GS and BAC Pull Up Financials to Lift Markets
Stocks closed higher today as Meredith Whitney's comments on Goldman Sachs (NYSE:GS) helped to lift financials, including Bank of America (NYSE:BAC), which she indicated as being inexpensive. Previously she'd been down on financials and very accurate with her assessment concerning their exposure to sub-prime mortgages.
The Dow closed up 185 points today to end at 8,332. The Nasdaq and S&P 500 followed suit to close at 1,793 and 901, respectively.
The Russell 2000 closed at 492, up 11 points.
Small-cap stocks showed leadership behind Territorial Bancorp (Nasdaq:TBNK) of Honolulu, Hawaii, which was up 49% to close at $14.94. Shares in TBNK started trading today as part of an initial public offering with the opening price set at $10.
Other small-cap gainers include PMI Group (NYSE:PMI) up 31%; iBasis (Nasdaq:IBAS) up 28% on news that Dutch telecommunications firm Koninklijke KPN issued an offer of $1.55 per share or roughly $48.2 million to acquire 44 percent of the shares outstanding in iBasis; and American International Group (NYSE:AIG) up 24%.
Decliners were lead by China-based baby formula producer American Dairy (NYSE:ADY) down 44% after issuing news that it had reduced guidance by stating that Q2 revenue would be increase only 10% against the year-prior period.
American Dairy had previously grown by nearly 200% after the company was untainted by the scandals surrounding other Chinese dairy producers over contaminated baby formula that left six infants dead and millions of gallons of milk considered suspect and destroyed.
Other decliners include CardioNET (Nasdaq:BEAT) down 34%; Sinclair Broadcast Group (Nasdaq:SBGI) down 21%; and American Axle & Manufacturing (NYSE:AXL) down 15%.
*****A few weeks ago, Treasury Secretary Geithner had to go to China to assure our largest creditor that their investment in the U.S. dollar was safe. Now he's off to Saudi Arabia and United Arab Emirates for another round of "strong dollar" propaganda.
Of course, it's not an easy task to convince foreign governments that the U.S. wants a strong dollar when interest rates are at zero and we're selling tens of billions in Treasury bills virtually every week. You may recall Geithner's assurances elicited laughter from a group of Chinese college students when he made the strong dollar pledge there.
If college students know the score, you can bet everyone else does, too. But Treasury auctions have been met with plenty of demand, and that's a good thing.
*****Fed Chief Bernanke is expected to reveal to Congress just how he plans to reverse his stimulative monetary policy next week. The Fed has expanded the money supply by about $1 trillion, cut rates to zero and doubled the assets on its balance sheet.
In normal times, this would be highly inflationary. But these aren't normal times. Were it not for the Fed's action, the U.S. economy would be broken even more than it already is.
Now, normal times will return. And how the Fed plans to reel in liquidity when the economy starts to grow again is critical. The potential for runaway inflation is real, and the Fed will have to be just as diligent at fighting inflation as it was fighting deflation.
*****Goldman Sachs (NYSE:GS) received an upgrade from the very same banking analyst that predicted collapse of mortgage-backed securities, Meredith Whitney.
Upgrading Goldman is easy. The bank is practically a subsidiary of the U.S. government. But the timing is interesting, given that Goldman reports earnings before the bell tomorrow.
And speaking of earnings, this is a big week for some important companies. In addition to Goldman, we get Intel (Nasdaq:INTC) after the bell tomorrow. Thursday, we'll hear from JP Morgan (NYSE:JPM), Google (Nasdaq:GOOG) and IBM (NYSE:IBM). Then Friday, we get General Electric (NYSE:GE), Bank of America (NYSE:BAC).
Tech and financials - the anchors for the U.S. economy will be reporting this week. Investors will be watching these early earnings reports closely. Much of the rally of the past few months can be attributed to investors' faith in companies meeting Q2 earnings, even if expectations were substantially lowered. Any bad news from these bellwether companies and the market could turn. We'll be watching closely.
*****As if earnings weren't enough, there's a full slate of economic data coming out this week, too. Tuesday, it's the Producer Price Index (PPI) along with retail sales and business inventories.
Wednesday, we get the Consumer Price Index (CPI), the Empire Manufacturing Survey from New York state, capacity utilization, industrial production, crude inventories and the minutes from the last FOMC meeting.
Thursday, it's initial unemployment claims and the Philadelphia Fed.
And finally, on Friday, we get building permits and housing starts for June.
Whew! That's going to be a lot of data to review.
*****On January 15, my Top Stock Insights advisory service released its Predictions 2009 special issue. This issue was our blueprint for profits with mid- and large-cap stocks as we headed into the new year.
In that issue, I outlined the case for oil, gold, commodities and biotech/healthcare stocks. And we took 51% profits on an oil stock, 25% on a gold stock, another 25% on a commodity stock and we're still holding three biotech/healthcare double-digit winners in the portfolio.
In other words, our expectations for the year led my readers to some nice gains this year, and there's more to come...
Now, I'm all set to release an update to that special Predictions issue that will get us through the rest of this year with more solid gains. It comes out on Wednesday, and if you'd like to get my blueprint for profits for the rest of 2009, please click here. Or go to topstockinsights.com.
*****Also, if you missed TradeMaster Daily Stock Alerts technical analyst Jason Cimpl's weekly video chart analysis, here's that link again.
51Job Inc, Orthofix International NV and Reddy Ice Holdings Inc among 52-week lows
51Job Inc. (Nasdaq:JOBS), Orthofix International (Nasdaq:OFIX) and Reddy Ice Holdings Inc. (Nasdaq:FRZ) are among the new 52-week lows in Thursday's trading among companies with market capitalizations under $1 billion.
Also included among the results: Hickory Tech Corp. (Nasdaq:HTCO), H&E Equipment Services Inc. (Nasdaq:HEES), Maxcom Telecom (Nasdaq:MXT), Arlington Tankers Ltd. (Nasdaq:ATB), MAG Silver Corp. (Nasdaq:MVG) and Sinclair Broadcast Group Inc. (Nasdaq:SBGI).
Here are the new 52-week lows among small caps:
Advisory Board, 21st Century Holding and Sinclair Broadcast Group among 52-week lows
Also included among the results: Britannia Bulk Holdings Inc (Nasdaq:DWT), NetSuite Inc (Nasdaq:N), ACCO Brands Corp (Nasdaq:ABD), Radware Ltd (Nasdaq:RDWR), inVentiv Health Inc (Nasdaq:VTIV) and First Mercury Financial Corp (Nasdaq:FMR).
Here are the new 52-week lows among small caps:
