Stocks a bit weaker this morning as Lowe's joins JC Penney, Kohl's, and Ann Taylor in lowering guidance...down 4% pre-open, and Goldman downgrades Citi to a sell, saying it may have to write off $15 billion in debt losses over the next two quarters. With all that has happened to Citi, traders griping this is a little late, down 4% pre-open.
While we are still clearly a bit oversold and might have a shot at a brief tradable rally, most traders have turned decidedly bearish--the talk is of a broader economic slowing ahead--and a continued crimped credit trading environment.
Speaking of crimped trading environment...look at Swiss Re. They took a $1 billion hit as they wrote down the value of CDOs (some marked down to zero) and subprime. Here is a firm who actually is marking down assets, and of course the Street is concerned that if others follow with similar aggressive markdowns it could get ugly.
While Iran and Venezuela are making noises about the demise of the U.S. dollar, the dollar has stabilized in the last two weeks. As Ashraf Laidi has pointed out, this is not trivial; since oil is at an all-time higher, the choice of currency is now the point of contention, rather than the price.
Still, the Fed is in a tough situation here. Cut rates and soften the dollar more or hold them here and watch equities go lower in advance of an expected recession. Three month LIBOR rates are up sharply again after last week's moves so more signs of stress in the banking system. Moodys is talking about commercial real estate slipping a bit.
And China is stepping up efforts in slowing growth by trying to limit loan growth: maybe not an outright freeze on bank lending, but China is getting more aggressive about slowing its economy.
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