The global stock market had more ups and downs this week than the career of Britney Spears. Don't look for the bottom to appear anytime soon following the worst week for global equities in six years.
A parade of superlatives continues to weigh on the mind of investors, most of them bad. Unemployment is at a five-year high. Payrolls shrank by 84,000 last month, according to the Labor Department. That's more than 75,000 economists predicted, the Associated Press said. Rising interest rates spurred the biggest increase in the foreclosure rate in almost three decades, according to Bloomberg News.
Sure oil prices are dropping to near $105 but they are still high. No car, truck or airplane was ever designed with the thought that oil would be anywhere near that high. Gasoline prices have also come down but they are still at levels that many Americans can not afford.
One of the many cliches about the stock market is that it's never wrong. Today's triple-digit rise in the Dow Jones Industrial Average shows that markets can be depressed, manic or just pain stupid, sometimes all at the same time.
There is no sign that the market has hit bottom. Garage sales are mushrooming in my suburban community as people sell their personal possessions to raise cash. It's really sad.
Mania set in today as investors start to wonder whether lowering commodity prices will give the economy a jolt. Remember that no car or truck was designed with oil over $100 a barrel in mind. The fact that oil is only slightly less insanely high should give no solace to anyone. Fuel got so expensive that people started driving less and began snapping up pint-size Smart Cars, which look to me as safe as a Matchbox car. This is a sign that things are bad -- not that they will improve. Mind you, the smallest wiff of political instability and oil prices will start climbing yet again.
People seem to think that the economy is going to get better through some magic elixir of a second economic stimulus package and drilling for oil. Those ideas are not only stupid, they are dangerous. Unfortunately, quick fixes are not the answer. We have to let the market sort things out. About the best the government can do is figure out a way to cushion the blow.
They were terrible of course. Net income fell 53% to $2 billion, or 54 cents a share, ahead of the 44-cent average estimate of analysts surveyed by Bloomberg News. Net revenue fell 3% to $18.4 billion, beating the $16.6 billion average Bloomberg estimate.
The results, though, underscore how well the company has fared under the leadership of CEO Jamie Dimon.
Here are some highlights:
Investment banking fees were $1.7 billion, their second highest quarter ever.
Net income in commercial banking rose 25% to $355 million.
Net income was a record $425 million in Treasury and Security Services, up 21% from a year earlier.
Equity underwriting fees rose 6% to $542 million.
Fix income markets revenue dropped only 4% driven largely by net markdowns of $696 million on leveraged lending funded and unfunded commitments, as well as mortgage-related net markdowns of $405 million.
The straight-talking Dimon did not mince words about the challenges that lie ahead for JPMorgan, saying in the release, "Our expectation is for the economic environment to continue to be weak – and to likely get weaker – and for the capital markets to remain under stress.... In spite of the environment, we are confident that we are building an increasingly strong and profitable company."
But unlike many on Wall Street, Dimon can walk the walk and talk the talk.
Want to know how bad it is? Apple Inc. (NASDAQ: AAPL) shares are down on the day the geeks around the world are waiting in line for the new iPhone, which has gotten rave reviews. Amazing. If people are looking for an excuse to buy Apple, this may be it.
As each day passes, estimates for how bad Q2 earnings will be grows. According toThe Wall Street Journal, "analysts estimate S&P 500 operating earnings -- income excluding one-time items -- fell 11.5% in the second quarter."
While the paper points out that earnings often come in a bit worse than expected, this quarter could be a bit different. Everyone expected the numbers to be bad in sectors including banking, brokerage, insurance, autos, and airlines. But the real question is whether business and consumer spending have been hit harder than predicted.
If spending is down, even companies which are expected to do fairly well such as Apple (NASDAQ: AAPL) and Cisco (NASDAQ: CSCO) could face rough earnings reports as big business and the little consumers defer purchases which they feel they cannot afford. That means that tech earnings, which were expected to be OK, could take a big hit.
If tech falters, what is left? Energy and commodities companies? Perhaps, but that is thin ground on which to build an earnings season.
Douglas A. McIntyre is an editor at 247wallst.com.
The Wall Street Journal reports that the stock market finished the second quarter just above Bear market territory. Does that mean everything's great or that things are going to get worse from here? I think the worst is yet to come and that investors should hold onto their stocks unless they and/or the companies they've bought are going bankrupt. And they might look to buy stocks in the coal and fertilizer industries.
The Journal reports that the Dow Jones Industrial Average (DJIA) began its march downward, ending the quarter (including Monday's slim 3.50-point gain) with an overall loss of 912.88 points, or 7.4%, at 11350.01 -- and perilously slightly less than the 20% decline from a recent high that is considered the start of a bear market. It was the third straight quarterly decline and the worst second quarter since 2002.
I think the 20% decline that designates a Bear market is pretty arbitrary. People know that the market has been a disaster. And if earnings matter, it's likely to get worse. The Journal notes that analysts expect earnings at S&P 500 companies to be down 11% for the second period, led by a 60% plunge in financial-sector earnings. Estimates fell sharply as the quarter progressed. On April 1, analysts were expecting a 2% drop in S&P earnings and a 31% decline in the financial sector.
No sooner than we got used to the huge writeoffs and thought most of the fallout is behind us, that Goldman came today and whacked us on the head. "Over?" it laughed, "you wish!" It then proceeded to downgrade investment banks from Attractive to Neutral. Specifically, it downgraded Citigroup (NYSE: C) to Sell, urging investors to short sell it!
Citigroup will have another $8.9 billion in writedowns, William Tanona, the Goldman analyst said, and added Citigroup to Goldman's "Americas conviction sell" list, cutting his price target on the stock to $16 from $20. Citi shares are down 5.5%.
Merrill Lynch (NYSE: MER) has already been subject to rumors last week it would have to write down more assets. Today, the same Goldman analyst said it will likely incur $4.2 billion of write-downs in the second quarter. MER stock is down 4.5%.
At least Goldman shares have not been immune and are declining nearly 2.7% along with the rest of the investment banks and the market.
Nothing seems to be going right for Citigroup (NYSE: C). In fact, this week the stock price hit below $20 to $19.30 (there was a 4.31% drop on Friday).
With its many acquisitions over the years, there was supposed to be a globally diversified platform – which would deal with downturns. Unfortunately, that experiment has been a failure. If anything, Citigroup's massive size is becoming a hindrance in dealing with the new realities.
Now, according to the Wall Street Journal [a paid publication], Citigroup has some more bad news. It looks like the company will slash jobs in the investment banking division – perhaps as much as 10%. The current size of the group is about 65,000.
Of course, these are high-paid folks. But, then again, they haven't been bringing in much business lately. Instead, Citigroup continues to pile up mega losses.
So, the layoffs should not be a surprise (the activity for buyouts and IPOs has plunged). Yet, it's another sign that things aren't likely to get better soon for Wall Street.
Investors looking for good news today can take solace knowing that Friday the 13th is not especially unlucky.
Indeed, researchers in the Netherlands have determined that fewer accidents and reports of fire and theft occur on Friday the 13th than other Fridays. And stocks are actually trading up in early market action. Still, some people won't care. About $800 million to $900 million will be lost in business today because people will not do things they normally do.
Investors need to remember that there are many ludicrous theories about the stock market. There is the Super Bowl Indicator where people figure that if a team from the old American Football Conference (now the American Football Conference) wins, the market is headed down, while a win for the old NFL (now the National Football Conference) means good times are ahead. People believe that bad things happen in October and that May is the time to sell and go away.
Sometimes these theories "work." Other times they don't. None of them should serve as the sole basis for any investing decision. I understand their appeal because they seem to take the guesswork out of figuring out the gyrations of the market. Real life, though, does not always fit into theories.
The Dow Jones industrial average and the NASDAQ Composite Index are both down more than 8% this year. Gasoline prices have topped $4, sending many trucking companies to the brink of bankruptcy. Soaring commodity prices have squeezed profits of businesses ranging from Dow Chemical Co. (NYSE: DOW) to the local pizzeria.
If you want to invest, do your homework. Of course, people still need to avoid black cats crossing their path, stepping on sidewalk cracks and breaking mirrors.
Some investors thought that tech shares would fall apart like financial and transportation stocks have. One by-product of the recession would be a slowing of consumer and business purchases of PCs and enterprise equipment like routers. Internet businesses would suffer from a drop in online ads.
It may be that things are not working out that way. The Nasdaq jumped almost 5% over the last month.
As The Wall Street Journal writes (subscription required), Dell Inc. (NYSE: DELL) jumped late in the week on better-than-expected earnings. The largest of the internet companies, Google Inc. (NASDAQ: GOOG), rocketed after good earnings and has kept most of those share price gains. Consumer electronics bellwether Apple Inc. (NASDAQ: AAPL) has kept moving higher as investors expect a new iPhone and Macs continue to sell well.
Overall, the market may continue to fall. Certainly most companies still run great risks with higher inflation and slowing GDP. Tech seems to have dodged those bullets.
Every economic problem or setback seeks a scapegoat -- someone decision makers, pundits, and others can blame (unjustifiably) for a turn of events that's preferred by virtually no one.
The criticism is parsimonious, unfair, and injurious -- but that hasn't seemed to stop practitioners from venturing forth with charges that are often tenuous, if not absurd.
Scapegoat-of-the-moment
The ever-incisive FT columnist Martin Wolf points out that former U.S. Federal Reserve Chairman Alan Greenspan is being cast as 'the villain' for the housing bubble, its bursting, and consequent impact on credit/bond markets and credit availability. All of it is unfair, Wolf notes, and he provides ample evidence to support his point.
Chiefly: Greenspan did not create low, long-term interest rates. The low, long-term rates were caused primarily by a global savings glut, Wolf said. (See: China's savings rate.) The Fed had little control over this -- Greenspan even creatively and accurately referred to the Fed's inability to force long-term rates higher despite the Fed's best effort: he called it "a conundrum." Given the surplus savings sloshing around in global markets at that time, among other factors, those low rates would have occurred regardless of who was Fed chairman.
NASDAQ has released its short interest for the end of March, with a March 31, 2008 cut off date. Overall short interest fell by a rate of some 1.2% on NASDAQ for the two-week period to 9,657,092,223. Interestingly enough, there were a few standouts that saw some major gains in short selling.
The percentage terms on Level 3 are not that great, but the raw number of shares is significant.
These were not the only gainers out there, but the bets against some of these rising short interest stocks were staggering. You can check NASDAQ short interest on any of these stocks or others at the NASDAQ Trader site dedicated to short interest.
As investors await today's start of earnings season, they should remember that Wall Street's equity analysts blew it in the fourth quarter, overestimating profit by 33.5 percentage points, the biggest miss ever, according to Bloomberg News.
"Merrill Lynch & Co.(NYSE: MER), Bank of America Corp. (NYSE: BAC) and the rest of the securities industry aren't losing credibility because of anything sinister," the story says. "The problem is they didn't get their math right after credit markets froze nine months ago."
I am not terribly optimistic that analysts have improved much in the first quarter. Earnings estimates are probably still way too high. Many, many companies are going to miss their earnings estimates. This will erode Wall Street's credibility even further.
Richard Weiss of City National Bank told Bloomberg that first quarter results will be a "big wake-up" call for some analysts. Some may lose their six- and seven-figure jobs because of it.
The lesson here is for investors to do their own homework. Anyone who doesn't have the time or motivation to do it should either hire an adviser or buy index funds.
These days, you can't take Wall Street's word for anything.
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
My riskiest stock pick Newcastle Investment Corp (NYSE:NCT) is down almost 37% this year, and the energy stocks did almost as poorly even though fuel prices are near all-time highs. The downers were not offset by this months' repeat winners.
March was a seesaw battle, but in the end there was not much to show for it. However, unlike the last day of January (down 370 points in the Dow) and February's last trading day (down 315 points), March had a final day of plus 46.49, which is not very meaningful.
Most of my picks sagged a little more, while two remain in positive territory. Raytheon Co. (NYSE: RTN), the high tech defense contractor is up and Reliance Steel & Aluminum (NYSE: RS) is way up.
MOST NOTEWORTHY: Cisco Systems, NYSE Euronext, Nasdaq and Cognicase were today's noteworthy initiations:
Friedman Billings believes Cisco Systems (NASDAQ: CSCO) is well-positioned to take advantage of "Business 2.0" applications and to gain share in a slower economic environment. The firm initiated shares with an Outperform rating and $31 target.
NYSE Euronext (NYSE: NYX) and Nasdaq (NASDAQ: NDAQ) were assumed with a Neutral rating and $72 target and $44 target, respectively, at UBS. The firm cited increasing competition and moderating volumes.
Deutsche Bank believes Cognicase (COGI) is one of the few carriers offering high-capacity commercial Internet access to enterprise customers at a discount to nearly all of its competitors. Shares were initiated with a Buy rating and $23 target.
OTHER INITIATIONS:
China Housing (OTCBB: CHLN) was initiated at Merriman with a Buy rating.
Goldman started Juniper (NASDAQ: JNPR) with a Market Perform rating and $27 target.
Suntrust initiated hhgregg (NYSE: HGG) with a Buy rating and $16 target.
The global stock market had more ups and downs this week than the career of Britney Spears. Don't look for the bottom to appear anytime soon following the worst week for global equities in six years.
One of the many cliches about the stock market is that it's never wrong. Today's triple-digit rise in the Dow Jones Industrial Average shows that markets can be depressed, manic or just pain stupid, sometimes all at the same time.
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Investors looking for good news today can take solace knowing that Friday the 13th is not especially unlucky.
Every economic problem or setback seeks a scapegoat -- someone decision makers, pundits, and others can blame (unjustifiably) for a turn of events that's preferred by virtually no one. 
As investors await today's start of earnings season, they should remember that Wall Street's equity analysts blew it in the fourth quarter, overestimating profit by 33.5 percentage points, the biggest miss ever, according to 
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see..gif){kind=logo}
Comfort Zone Investing: Oil's down, which is a start, but not good enough
Stocks have their worst week in six years
Why haven't the Republicans said much about the economy?
