They're like evil twins scaring the stock market.
High oil prices and the credit crunch. The stock market will have to put one or both aside in order to move ahead.
But what might help it in Thursday's market is the foaming, $46.3 billion unsolicited bid for Anheuser-Busch from Belgian brewer InBev, a bid Bud looks poised to resist. Bud stock popped on the after hours news, but it had started moving up in the 3 p.m. hour after CNBC's David Faber reported an offer was getting close.
"Corporate America is on sale. $46 billion sounds like a lot but $30 billion odd euros is a lot cheaper. I think the big story is the weakness of the dollar," said Vince Farrell, managing partner with Scotsman Capital and a CNBC contributor.
Farrell said the Bud bid could help the market shake off some of its worry Thursday, but only if oil prices simmer down. Thomson Reuters says the Bud proposal is the largest announced U.S. takeover offer in 2008 and would be the second largest global deal of the year. The deal would also be the third largest foreign acquisition of a U.S. company if it takes place.
Ahead of Thursday's open, there is early data that will be telling about the consumer - May's retail sales - at 8:30 a.m. There are also weekly jobless claims at 8:30 a.m.; import/export prices at 8:30 and then business inventories at 10 a.m.
There's more Fed speak in store, too. Philadelphia Fed President Charles Plosser will talk to CNBC senior economic correspondent Steve Liesman on "Squawk Box."
Fear of Financials
The nervousness that gripped financial stocks during the worst days of the credit crisis has been creeping back into the market with Lehman's poor market performance topping the list. The S&P financial sector lost 3.3 percent Wednesday as Wall Street traded on a renewed fear of itself (i.e. its investment banks).
"It's really about Lehman and oil, and if Lehman doesn't bounce, we don't bounce," said stock trader Todd Leone of Cowen. "There's no reason to buy the market," Leone said just before the close. "It's a lot psychological too."
The Dow lost 205 points, or 1.7 percent to 12,083, while the S&P fell 22 or 1.7 percent to 1335. The Nasdaq slumped 54, or 2.2 percent to 2394. Oil meanwhile, spiked $5.07 per barrel or 3.9 percent to $136.38 as the dollar slid 0.64 against the euro and 0.45 against the yen.
Lehman stock was down $3.75, or 13.6 percent to $23.75, well below the secondary offering at $28 Lehman announced earlier in the week. The stock has lost 29.8 percent in the last four sessions, and hit its lowest level since October, 2002.
Lehman continues to have its defenders and detractors. Larry Fink, who heads BlackRock, said his firm bought into the secondary offering, and he does not view Lehman as a Bear Stearns equivalent, as many in the market fear.
Oppenheimer analyst Meredith Whitney said on "Closing Bell" that Lehman is being picked on because its the smallest firm, but that unlike Bear Stearns, it has a real business mix. She said other financial firms could see their stocks decline sharply.
"I still think these stocks will trade to some multiple of tangible book. So I still think there is 30 percent downside in many of these names. You have a company like Lehman that's trading below tangible book. I think investors are questioning what tangible book is when all he mark downs are taken at a company like Lehman," she said.
Whitney said in her latest report that she believes the credit crisis will extend into 2009 and beyond. Her comments help explain some of the fear around the financial group. She said some banks, like Citigroup and Wachovia, could still eliminate their dividends.
She also said the Wall Street firms will be required to show their tier 1 capital levels for the first time this quarter.
"Goldman, Lehman, Morgan Stanley will stack above Merrill Lynch. No broker in my estimate will fall below regulatory capital requirements, but it's a question of relative standing. Merrill has more hybrid debt. They may elect by their own choosing to raise equity. They do not need to, but they may elect to raise equity," she said.
Wall Street Legend
I recently spoke to Muriel Siebert, former New York state banking superintendent and founder of Siebert Financial. She told me she is in the camp that believes that Lehman is no Bear Stearns. Bear was acquired by J.P. Morgan after it was clear the firm would collapse on its own.
Siebert thinks the shorts around Lehman are partly to blame. Shorts have also been blamed for helping trip up Bear Stearns and pressuring its stock as business left the firm. "Maybe the experience with Bear Stearns has encouraged them," but she notes the trading in Lehman is not the same as in Bear.
Siebert says she also believes the elimination of the uptick rule for short sellers could be part of the reason the declines in stocks are exaggerated. She reiterated that it could be adding to market volatility overall and the SEC should be investigating that correlation.
The uptick rule was put in place in the late 1930s to stop sellers from ganging up on a company's stocks and profiting from driving it down. The uptick rule required that anyone who shorted a stock could do so only on an uptick in the stock's price.
"I think there's a lot of questions. I regard the elimination of the uptick rule as just playing into the hedge funds," she said. She also believes there should be global margin requirements so that hedge funds can't go offshore and live by different rules. "There are hedge funds and there are hedge funds," she said.
"When you see these volatilities of 200 to 300 points a day, the SEC should be asking basic questions," she said. Siebert is a legend on Wall Street and was the first woman to hold a seat on the New York Stock Exchange. She feels passionately about the uptick rules' elimination and is known to speak her mind.
I asked Siebert about the broader economy. She told me she does not believe the U.S. is in a recession but she does think New York City has yet to feel the hit from the financial services industry's distress and layoffs.
UAL holds its annual shareholder meeting Thursday, as does Thornburg Mortage. The FCC also holds an open meeting today. (the XM-Sirius merger is NOT on the agenda as I incorrectly posted earlier).
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