Markets sink Monday on Economics as Politics rears its head

Well, the week that wasn't, was it fact followed swiftly by heavily directed market action. The bears came out Monday and sent stocks lower from the start of trading as the Dow has been hovering another the minus 200 point total all afternoon.

Weak economic signs triggered some of the sell-off, which was broad enough to come to stocks and commodities. A Home Builder survey citing a drop in confidence was partly to blame, as was a New York survey of a decline in factory activity, according to the Wall St. Journal. Oil also slid, falling back towards $70/barrel after spiking to the mid $70s last week.

With option expiration occurring at the end of this week, traders are looking at where lock-ins are likely to be. Lock-ins being the certain levels stocks regularly fluctuate and float towards during options expiration week. While several economists and general "experts" are throwing around the term "green shoots" these days, the market's rally since the March lows proved that stocks at attractive valuations can recover to fair value in almost no time at all, given even glimmers of prospective recovery. Many are hopeful for economic recovery by the end of this year, however the still rising unemployment is tempering optimism and political fighting between Republicans and Democrats on everything including the most trivial of issues does not invoke the confidence Americans need in their government at a time of broken-down micro and macro-economics climates.

The President and his administration are trying to fight battles on several fronts and it appears to be taking its toll. The financial situation, the automotive situation, housing, health care and education reform, and the stimulus package are only some of the bigger areas where President Obama and his team are entrenched for change, and involved in business more heavily than any world leader would want to be. Could an agenda push too broad for its own good be responsible for the latest setbacks in the stock markets as businesses see future profitability diminished by stricter rules and regulation?

Most investors, economists and traders know significant overhaul is needed, though many don't accept several sweeping changes at once. The bankruptcy in the American auto sector, leading to government ownership and European partnership for 2 of the big 3 has turned that industry on its head. The financial fallout of the credit crisis is still very much at the top of the heap of troubles in the United States, with the Treasury and the President rolling out new reforms and a plan of action for the financial sector which will undoubtedly bring about increased regulation, not likely to appease profit seeking investors. The health care issue, the latest on the President's seemingly worldwide tour of change, may bring prosperity to some, in the field of electronic medical records and cost-saving technology, but is sure to complicate business for the private insurers and medical practitioners who in the future see a potential competitor in the public sector.

An agenda this broad and this ambitious is always met with an incredible number of challenges, but the time may not only be right, but may in fact be perfect, allowing America to somewhat reset itself stronger and leaner, more productive and more profitable in the years to come. As the economy recovers and some banks pay back TARP money and some infrastructure projects begin in the summer across America and some medical institutions start saving costs, the up swell of goodwill can spread across the country and public perception will lead to spending, leading to profitability, and leading to stock market advances.

Stocks are taking a breather today, after a 40% rally its almost expected, but looking to the future, the Investor should not be afraid of an administration taking drastic steps, but should embrace the goal that all investors share. Prosperity

Stocks Gain Early on Election Day

The moment of truth is here for Americans, as all over the nation blues and reds visit their polling stations to cast their ballot for the next 4 years of policy, control and decision making. While Democratica Senator Barack Obama continues to show a wide lead in National polls (almost 10 percentage points), Republican Senator John McCain is not giving up the fight just yet.

Stocks rallied this morning in anticipation of the election and what is represents as the closure of a long, stressful and attack-filled campaign. The richest political campaign in US history featured a little bit of everything including Senator Obama's half an hour television infomercial. Although the Republicans by all accounts have been badly outspent in this election they continue to move valiantly from city to city in battleground states in hopes of achieving a possible electorate number necessary for another 4 years in office.

Stocks gained ground on results from Mastercard (MA) as the world's second largest credit card company turned in an analyst-besting $2.37/share exclusing items, vs. the $2.25/share estimate. On the top line Revenue was $1.3Billion vs. the estimated $1.27Billion. Although seemingly every company reporting has a murky view of 2009, Investors are getting wise to the game and realizing that the kind of growth previously expected is just not viable in a down-trend given today's economic outlook. Mastercard was no different offering 2009 growth below their previous projections but by keeping expenses flat and under control MA was able to put a positive spin on next year. The stock rose nearly 11% in early trading.

What America needs and what the Stock Market needs is a decisive Presential victory so as to have the ability to set forth and push an agenda of economic and fiscal policy that will see growth return to the biggest market on the world stage. Judging by the National and State-wide polls, the electoral map and the market's advance, I would wager that the market will get its wish.

For investors, that wish needs to translate into a clear vision of recovery.

Disclosure: Author holds no position in MA

Global Market Fears Return Friday, Sell-Off Continues

Corporate Earnings results have trended towards the "not too bad" and "above lowered expectations" columns more times than not this quarter, however the expectations game and fears of a drastic 4th quarter slow down have stocks reeling worldwide. From Europe to Japan, the sentiment this morning was profoundly negative, causing a halt in Dow futures trading as contracts dropped significantly in the early-hours.

At the open, American markets led off with a 500 point drop in the Dow, and while some Traders have bought off the bottom the morning is still holding to about a 400 point decline, roughly 4.5%.

Major corporations have been forced to plan layoffs, amongst other cost-cutting ideas, to not only shore up business capital but to provide Wall Street investors with any-type of strategic plan to try to hold down sellers. More recently it was Yahoo (YHOO) and Goldman Sachs (GS) announcing a round of firings.

As all the headlines surrounding the markets paint the gloomiest of pictures, it should be a time to make the sideline Investor think of potential opportunities. But this is one of the types of attitudes that has not worked recently. The Dow continues its slide and has dropped to 10,000....9,500....9,000.. down to its current levels of 8300. As this credit and financial crisis has expanded, it's become abundantly clear that its effects have been and are worse than anyone in the economic field imagined. The fear of the typical market participant and consumer are at all-time highs. A feeling confirmed by action in metrics such as the Volatility Index.

As the US approaches the Federal Election, perhaps the hope of a change in policy will divert the economic fears enough to showcase a plan of action and a call for change. While Barack Obama continues to lead in most polls, running on a platform of change, John McCain still finds himself within striking distance as the race closes in on Election Day. Americans will determine on November 4th who will lead them away from these economic fears and into a future of change and prosperity.

The resolution of some uncertainty and a Call to Action from a newly elected President could be the catalyst the market needs going into the finale of a rough, tumble and volatile trading year.

Markets Finish Higher on Bush and Bernanke Speeches while Apple's iTunes splits with NBC over Pricing

Optimism spread throughout the Financial Markets in North America Friday as Federal Reserve Chairman Ben Bernanke and US President George W. Bush presented speeches discussing the sub-prime mortgage crisis.

While not stating any certainties of an upcoming rate cut the Fed alluded to the fact that it will be ready to act if the economy becomes broadly hurt from the fallout of the credit-crunch. This was enough for investors to believe that a rate cut is more and more likely. The President conveyed a similar stance that it is not the job of the government to bail out over-extended investors, institutions and individuals. Bush did however outline a series of plans and proposals that will allow individuals to refinance some mortgages to avoid further potential loan defaults. Bush also presented proposals for slight changes to the tax code that would provide relief for people with heavy loan payments.

These were seen as positive steps by the markets as the major indices (Dow, Nasdaq, S&P, TSX) were all higher by about 1%.

In other market news Citigroup (C) is getting in on the bargain mortgage hunt as it is buying assets from ACC Captial Holdings (Parent of Ameriquest Mortgage Co.). This follows Bank of America's (BAC) recent $2Billion investment in Countrywide Financial (CFC).

In technology news Apple (AAPL) was in the news as hard-ball contract negotiations with NBC-Universal, a subsidiary of General-Electric (GE), fell apart. NBC noted that it will not renew its contract for shows in iTunes and let the current deal expire come December of this year. Apple took it one step further and stopped hosting new NBC TV Shows in iTunes before the television season starts later this September. The reasoning from Apple's press release was given as NBC demands for a 150% price increase per downloaded show. iTunes current rates are $1.99/show and NBC apparently wanted that to increase to $4.99/show, stricter piracy controls and the ability to change and bundle pricing. Apple stood its ground and talks faltered.

One of NBC's most popular shows Heroes had 23 episodes last season and at $5 a pop, a customer is expeced to shell out $115/season to be able to watch the shows on an iPod a day after it has aired on regular television. In the days of Tivo (TIVO) and the DVR the idea of drawing television audiences is about making it easier and cheaper, not more complicated and expensive. Season 1 of Heroes was just released on DVD for about $40. From a consumer perspective which party seems to have consumer interests more at heart?

There's been several editorials written about this issue including an open letter to NBC from iLounge.
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iLounge (Link)

Disclosure: Author is long AAPL, C, BAC