WM) - Down 17.25%
Countrywide Financial (CFC) - Down 9.25%

Not even high flying Technology could save this session as selling was seen across the board. The amount of trader fear that exists over further credit losses, makes this a scary time as yet to go bargain hunting. If trying to buy on the cheap, do it in blocks and stagger the purchases because this pent up fear carries with it more potential downside.

Cisco Systems (CSCO) reported after the bell, a strong profit quarter, in line with forecasts but their guidance and words sparked further after hours selling. The US Bank debacle has starting to creep into the technology sector according to Cisco, as orders for networking equipment from the Financials were much weaker and comments form Cisco management only stroked further fears. Shares were off 4% in trading and another 9% in after-hours trading, leading major tech futures lower going into tomorrow's trading session.

Disclosure: Author owns and has covered calls in C, BAC, WB, GS

Is the Hype behind the VMware IPO Worth the Investment?

VMware (VMW) is a software service unit that creates various virtualization solutions for a multitude of consumers. EMC Corporation (EMC) is behind VMware and is spinning about 10% of the company in the IPO that is due to open trading August 14th. EMC acquired VMware in 2004 for around $600Million and if the hype machine behind the IPO translates into interested investors, the company will surely reap the benefits. The biggest sell of virtualization software is the ability to run multiple operating systems on the same physical machine at the same time. With the amount of money that is spent on server infrastructure within American corporations this, some argue, is the future of computing. Less physical boxes running simultaneous split operating systems will save incredible amounts of money, use less resources and provide increased flexibility as the world of multi-core computing becomes reality.

VMware also creates smaller scale solutions for consumers, such as its popular desktop virtualization tools that allow Apple (AAPL) Mac users the ability to simultaneously run Windows on their Intel-based iMacs or MacBooks. Apple's own solution called Boot Camp provides a similar functionality however the user is forced to reboot the machine in order to switch between Windows and Mac OS X.

This growing business isn't anything close to small peanuts as VMware did $700Million in Revenue last year and had $87Million in profit. Last quarter the growth continued as VMware reported $300 Million in revenue, representing an 89% increase year-over-year. EMC plans to issue 33 Million shares of the around 375 Million in VMware. That's right EMC is keeping almost 90% of the company out of public hands. VMware has certainly been popular among the huge market tech names as both Cisco (CSCO) and Intel (INTC) have stepped up and purchased small pieces of the firm.

Can VMware make the average investor money on IPO day? It's possible but I would be extremely cautious of over-paying for a tiny piece of this solid, growth company. Investors started to realize that EMC would actually be the safer way to get in on the VMware craze and shares of EMC jumped 8% today to $19/share, giving the company a market cap of $40Billion and a P/E ratio of 31. A company that showed growth of 20% last quarter and posts an estimated growth rate of 19% from this year to next is certainly attractive at P/E levels in the low 30s.

The hype behind VMware is icing on the cake for EMC investors, and this should be the safer, smarter play for those who won't get in on the ground floor when VMware's IPO price is announced. Ranges for the IPO have increased from the mid 20s to the high 20s with some analysts expecting over $30/share. There's also been talk that the company could open as high as $60/share. At $60 that would give VMware an implied market cap of $22Billion. Half the market cap of its owner EMC. That would be extremely high for a company that looks at estimates of $1-2Billion in revenue this year. In contrast, EMC had over $11Billion in revenues last year and sports of growth rate of almost 20%.

Virtually the entire market expects a red hot VMware IPO, no pun intended. Plenty of money will change hands and opportunities will be there, however, a word of caution for investors because if reasonable prices can't be found in the early going I would not recommend the chase. With EMC still owning 90% of VMware anyway, that should be the way to play this one.

Disclosure: Author is long AAPL, INTC and holds no positions in the other stocks mentioned

Bulls are Back in Town

Markets scoring their 3rd straight positive day means a 3-peat for the Bulls on Wall Street. No, that wasn't Michael Jordan on the floor of the exchanges this week but with the positive start of the week the major indices - Dow Jones, Nasdaq, S&P and TSX - are all up around 3%.

Murky waters still lay ahead as the sub-prime scares are by no means over, but with the Fed's interest rate stance providing a little relief to those fears, investors were buying for the time being. Couple that with a slight drop in oil and a few key positive earnings reports, specifically Cisco (CSCO) yesterday, which powered the stock to a 52-week high, and you've got yourself 3 straight sessions in the green.