Monday’s Market Recap: Stocks started the week in red on bearish analyst comments and break down in talks on $7 billion takeover offer by IBM for Sun Micro (JAVA).
Influential banking analyst, and a known banking sector “bear”, Mike Mayo of Calyon Securities cursed the banking sector, slapping an “underweight” rating. In his report “Seven Deadly Sins of Banking”, he indicated that the banks would suffer more losses despite the intervention by the federal government. Mayo advised investors to minimize exposure to banks in their portfolio. Similar sentiment was expressed by another ‘bear’ side analyst, Peter Winter of BMO Capital whose concerns were the increasing deterioration in commercial real estate and commercial and industrial loans. On the other hand, another veteran analyst, Dick Bove had a different point of view on Bank of America and the economy. Bove said in a note to investors that the “economy has turned the corner” and the BAC stock price will ultimately “return to its all-time highs”.
Adding to the sour note was a downgrade of CSCO by a Goldman Sachs analyst who cut the rating to “neutral” from “buy”. CSCO dropped 3.5%.
Markets were able to recoup some losses in the last hour before close. Shares of defense contractors – NOC, GD, BA, and LMT rose on the heel of announcement by Defence secretary, Mr. Gates of revamped defence budget. Shares of Ford (F)added 16% after the automaker successfully reduced it’s debt load by 39% or $9.9 billion. Also, in an interview with CNBC’s Maria Bartiromo, the analyst and the banking sector nemesis – Ms. Meredith Whitney appeared “less bearish” on banking sector. She thought the evaluations would go higher because of recent action by FASB (mark to market relaxation), fed support, and cheep credit. This is some great news for banking stocks!!
By close, the Dow gave up 42 points or 0.5%, to close at 7976, and the S&P 500 lost 7 points or 0.8%, to 835. The Nasdaq shed 15 points or 0.9%, to 1607. The volumes were however low.
Crude fell $1.46 to settle at $51.05 a barrel, and gold dropped $24.50 to $872.80 an ounce. The dollar was slightly stronger against the yen and somewhat weaker against the euro and pound.
TaurusTrader swing portfolio had a decent day. No position was stopped out. AMR is finally showing some life, and was up over 10%. Two new positions suggested yesterday, were added – OMTR and CMED. Two other recommendations, RRC and BCE, are yet to hit target entry price, hence were not bought.
By the end of the day, the TaurusTrader swing portfolio had 13 positions in – WNR, AGU, AMR, FCN, HON, HSP, WDC, TNA, EXP, FMX, WFC, CMED, and OMTR.
Stocks to Focus for Tuesday, April 7: The market is on edge about the coming parade of first-quarter results. The earning season kicks off Tuesday with the Dow component Alcoa (AA), ag fertilizer giant MOS, and the home goods retailer BBBY. Worse-than-expected reports could easily upset the market’s mammoth recent advance.
Jittery market is also awaiting for clarity on the proposed private-public partnership program to buy toxic assets from banks, and the results from the “stress test” of major banks. Also, important on the horizon is the ruling from SEC on the up-tick rule for shorting stocks.
This is short week for trading as the markets will be closed on Friday for observing Good Friday. So, greater volatility is expected.
I do not have any fresh picks for TaurusTrader swing portfolio for tomorrow. I’ll follow my positions closely with suggested stops.
BLUD reported a better than expected earning after the markets closed on Monday. BLUD beat the street by 5 cents, and also guided modestly above the expected upper range of, $0.97 to 1.02. If interested, I would suggest buying BLUD above $25.50 and sell it just under 27.00, either as a day trade or overnite swing trade.
As I cautioned in my blog yesterday, if you have gold or gold mining stocks, please watch carefully. GLD closed just below the important support of 200 day MA.
Other sectors of interest for tomorrow’s trading are – technology, ag and fertilizer, and financial.
As usual, if there are questions or comments, please do post.
Have a great day ….