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

E*Trade Sinks on Liquidity worries, Risks continue to mount

Investors fled from E*Trade Financial (ETFC) this morning as rising worries or more loan loss write downs and the possibility of a liquidity crisis hit the stock. Shares fell over 50% in the early market hours on the heels of an analyst report that brought up the possibility of Bankruptcy.

No, this analyst didn't get Wheel Of Fortune re-runs mixed up with E*Trade, there are legitimate concerns here. The Citigroup analyst made the point that the possibility of bankruptcy is only 15-20% right now, but that can certainly rise if things get worse in the loan department. E*Trade's core business is their discount brokerage and if that starts to go it's lights out for the company.

Management is trying hard to reassure the Street that the company is well capitalized and can afford to take an immediate $1Billion hit. While that may be so the lingering thunder-cloud here is that E*Trade's own brokerage customer may flee and demand their cash. If this happens in droves, E*Trade is in real trouble. If things do get so bad that E*Trade will have to go into bankruptcy protection the masses of angry customers and lawsuits will keep the company tied up for years and years and make E*Trade "Uninvestable".

The sheer drop today makes for some potential day trades off of lows but until things get better -and all signs point to things getting worse first- E*Trade has to be ignored as a stock to own. There are no catalysts here for the company right now except for the general North American economy and more potential reassurances. Traders didn't seem to buy today's reassurances so future press releases from Management will have to be much more convincing of a recovery to business as usual.

Disclosure: Author holds no position in ETFC