This Is Where Financials Test The Lows
The Bank Index is sitting right at its November closing low, and many big names — Bank of America , M&T Bank , US Bancorp and others--are already at multiyear lows.
There are two issues:
--Have stocks adequately discounted fourth quarter losses? For example, Bank of America (16 year low today) may still have huge losses buried in the old CountryWide, and even at Merrill, while JP Morgan will report its first quarter with Washington Mutual (they are expecting it to contribute a small loss) and another quarter with Bear Stearns, which should be slightly accretive. But we don't know.
--Concerns that additional capital raising may be necessary.
What's up with GE?
Separately, our parent company, General Electric, broke below $15 for the first time since November (the intraday low is $12.58 on November 20th).
GE will report earnings on January 23rd. They last gave fourth quarter guidance of $0.36-$0.42 back on December 16-17.
1) Concern that the outlook has weakened since then
2) GE suffering along with other financials
3) Barclays out with a note overnight, speculating that a large part of the fourth quarter profit (perhaps as much as $0.20) may be due to a tax gain. They also made a comment on credit: "We think Moodys could take their outlook from stable to negative & be in line with S&P. However we think GE's ability to have raised ~$28B of the targeted $45 billion in funding for 2009 is a positive."
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