What A Week - Down, But Not Out
For the week: Dow Industrials down 5.3 percent, S&P down 4.9 percent, NADAQ down 3.6 percent.
Stocks rallied midday, then fell back, as the White House said President Obama will unveil details of a home foreclosure plan on Wednesday.
The House passed the stimulus bill; the Senate is expected to pass it tonight. The G7 are issuing statements about the need to stabilize the global economy, none of which were big market movers.
Banks stocks, as usual, were the weak performer for the day (week, year). The Bank Index was down 14% this week:
1) We will not have clarity on the pricing of the toxic assets for at least a week, if not more, so it is safe to short bank stocks-for a little while longer;
2) A bank stress test has caused a sell-off in many regional banks, which traders believe will need considerable capital;
3) Finally, capping a bonus at 1/3 of your salary (in the stimulus package) is not going to encourage anyone to stay in the banking business.
Are commodities turning? Traders have been picking on commodity stocks for several weeks now, under the theory that the U.S. and China are co-conspirators in the Global Reflation Trade.
1) Chinese stocks are at the highest levels since September. The Chinese are flooding their economy with money; bank loans are WAY UP.
2) Copper has been rallying modestly, and the Baltic Dry Index has staged a big move off its bottom.
Bears, again, think bulls are delusional:
1) Metal inventories up at the London Metals Exchange
2) Global oil demand down.
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