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Daily Blog -01/28/09- 1:33 P.M.


Worldwide Bounce

Stocks are higher on Wednesday as a confluence of sentiment, news, and analyst opinion all flowed together to lift global markets. A big bounce in banking stocks is powering most of the move but the rally in technology stocks isn't too shabby.

Last night word got out that the Obama administration was strongly considering the "good bank, bad bank" idea and that he might appoint the FDIC to run this "bad bank" of troubled assets. Estimates were setting the potential value of the bad bank's assets upwards of $1 trillion. American banking stocks immediately started moving higher in Tuesday's after hours market. This positive tone carried overnight across Asian and European markets and we are seeing a worldwide rebound in stocks with the Chinese markets one of the few exceptions.


-- Global Indices -- 
German DAX ........ +4.5%
French CAC 40 ..... +4.1%
British FTSE ...... +2.4%
Brazilian Bovespa . +3.6%
Japanese NIKKEI ... +0.5%
Hong Kong Hang Seng -0.6%
Chinese Shanghai .. -0.7%

-- U.S. Markets --
Russell 2000 smallcap +3.3%
NASDAQ Composite .... +3.2%
S&P 500 index ....... +2.7%
Dow Jones Industrials +1.7%

Chart of the S&P 500:

Chart of the NASDAQ:

European banking stocks were really seeing a lift after Citigroup upgraded shares of Lloyd's Banking to a "buy" in a note that suggested investors were overdoing the fears of nationalization. Shares of Lloyd's surged more than 50% to $100. German Deutsche Bank was up 22% and Spanish bank Santander was up about 10%.

U.S. financials continued to carry the positive tone from last night and were buoyed by Europe's strength. The BIX banking index is up 15.5%. The BKX index is up 11.9%. The XLF financials ETF is up 22% to $10. Some of the individual movers are Citigroup (C) +16% to $4.13, Bank of America (BAC) +16% to $7.33, J.P.Morgan (JPM) +9.4% to $27.40, and Wells Fargo (WFC) +23.5% to $20.00. WFC is a big mover on its earnings report announced this morning. The company turned in some horrendous losses but said they had no plans to ask for more TARP money and the Board of Directors had decided to keep their 34-cent dividend.

Chart of Wells Fargo (WFC):

While financials continue to get the spotlight the tech sector was also running higher. Yahoo (YHOO) reported earnings last night and investors were responding well to the news. Shares of YHOO are up 7.6% at $12.20. Meanwhile Sun Micro (JAVA) reported earnings last night that significantly beat Wall Street's estimates. Analysts were expecting a loss of 10 cents a share. JAVA delivered a profit of 15 cents. The stock is up 24% to $4.95 and testing resistance near $5.00 and its 100-dma.

The NASDAQ was also enjoying strength in its normal big cap leaders like Google (GOOG), which is up 5% to $348 and breaking out over its 100-dma. Apple Inc. (AAPL) is up 3.9% at $94.30 and breaking out over its three-month trendline of lower highs. The SOX semiconductor index is up 2.8% and the DDX disk drive index is up 9.4%.

Chart of GOOG:

Chart of AAPL:

Energy stocks were also performing well even though crude oil was flat on the day around $41.70 a barrel. This morning's weekly inventory report showed another rise for U.S. stock piles. The OIX oil index is up 1.7% while the OSX oil services index is up 5.2%.

Trading note: OIH, a call play on OptionInvestor.com, has exceeded our secondary target at $82.45. It's time for us to exit. More aggressive traders might want to consider letting it ride and aiming for potential resistance near $85.00. The OIH is up 4.6% at $82.50.

Look for potential volatility when the FOMC's two-day meeting ends and their statement is released about 2:15 P.M. Eastern today.



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