Market Bottomed Out? Yes (Bulls) No (Bears)
So is this is a tradeable bottom or just a head fake? Bulls point to the still-huge short position in financials, the large cash positions, and the hopes that the strength of the rally will suck in other players looking for a last year-end play to add a point or two to their bottom line profits.
Bears say that if you think the Fed's Don Kohn implying the Fed will cut a quarter point is going to solve the credit problem, you are delusional. Bears screamed bloody murder about the implications of Wells Fargo's $1.4 billion hit for home equity loans yesterday. These are NOT subprime loans, but they do usually involve high to loan value ratios; in some cases the loan to value could be as high as 100% of the value of the house. If high loan to value becomes the new subprime, a lot of other banks will have to take additional writedowns. And don't forget the Ben Bernanke speech tonight.
Elsewhere, there are more signs that the labor market is softening: jobless claims rose to 352,000, the highest since Feb 9th and 22,000 more than expected.
Meantime, retail land is not generally happy today:
1) Sears missed by a wide margin and said it was forced to take markdowns due to higher inventory levelsbecause of lower sales. Gross margin was also down. Down 11% pre-open.
2) Men's Wearhouse earnings came in in-line, but guidance was poor: $0.43-$0.48 vs. estimates of $0.55. Company expects same store sales growth to be in the negative low single digit range. Down 11% pre-open.
3) Aeropostale beat, but fourth quarter guidance was below expectations; down 8% pre-open.
4) Jo-Ann Stores beat but also guides lower.
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