U.S.-based stocks had a tough week. Peter Boockvar and others have pointed out that stocks with the most U.S.-based focus were the biggest decliners on the week:
- Banks down 16%
- Homebuilders down 13%
- REITs DOWN 13%
- Retail DOWN 6%
While Emerging markets were down only 3 percent.
There was good news...and not so good news, this week.
Good news: financials and several other companies raised much-needed capital, even though their stock prices came off their highs.
This was an important test for financials, the ability to raise money without the government. Citigroup, for example, is raising $2b in bonds without a government guarantee, 562 basis points over comparable 10-year Treasuries, which seems to be close to the norm these days. Indications are that the offering is oversubscribed.
Separately, remember that Citi has announced that it is proceeding with its plan to convert $20.5 billion in publicly-held preferred securities to common shares, dividends of those preferreds presumably will be suspended once the exchange program occurs.
And not so good news....credit card defaults rose to record levels. Citi reporting a 10.21 percent charge-off rate. Wells Fargoalso had a 10.03 percent charge-off rate.
Sign of the times: utility companies, gas companies, and coal companies were all weak as it appeared that demand for energy would remain weak.
I noted earlierthat utility FirstEnergy, which sells energy in an auction process for Ohio customers, reported receiving prices well below what were anticipated. The problem: lower demand for coal, gas, and nuclear power from both residential and industrial customers.