Sunday, July 18, 2010

Itz Weekend Market Review

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One word describes Friday's trading...'UGLY'! Granted it was option expiration and the market had put in a string of up days since the Doug Kass bottom call. Sellers were looking for an excuse to take profits and it came from the bearish University of Michigan Consumer Sentiment number.
The 66.5 headline number was the lowest level for sentiment since last August and it is only 10 points above the 28 year low set in November 2008.
June 29th the Consumer Confidence headline number also dropped a whopping -10.4 to 52.9 and the Dow lost -266 points on the news. Friday's sentiment report was a confirmation of the confidence number decline.**Note below the similarities from the early '80s and now.

Same similarities as Itz has noted in the past, for the Wilshire 5000 a broad index. As in 2003 bottom and sharp run up followed by a sideways trending 2004, same is occurring now. 2003/2004 chart current chart

Earnings continue to be key, as Itz pointed out last the banks. Bank of America (BAC) shares took a -9% hit wiping out more than $10 billion in market cap after reporting earnings that disappointed the street. Earnings rose +15% to $2.78 billion. Loan loss reserves fell -17% from Q1 levels and credit quality was rapidly improving. Citigroup (C) said it earned $2.7 billion last quarter which works out to 9-cents per share but revenue fell -37%. Investment banking revenue fell -36% from the prior quarter. Wall Street was expecting 5-cents per share. Loan loss reserves dropped slightly to $46.2 billion or 6.8% of outstanding loans. The Bank Index dropped -5.7% on Friday because of the earnings disappointments from Citi and BAC. Even the blowout earnings from JPMorgan on Thursday failed to save it from a 4% loss on Friday. The banks are all warning that life under the new FinReg rules 'could be' costly and unpredictable. JPM warned of "unintended consequences" from the 262 new rules that have yet to be turned into laws. Banks will see fees cut, trading restricted and opportunities narrowed.

Q2 earnings will see a good chunk of S&P companies reporting this coming week. Twelve Dow stocks report along with 122 S&P companies. There are 73 companies reporting that are seen as key bellwether stocks. Some of those would be IBM, MSFT, MMM, EBAY, AMZN, AAPL, UTX, CAT, etc. Earnings expectations are good but the guidance and top line revenue numbers from those that reported last week are not exciting.

 Market continues to grapple with uncertainty and indecision along with concerns  companies reporting disappointing revenue outlooks. Bias looks to the downside, will the Doug Kass call that the yearly low has been put in--hold? latest from Doug Kass

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