1) Modest, multi-month breakouts in energy, industrials, materials, techs. Don't be fooled by the low volume and lack of wild trading ranges. Lower volatility, and a shift into economically sensitive stocks and out of defensive names, are all positive signs. S&P 500 up 6 of the last 8 trading sessions.
2) Mortgage rates below 5% as the Treasury continues to buy mortgage-backed securities.
3) Corporate bond demand picks up. GE Capital successfully floated $10 billion in FDIC-backed bonds--the biggest deal since the FDIC-backed program began in November. More offerings expected from Devon ,Brown Forman , Tyco, and others.
4) Reflation signs--a successful TIPS auction, rising commodity prices all signs that some believe modest reflation is on the horizon.
And...a reality check. Ken Lewis at Bank of America telling employees he expects final results for 2008 to be below expectations, according to the WSJ.
But hold on, the Street has also been taking down expectations. Today, RBC Capital said that banks would bottom in 2009, but not before banks see additional problems with commercial and industrial loans. Still, non-performing assets should peak at the end of 2009 or beginning of 2010. They also expect additional pressure to cut or eliminate dividends.
Yesterday, Mike Mayo at Deutsche Bank took down 2009 and 2010 estimates for JP Morgan .
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