Banks are Gold, according to Goldman

Goldman Sachs (GS), long the darling (and jealously-driven scorn) of Wall St. just gave an emphatic gift to all its rivals by declaring the American financial system is a worthwhile investment. With its own shares more than doubling year-to-date Goldman gave its investing clientele the go-ahead to purchase other large banks, sending financial shares higher today and leading the market to gains or just about 1%.

By claiming large banks will outperform regional banks, Goldman spawned gains of between 2 and 6% for the major financial institutions. Despite the shot of love Goldman has thrown the financial companies, it finds itself battling one hell of a PR campaign on the topic of excessive bonuses. The company was looked at with balking eyes as it reported near record profits and bonus levels in the first half of this year, a year only one removed from the biggest financial and market failure since the Great Depression.

Perhaps Goldman wants to set the mood, favourable for all banks and it turn for itself. Since there's no shortage of politics now in finance, by giving an agreeable nod to the upcoming performances of the major banks, it'll soften the political blow when Goldman reports another record quarterly profit and annual bonus numbers that draft everyone else on the street.

The company is known for its shredding and fleecing of most it does business with, and a recent report showcased that Goldman receives $1Billion if the institution CIT fails, and price tag that would cost taxpayers $2.3Billion will do nothing to change that reputation. The well publicized bailout of AIG during the meat of the financial crisis, of which Goldman Sachs was one counter-party reportedly receiving billions of then federal dollars is just another such example.

But isn't that exactly what you want from an Investment Bank? To be the smartest group of guys in the room? I'd say so, and despite any public or political backlash over bonuses, Goldman is on tap to report another golden quarter. And that's something worth owning.

Disclosure: Author owns GS

For Bank Of America, $34Billion, what $34Billion?

Bank Of America (BAC) has been surging the last few days, up 56% the last 5 days, despite leaked information from the Federal Government Stress Test results. Even though the leaked details of BAC's capital needs seem ludicrously high, the number could have been a lot worse. Analysts have been on BAC's high horse, upgrading the stock, despite the need for $34Billion in capital! And here's why.

Despite the fact that $34Billion seems high, you've got to remember this is Wall Street thinking. The same Wall Street thinking that applauded a government move to secure defaults on over $300Billion in debt of Citigroup (C). Both banks have been surging lately as Investors jump back into an industry that was decimated by the credit crunch losses and prolonged recession.

For Bank Of America, and several other banks requiring more capital, the easiest thing to do would be to convert preferred shares into common equity. In BAC's case, doing so would add approximately $28Billion in capital, according to an analyst from Morgan Stanley. The comprehensive analyst report from Morgan's Betsy Graseck details other potential asset sales that would raise the remainder of the required capital. All in all, a situation for BAC, that looks much brighter compared to several weeks ago. It was very recently that Goldman Sachs (GS) made a splash by raising $5Billion in a stock offering, in order to use the money to repay the government's TARP funds.

Ken Lewis having his role of Chairman and CEO separated has given shareholders a new life, and recent gains certainly helped cement realistic rebound expectations. All this, despite the the financial sector still on what can be described as slightly thicker ice.

What Investors are still most weary of is government control of the financial sector, and despite the new Administrations repeated denials of Nationalization the potential of having the US government as the largest shareholder of several major banks will do nothing to quell the argument.

For now though, When the Stress Test results are made public investors will await word of what exactly Bank Of America will do to raise capital. Till then, what $34Billion?

Disclosure: Author owns C, GS

Markets Rise despite GDP data

The GDP dropping by 6.1% versus a 6.3% drop last quarter, could be seen as an improvement, but more so, it continues to paint a tepid picture of the US economy. With economists expecting a drop of 4.6%, according to the Dow Jones Newswires, the realities are still fairly uninspiring.

No matter for the markets however, as the 100-day milestone of President Obama's term approaches, Investors are cautiously optimistic in the direction of the US economy. The Dow, Nasdaq and S&P trackers were all higher Wednesday by about 2% in early trade showcasing some of that optimism. The rally was broad, but Financial and Energy stocks led throughout the morning. Despite calls from the Fed that several banks would require more capital based on the results of the now infamous "Stress Tests", banks have shrugged off the major concerns and have header higher.

Various sources have reported that Bank Of America (BAC) even plans to appeal, their stress test results, to the government in an effort to show it is capitalized well-enough and would not need to drastic dilute shareholders with a market offering. This despite, several bank CEOs, including BAC's Ken Lewis, being on the hot seat with their respective jobs.

The ambitious agenda that President Barack Obama began his administration with has polarized the nation in some respects but brought it closer together in others. Despite news networks dedicated to one side of the argument or the other, the Democrats in power have shown many specific plans and remarkable resolve, and as the 100 day celebration comes to be another Obama media spectacle, the investing community is buying in. But with economic data points showing little to no improvement just yet, time will tell when recovery will truly take hold.

Disclosure: Author holds no position in BAC

Markets Rebound Monday on Government Plans for Financials

Rebound Day? Or the start of something market-wide? That was the question facing Traders Monday morning following a wild weekend where Finance heads of the G7 met and came together on ambitious plans to cure economic ills around the world.  European governments vowed to guarantee all inter-bank lending and the US Treasury announced its intentions of buying into healthy banks to shore up liquidity and get credit moving throughout the economy.

Coming off the worst week for the stock market in a lifetime, and a Friday which saw the Dow see-saw over 1000 points in a single day brought analysts out of the woodwork uttering "capitulation". The market term is the English equivalent to Gold for Bullish Traders as it signifies the end of the end.  In other words, capitulation days typically lead to a buying rally in the short term.

It seems to have all come together for buyers over the weekend with Europe's unified stance on the banking sector, including Germany, France and Spain coming together to pledge $1.3Trillion to guarantee loans between banks and to purchase stakes in Financial companies. This dramatic effort was seen as necessary to avoid the kind of Financial failure throughout Europe that was seen over the last months in the United States.  The unified commitment in Europe led to further plans coming from the US Treasury leaving Monday morning trading in an almost euphorically positive frame.

By no means is the situation going to correct itself in a day.  The credit situation is hitting businesses of all sizes, causing stagnation in the job market, stagnation in productivity and in-turn sales.  The steps by Governments around the world are the beginning, and as money precipitates through the system it will eventually come out of the system as new loans to businesses and individuals. Credit will loosen, productivity and job growth will turn back to the positive side of the spectrum. The big question is when the little guy sees the results?

Markets, always look forward and the positive signs are aplenty today, with the Dow up nearly 600 points, the Nasdaq up 120 points and the S&P up 60 points by the middle of the trading day.  It'll be important to see whether the Bearish tone of late doesn't overcome the early gains towards the end of the day.  If buying like this can be sustained on high volume Traders will see that as a big positive, signalling that last week's downturn was in fact the result of fear-mongering rather than trading to valuation.

With two and a half months left in the trading year, and plenty of Investors sitting still on the sidelines, is now the time to think about getting back into your favourite stocks on the cheap? Was Friday indeed that day of capitulation? Will the Government plans begin to take form and alleviate the credit problems suffering the nation in the short term? All valid questions that only the next few weeks will tell. However, seeing the signals today, it's clear more Traders are starting to lean towards 'Yes' across the board.

US House defeats Bailout Bill. Markets plunge.

The controversial $700Billion bailout plan being pushed into the House today was to be the tipping point for the US economy and financial markets. With optimism swirling on the weekend that agreements had been finally reached on the bill, the one thing left to do was the most important. Vote on it.

The vote they did, the elected House narrowly defeated the bill, sending markets into a selling frenzy by mid-day. As traders learned of the tallying votes against the bill, sellers rushed through the electronic order desks and buyers were heading for the exits. The Dow fell 700 points during the early afternoon while the Nasdaq led all decliners (off about 7% at the bottom of the session).

With politicians on both sides of the spectrum resonating the importance of the bailout package with regards to the fragile nature of the US economy, it is crucial lawmakers do something substantial soon. President George W. Bush urged for the passing of the bill, as did Federal Reserve Chairman Ben Bernanke, but their pleas fell on a deaf House. Democrats did not get the overwhelming show of support they needed and Republicans held firm with their ideas and showed virtually little support even when implored by their President and House leaders. The final tally stood at about 60% of Democratics voting to pass the bill, along with about 30% of Republicans. Pitting the vote at 228 against, 205 for. Ending a tumultuous debating session in Washington that will surely leave politicians scrambling to draft a more "commonly-acceptable" solution soon.

The key is of course, that chances to rescue the financial system in America are few, and with another bank on the bubble, having to sell its banking assets, the focus has shifted from Bailout optimism to, who is next on the chopping block.

JP Morgan Chase (JPM) salvaged Washington Mutual in what became the biggest banking failure in US history, and today Citigroup (C) bought the banking assets of Wachovia (WB). Citigroup has insurance from the FDIC against Wachovia losses if they exceed $42Billion. A truly remarkable number, that will stretch Citi's already thin resources in the coming quarters. The company had to issue another set of preferred shares to the FDIC, as well as slash its own dividend down to $0.16/share.

As the day drew up a close the Dow continued to drift lower falling over 600 points just after 3pm. The Nasdaq continued to be the biggest decliner of over 160 points and the S&P followed suit down 90 points.

US looking to President and Nominees to push bailout plan

Dire times call precisely for dire measures, and the proposed US Government bailout of the Financial Crisis is certainly one of those times. A crisis which has been called one of, if not the worst financial implosions in history. President George W. Bush went on Television to reassure Americans and to pledge support of the historic $700Billion plan to rescue the financial system and the markets.

Bush, also planned meetings with candidates Barack Obama and John McCain to detail, not only the urgent need for passing the proposed bill, but also to outline a strategy for moving forward to sustain economic activity. And furthermore to appeal to the American people that such a drastic monetary package is necessary to avoid a long and likely complete economic slowdown, the likes of which not seen in decades. The word collapse has been thrown around far to often in these discussions but it strikes an important chord as the emphasis on the swift approval of a bailout is seen as vital for market recovery.

Treasury Secretary Henry Paulson, a former Goldman Sachs (GS) chief, was the driving force behind the broad outline of the bailout plan and negotiations with lawmakers on Capitol Hill have been ongoing for days now. As these talks languish, in turn so do the buying trigger fingers of the investor community. President Bush speaking to the population is a direct result of the waning attitude towards the bailout package and its needed swift passing.

While the Dow experienced a two day gain of nearly 1000 points following the announcement of the Bailout proposal, the sentiment has been mixed since. The old adage of 'When government gets to talking the whole process stalls' had been floating around, while it may be unfair to pigeonhole that complaint here, it still provides the media a talking point. Something this drastic and this complex needs to be thoroughly discussed and with issues ranging from individual consumer tax protection, executive compensation, and specific borrowing terms there is bound to be differences of opinion in any Congressional discussion on these topics.

Today's news brings with it the optimism that the bailout package is just about complete, and all major details have been worked out. To that end, the Dow and the other majors are seeing Bullish activity. This morning, the Dow averaged stood higher by almost 200 points (1.8%), with equal percentage gains also present in the Nasdaq and S&P.

Markets eye huge open as SEC bans Short Selling Financials

Following Thursday afternoon rally, which led the Dow to a 400 point gain, the US SEC stepped in announcing a temporary ban on short selling 799 Financial stocks. A move that had been called for by Investors and members of the industry for the last few days. A move that is certainly seen by Investors as curbing the tide of massive profiteering by manipulators betting with the Financial collapse.

The news, along with the Federal Reserve's talking points about a sweeping plan to fix things in the tumbling financial sector, gave traders a renewed optimism. On this day the bull wins in the morning. The usual finance suspects are making the most waves as buyers are coming back in full force in pre-market trading.

Before the open some of the big names in the sector were looking well up.
Citigroup (C) up 34%
Goldman Sachs (GS) up 32%
Bank Of America (BAC) up 26%
Morgan Stanley (MS) up 49%
JP Morgan Chase (JPM) up 19%
Wachovia (WB) up 65%
Washington Mutual (WM) up 58%

An incredible buying turnaround from where these companies were just a few days ago.

Uncertainty remains within Brokers Morgan & Goldman

Last of a dying breed? Morgan Stanley (MS) & Goldman Sachs (GS) remain Wall Street's 2 independent brokerage houses, and for that fact, their shares are being sold off heavily day in and day out. Despite the fact that both companies beat reduced earnings expectations for the quarter, they are being lumped into the same selling frenzy as their industry com padres due to their heavy reliance on leveraged investments.

Goldman profit fell 70% year-over year but the company still managed to make ends meat. The yearly comparisons are not pretty considering Goldman's record 2007 financial year. $810Million in profit ($1.81/share) vs. $2.81Billion ($6.13/share) last year. Overall revenue was down also from $12.3Billion to $6.04Billion.

Morgan Stanley, which had its own set of difficulties over the year reported profit that fell 3% year over year, $1.43Billion vs $1.47Billion, which translates into $1.32/share this quarter. With net revenue reaching $8Billion, a 1% year over year increase, Morgan showed it can still deliver results, however the pressure on the company to make a deal with a bank is staggering.

The old leverage issue again, as Investors feel the only way to shore up capital and assure broker survival is to pair up with a bank and the giant vault of deposits that go along with it. When Merrill Lynch (MER) made the deal with Bank Of America (BAC), followed by Lehman Brothers (LEH) bankruptcy, both of which followed JP Morgan Chase (JPM) rescue of Bear Stearns the Street was down to 2 stand-alone investment houses.

The rumor-mill has run wild of late regarding Morgan, with reports of conversations with Citigroup (C), Wachovia (WB) and China Investment Corporation, which if done would leave Goldman Sachs as the sole big name brokerage left on Wall Street. Investor publications have held a positive opinion so far on BAC's deal for Merrill, so for Citigroup or Wachovia picking up Morgan Stanley on the cheap would also feel like a win.

However, in the turbulent times that are continuing, with a financial crisis unseen in most Investors lifetimes, the "Let's make a deal" talks are very cautious to say the least. If Morgan does join with a bank, and signs are pointing more likely recently that they will, Goldman will find itself in a unique position, having its main competitors under the corporate shells of some of the largest financial institutions in the country. The optimist finds that this will allow Goldman to thrive as the economy strengthens and underwriting and M&A advisory work become more prevalent, but the pessimist finds a single brokerage model struggling to survive in these economic tidal waves.

As Markets see-saw between down 400 point and up 400 point days, the successful trade is being on the optimist/pessimist part of the see-saw on the correct day. Lately though, the pessimism has run rampant.





Disclosure: Author owns GS, C

Finance Fails Again! Dow Drops 500 points

Monday started poorly and ended worse for Markets as the weekend turmoil of Lehman Brothers (LEH) and AIG (AIG) weighed heavily on the financial sector and stocks as a whole. As hope for a bailout of Lehman, or at least heavy asset sales dwindled Sunday, leading suitors heading for the exits, the company had no choice but to file for the bankruptcy protection.

Still standing, but sharing the negative spotlight is AIG, the insurance giant, which said that it may need $40Billion to keep moving forward. A remarkable number, when considering the company is reportedly backing nearly $60Billion ($57.8Billion according to Bloomberg) in sub-prime mortgages. AIG is looking to raise about $20Billion in capital and sell off another $20Billion in assets. New York has allowed the company special permission to access $20Billion in an effort to shore up some liquidty. The mathematics are still working heavily against AIG as shares plunged 60%, cutting half of AIG's market cap. Still not as bad as Lehman though, which lost 95% of its value due to its bankruptcy plans.

As Bank Of America (BAC) and Barclays (BCS) walked away from Lehman bailout talks on the weekend, BAC was busy getting another deal done as it agreed to purchase Merrill Lynch (MER) for about $50Billion, valuing the firm at $29/share. While Merrill jumped at the open the market's selling sentiment dragged it down to $17 from a high of $22.

And the rest of the financial doghouse followed:

Citigroup (C): down 13%
Bank Of America: down 21%
Wachovia (WB): down 25%
Washington Mutual (WM): down 26%
JP Morgan Chase (JPM): down 10%
Goldman Sachs (GS): down 12%
Morgan Stanley (MS): down 13%

The markets have seen down days like this before, albeit not to this extent, and many traders start talking themselves into the so-called bargains, but as former Fed chariman Alan Greenspan put it, and I paraphrase, 'This is the worst economic situation I've ever seen'.

Even the strongest of financials can still go lower from here, but for the ones who can ride it out, show they can stay afloat and show they can stay profitable, bargain basement prices wont be around for that long. That's a big reason why the Street will be looking so closely at Morgan and Goldman earnings.

Disclosure: Author owns C, GS

Buyer Beware, Monday belongs to the Bears

Coming off the weekend and looking ahead to the start of school years the the Labor day holiday, Traders were decidedly negative with the markets today, selling off in droves. Once again uncertainty in the Financial sector was the biggest catalyst of downward pressure.

Stocks started the day lower with the major indices hitting bottoms by mid-day, staying around those levels through the rest of the trading session. AIG (AIG) stock was making the most noise after having its price target cut by an analyst at Credit Suisse, following Friday's rumblings of falling ratings against the insurance giant. AIG was down over $1 (around 5.5%) to under $19.

The debate over Financial sector strength has swung negative lately with the rumors of Lehman Brothers (LEH) potentially needing a bailout, or impending partial sale abroad. Coupled with the daily Freddie Mac (FRE)and Fannie Mae (FNM) exploits it makes for a Financial situation in the US as turbulent as any in recent memory. Although both Mac and Mae were up substantially in this session, the bottom dwelling trades have to be timed and even with slight rallies, the only real course of action for both appears to be a government-led bailout effort.

When that kind of talk is on the table not even a 3% jump in Existing Home Sales can rally this market on this day.

Roller Coaster Market continues with Wells Fargo led Bullish Wednesday

The see-saw affair that is today's markets went there and back again earlier this week and Wednesday, based on some encouraging news from Wells Fargo (WFC), saw the scales tip towards the Bulls.

Wells Fargo, the financial holding and banking company, saw its earnings drop 20% year over year, but in fact raised its divided and shouted from the rooftops that business ain't all that bad. The stock's reaction? a 30% gain! Piggybacking off this new found Financial Sector optimism were the usual banking and brokerage suspects. Coupled with a drop in Oil prices, the banks were the leading story in the Dow's 270 point resurgence Wednesday.

Despite the 21% fall in profits, WFC showed much optimism for continued operational flexibility and earnings-power. The company reiterated it's keen eye for 'strategic acquisitions' in a broad plan to expand into an Eastern customer base, and with mortgage houses and local banks falling by the wayside left and right, the marketplace is ripe for consolidation.

This was the biggest collective buying push for the company's shares today. Not to be outdone however was the dividend bump. As yields continued to climb for the Financial sector, many on the Street anticipate further substantial dividend cuts from the major banks, so a 10% bump in Wells Fargo's payout was welcomed by Investors.

Numbers were refreshing across the board, $1.8Billion in profit ($0.53/share) on $11.5Billion in revenue, representing a 16% year over year rise for the top line. It was also confirmed by management that product performance is increasing throughout the company and its clients. In effect, the company is selling more products to each customer, on average.

The fact that WFC set aside $3Billion to cover potential future losses, was largely glossed over in reporting on the quarter, and a number of that size has to be taken into consideration. Loan losses are still very real in today's banking climate, however IF WFC is one of the many first steps to stabilization in an un-easy US economy, the loss provision will seem largely insignificant in the quarters that lie ahead. In today's environment that is still and IF, that for many traders is filled with uncertainty.

Disclosure: Author holds no position in WFC

Bernanke comments lead to rally in Financials

Comments by Ben Bernanke, Fed Chairman, today lifted markets, especially for those battered companies in the Financial sector. In what could be called a "relief" rally, the worst 3 to 6 month performers in the sector received today the biggest lift in months.

Bernanke's comments sought for the Fed to increase its oversight ability and its power/resources in order to prevent future financial turmoil. In essence Bernanke wants to Fed to have new regulatory responsibilities and supervisory oversight of the Financial markets and Financial companies.

In light of the commentary and an almost $6 drop in Oil Futures, The Financial sector posted a board of green.
Bank Of America (BAC) up 8%
Washington Mutual (WM) up 15%
Citigroup (C) up 5%
Wachovia (WB) up 10%
Lehman Brothers (LEH) up 4.5%
Goldman Sachs (GS) up 3%
JPMorgan Chase (JPM) up 4.5%

While today's rally definitely was a relief for longer term holders of these companies, the industry as a whole, is by no means out of the woods. The Financials will still feel the pressure of the lingering sub-prime and mortgage troubles, and it wont be till the losses and write-downs fully subside can it become business-as-usual for some of America's most recognized corporate names.

Disclosure: Author owns C, GS

Banks continue decline, Job cuts at Citigroup, QMNM Day Trade

Markets Monday couldn't hold onto opening gains and slide lower before finishing roughly flat, as Energy was the only real green sector and continued pressure was put on the Financials. The Dow Jones and S&P ended flat while the Nasdaq was lower by almost 1%.

Energy's rise made up for further weakening Financials today as Banks and Brokerages were mainly to the red between 2 and 5%. Bank Of America (BAC) was hit with selling as it closes in on finalizing its purchase of troubled Mortgage lender Countrywide Financial (CFC). Continued worries at Citigroup (C) grew as reports surfaced of potential job cuts in the bank's Investment Banking division. As much as 10% of that workforce could be getting walking papers. With the stock already under pressure, Citi dropped another 4% to rest just 50 cents shy of its 52-week low.

On a brighter note, Investors buying in now are sitting on a 7% yield, provided no further dividend cuts are in store, and there's certainly no guarantees on that front.

A very interesting and lucrative day trade also was developing today with Quest Minerals & Mining (QMNM), a penny stock listed as an OTC issue. The company virtually doubled at the open to $0.03/share as the Kentucky based firm over the weekend announced its plan to get into production imminently with some of its energy and mineral properties, specifically its location at Pond Creek. The stock stayed around the $0.02/$0.03 levels as volume surged in the security, however towards the end of the session, a secondary flood of bidding pushed the issue to close at $0.07/share, making the day's gain over 400%!

Trading and Investing in penny stocks is certainly not the recommended path for those just starting out or learning the investing ropes, but it can be a lucrative proposition at times, and with the volatility inherent in the energy and materials sectors, it can not be overlooked that in this day in age, an increasing amount of small companies can truly make market-noticing breakthroughs specifically in these areas of business.

Disclosure: Author owns C

Up and Down Wednesday for The Street

American markets saw both ends of the spectrum on Wednesday as a flurry of economic data and commentary were on Trader minds. Oil Inventory data was out for morning trading and the fall of inventory by 4.8Million barrels seemed to initially lead the markets higher. Tech was in the drivers seat for most the day as the Nasdaq finished higher by almost 1%.

But by mid-day the party was over and the Financials and Energy led the decline. Oil prices continued to sell-off with Crude prices fell to $122/barrel. Fed Chairman Ben Bernanke spoke with some conviction about the Fed's view on inflation, and in the world of rising food prices and high oil there should be no surprise inflation is on the mind of the Federal Reserve.

Traders sold off heavily in the early afternoon after digesting the economy data and commentary leading the Dow Jones average from a gain of 100 points to a 50 point decline before ending the data just about at the flat line (.1% lower).

For the financials, this stance of 'inflationary concerns' doesn't bode well as traders were already exhibiting some heavy selling pressure on the sector. With the latest round of earnings coming from the sector and several executive shuffles (see Wachovia (WB)) there doesn't seem to be much optimism on the Street for a financial turnaround in the near term.

More Trouble Brewing at Wachovia after CEO ousted

Losses, losses and more losses appear to be the name of the game at Wachovia (WB). Quarter after quarter of losses and increased write down provisions, analysts and investors had hoped the worst had come and gone for the bank. With shares down almost 60% from their 52-week levels, sooner or later the patience well will run dry and for Wachovia's board, that day was today.

After claiming dividends would be safe and then subsequently cutting them (Link) Wachovia showed further chinks in an already severely weakened armor. Today's chink, the axe for CEO Kennedy Thompson. Analysts immediately started speculating that the worst is yet to come and 2nd quarter numbers will show another substantial loss. The company gave a statement that it isn't "in crisis" but shareholders have heard that for the last 2 quarters and having the board oust the CEO in an environment where economic data points have started to slightly rebound certainly makes a bold counter-point.

Analysts have also begun speculating about take-overs or buyouts with respect to Wachovia, but with a $50Billion market price tag, Wachovia doesn't seem the most attractive take over target. However, the credit crisis and sub-prime collapse have crippled some very respectable names over the months and if there's any truth to this speculation shareholders may indeed stick around in the hopes of getting an offer that would boost their holdings near the $40/share range.

It is hard to see in this environment a suitable bidder, although JPMorgan (JPM) seems to make the most sense. Coming off its buyout and rescue of Bear Stearns, JP could take another run in the regional banking sector by trying to get Wachovia on the cheap. However, all signs as of today seem to point to further losses and JP could find itself with Wachovia in the high teens after its next quarterly results hit the wire.

The Financial turnaround will come eventually, and it wont be quick. The major US banks are like tanker ships that can't turn on a whim, so Investors should feel solace and knowing they may get several chances to catch the rebound. Today's announcement at Wachovia shows that this still just isn't the time.

Disclosure: Author does not own WB

Markets end week with Rally as March Madness begins

It's that time of year again. College Basketball's best take the court all month long for a chance at a National Basketball Championship. The NCAA March Madness tournament begins this year at the onset of a long weekend for Traders.

With markets closing and options expiring this week, Trading was in flux but positive. Following a rough day for the Dow Wednesday, a rebound rally carried on as Investors poured money back in, sending the major indices higher by over 2%. Money flowed into the Financials once again as they continued to be the most volatile investments of late.

Good luck with your brackets Traders!

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

Aftermath of Fed Cut creates Market sell-off led by Financials, Citigroup Pressured

The Federal Reserve statements after their Halloween rate cut of 25 basis points, based on further economic instability due to housing issues, signaled that inflation is at the forefront of The Organization's list of concerns. This talk spooked investors Thursday and led to the Dow dropping by over 360 points. The Nasdaq and the S&P followed suit, both dropping over 2% and the Canadian TSX index fell 1.7%.

Worries over inflation signalled to Traders that the Federal Reserve will be much more cautious about further rate cuts; or as Traders read it, No December cut. This put a damper on the extended Fall rally that seemed to continue yesterday after the Fed's decision to in fact cut rates again.

The market was hurt today primarily by uncertainty in the Financial sector and Citigroup (C) was hit the hardest. Downgrades to Citigroup and Bank Of America (BAC) prompted selling in most financial securities. Looking across the Banking and Investment Banking board was not a pretty site at the close of trading as the entire sector was down by almost an average of 4%. Comments made about Citigroup focused on their ability to stabilize their balance sheet amongst the credit turmoil. This led to fears of a cut in the dividend and sellers were immediately very active. What's the point of owning a steady bank if it needs to cut its dividend just to maintain steady?

While the credit crisis poses serious issues and strains on the financial community of stocks, it is an atmosphere that seems to be closer to the bottom than not. With Citigroup falling below $40/share and probably on its way to $35, the buying support should establish itself in the months ahead. The dividend cut rumors may or may not be true but these banks will continue to operate and in the coming years this credit crisis bottom may be one of the best financial stock opportunities, to bottom feed, that has come around in quite some time.

Google (GOOG) broke a milestone yesterday as it crossed the $700/share mark, and today with all the selling still managed to hold onto a closing price of $703. But not before setting an intra-day all time high of $713. Techs are still in season right now for investors and its worthy to note that once again the Nasdaq was the smallest loser of the day amongst the major US indices.

Markets End Week on a high, boosted by further Strong Earnings

Microsoft (MSFT) led the markets higher as its quarterly earnings surpassed estimates. The Dow finished up 1% and the Nasdaq almost 2%. Hope in the Financials was somewhat restored today also as Countrywide Financial (CFC) painted a hopeful picture for Mortgage recovery.

CFC, seemingly America's poster child for the credit crisis situation, rose over 30% as the company provided an outlook that signalled recovery. Investors met this with broad buying in many large and tailored financial names. The big banks, including Bank Of America (BAC) and Citigroup (C), after being pressured all week, recovered a few percentage points.

On the heels of the red hot IPO of VMWare (VMW), parent company EMC (EMC) reported a stellar quarter and outlook Thursday. Shares lifted EMC to new highs and Friday sent the stock to a record of close to $25/share. The company was hovering around $18-$19 when a small stake of VMWare went public recently, and subsequently more than doubled.

Investors will wait for the Fed Rate Decision to come in the week ahead but the hope instilled by CFC has to provide some foundation for recovery in the battered sub-prime sector. The start of a recovery for the big banks and trading houses should filter through as well. All eyes will be on the Fed in the trading days to come.

Consumer Confidence Slips, Market Tumbles from Uncertainty

A second straight day of falling economic metrics gives way to a second straight day of losses for the markets. Fresh off the heels of Monday's Housing report, in which housing sales fell to a 5 year low, came this morning's Consumer Confidence metrics. The Consumer Confidence Index fell from previous month high levels of 111 to around 105 and further economic fears clouded American Markets.

Federal Reserve minutes came out also and pulled markets down further as talk centralized on the possibility of the housing slump being more prolonged than initially thought. Investors took this sentiment from the Fed as a sign to head for the door leaving the Majors (Dow, Nasdaq and S&P) down across the board about 2%.

Will this mean that the Fed will need to provide the market with the needed September interest rate cut? Investors seem to be hoping that the rate cut will come and the markets will more than likely continue in this drifting pattern till the interest rate policy is known. The Financials led the sell off today as earnings estimates are being trimmed left and right for the Investment Banks and Major Financials. Goldman Sachs (GS), Morgan Stanley (MS), Bear Stearns (BSC) and Merrill Lynch (MER) all were sold off substantially today with Lehman Brothers (LEH) being the biggest victim of the selling. Citigroup (C), Bank of America (BAC) and Wachovia (WB) were also sold heavily showing that the dip in the financial sector was widespread.

The selling was broad across North American markets with all sectors seeing red. The Fed revealed that it had hoped the market would, in essence, fix itself but that clearly has not been the case. Now although the American economy is still in good shape, to create market stability here the Fed has really no choice but to interject again and produce an Interest Rate cut soon.