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Daily Blog -02/19/09- 1:32 P.M.


Indecision in the Market

The U.S. stock market isn't sure what direction to go but the path of least resistance seems to be down. Currently the Dow Jones Industrial Average (DJIA) is flirting with a close under its November 2008 lows near 7,550. A closing print under this low would be technically very bearish. The S&P 500 index and the NASDAQ composite, while both lower today, have much further to fall before truly testing their November lows.

Financial stocks continue to be the anchor weighing this market down. The reaction to Obama's new plan on housing and mortgages to stem the tide of foreclosures is getting a mixed reaction but the biggest reaction is fear for how it might impact the banks. Pundits are more concerned about the "moral hazard" of the plan. Currently the BKX banking index is down 3.2% and the BIX index is down 2.8%.

Major financials are seeing bigger declines. Citigroup is down 9.2% to $2.64 and hitting new multi-year lows. Today's move lower is a breakdown under C's January low near $2.80. Bank of America (BAC) is off 9.4% and testing its lows near $4.00 a share. The damage in Wells Fargo (WFC) is not so bad with the stock bouncing from its lows hit yesterday near $12.15. WFC is only down 2.5%. Meanwhile J.P.Morgan Chase (JPM) is a bright spot with the stock trading up one-cent to $21.52. Potentially weighing on the financial sector today was an earnings report from European insurance titan Axa (AXA) who reported a full-year profit of 923 million euros, which was an 84% drop from the year before. AXA's management said 2009 was going to be a tough year. AXA closed down 9% today.

Commodities are also mixed today. Oil is higher as investors react to both a falling U.S. dollar and the weekly inventory report. Economists were expecting a build of more than two million barrels in oil inventory but the report showed a 200,000 barrel decline. This pushed the March crude oil contract up more than 10% intraday but oil has pared its gain and is now only up about 8% around $37.40 a barrel. The March contract expires this Friday. The April crude futures contract is up almost 5% near $39.25 a barrel. The USO oil ETF is up 6%. The DXO oil ETF is up 14.8% to $2.01. The oil services stocks, always more volatile than the rest of the energy group, is seeing the OSX index up 4.1%. Meanwhile gold is finally seeing a little profit taking after a strong week. The GLD is down 1.2% to $95.72. The SLV silver ETF is also seeing some profit taking with a 2.3% decline after a very strong five-week rally.

Here's a quick snapshot for the best and worst sector performers:


OSX oil services  +4.0%
RLX retail index  +2.0%
HMO healthcare... +1.8%
OIX oil index ... +1.5%
----------------------
IUX insurance...   -1.8%
BIX banking.....   -2.3%
DJUSRR railroads   -2.5%
BKX banking.....   -2.7%
XAU gold & silver  -2.7%
SOX semiconductor  -2.7%
DJUSHB homebuilder -5.8%
----------------------
Indices:
DJ Industrials -6.6 @ 7549
S&P 500 index  +2.4 @ 790
NASDAQ Comp.   -2.1 @ 1465




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