Well, they did it again and no one is calling them on it.
I’m talking about the lack of supervision by both the Treasury and the banks about the improper release of information coming from both. This situation is resulting in unnecessarily high levels of volatility in the financial stocks, and that puts investors at risk.
For example, after saying that the complete list of banks reviewed under the stress test plan would not be available until May 4, the clowns at the Treasury couldn’t wait to get the information out through the Wall Street Journal that Bank of America (BAC) and Citigroup (C) may need to raise billions more capital. The “leak,” which is looking more like uncontrolled flow, put the market into a spin yesterday morning, with the financial stocks leading the way down.
Enough of my rant. Getting back to yesterday’s market: After the initial blow-off of the financials, which took the Dow (DJI) down 87 points in the first five minutes, the market recovered and, with the exception of a small buying in late afternoon, stocks then traded flat for the remainder of the day.
Good economic news came from the Conference Board report that the Consumer Confidence Index for April improved to 39.2 versus an expected reading of 29.7.
At the close, the Dow Jones Industrial Average (DJI) was off just eight points to 8,017, the S&P 500 (SPX) fell two points to 855, and the Nasdaq (NASD) lost six points, closing at 1,674.
The New York Stock Exchange traded just 1.3 billion shares, with advancers slightly ahead of decliners, and on the Nasdaq 693 million shares crossed but with advancers ahead by 3-to-2.
The June crude oil contract fell 22 cents to $49.92 a barrel on worries that the swine flu outbreak could delay or even halt a world economic recovery. The Amex Energy SPDR (XLE) rose 10 cents to $45.30.
Gold fell for the second day with the June delivery price off $14.60 at $893.60 an ounce. The PHLX Gold/Silver Index (XAU) fell $4.23 to $119.38.
>
What the Markets Are Saying
Getting back to my rant: I drew attention to this lack of discipline by the banks most recently on April 20, when I said, “And there is another problem — forced short-covering resulting from a push to announce earnings early from several major financial institutions leaves the market with a much-lower short position. And that leaves the market without the potential for another major squeeze of the shorts and, thus, vulnerable to heavy selling.”
Previously, on April 14, I said, “The Wall Street Journal reported that a delay in [Citigroup’s] filing for a share offering, which would sharply increase the shares outstanding, caused fewer shares on the market and thus a shortage. This shortage, in turn, caused a ‘short squeeze’ and a ‘stampede of short-sellers buying back bets against the stock.’ Hmm, that sounds familiar — another plot against the short sellers by the bankers.”
And prior to that on April 13, when referring to Wells Fargo’s (WFC) contrived preannouncement of its earnings by 11 days, I said, “According to The Wall Street Journal, the timing of the Wells Fargo pre-announcement came after short positions in Well Fargo and Bank of America (BAC) climbed sharply during the preceding week. It reported that its source, Data Explorers, said that WFC increased its short position from 2.7% to 3% during that period.”
And the story said that it “caught the shorts with their pants down.”
I added: “Further, this sort of ‘monkeying around’ with dates of earnings releases leaves the investor with more doubts about the fairness of the trading system. The top management of the financial stocks have already come under sharp criticism for their self-serving ways and just because this ‘pre-announcement’ was aimed at their unpopular adversaries, the short sellers, is no reason for regulators to ignore the bad conduct.
So what’s the point?
Just this: Attempting to manipulate the price of stocks is not only against the law but discourages both long-term investors and traders from investing. This drives the public out of the markets, reduces liquidity, and increases volatility leaving the markets open for the institutions to do as they please.
And, this problem is of even more concern when one of the “institutions” that is participating in this practice is no less than the government itself which has a department (the SEC) that is responsible for market oversight.
Bottom line: Investors should stay out of the financial stocks until these markets become less volatile and a fair place to do business.
Today’s Trading Landscape
Earnings to be reported include: Abaxis, Acadia Realty Trust, Advance America/Cash Advance Centers, Advanced Semiconductor Engineering, Aetna, Affiliated Managers Group, Aflac, AGL Resources, Agnico-Eagle Mines Ltd, Akamai Technologies, Alliance HealthCare Services, America Service Group, American Capital Agency Corp, American Dental Partners, American Tower Corp, Amerigon, Amerisafe, Ameristar Casinos, Amkor Technology, Anika Therapeutics, Anworth Mortgage Asset, ArcelorMittal, Arris Group, Arrow Electronics, Asbury Automotive Group, Assurant, Atlantic Tele-Network, Avalonbay Communities and Avista Corp.
Baker Hughes, Baldor Electric, Banco Santander S.A., Bankfinancial Corp, Banner Corp, Bare Escentuals, Barrick Gold, Belden, Berkshire Hills Bancorp, BioMed Realty Trust, BOK Financial, Boston Properties, Brandywine Realty Trust and Burger King.
Cabot, CACI Int’l, California Water Service Group, Cavium Networks, CB Richard Ellis Group, CBL & Associates Properties, CenterPoint Energy, Central European Media Enterprises, China National Offshore Oil Corp, China Petroleum & Chemical, Ciber, Circor Int’l, Cirrus Logic, Citrix Systems, Cliffs Natural Resources, Coca-Cola Femsa S.A. de C.V., Concur Technologies, Continental AG, Covance, Cray and Crown Castle Int’l.
D&B, Digital River, Dionex, Dollar Financial Corp, DPL, DST Systems, DTE Energy Co, Dynamics Research Corp, East West Bancorp, Electronics for Imaging, Empresa Nacional de Electricidad SA, Encore Capital Group, Endo Pharmaceuticals, Essex Property Trust, Euronet Services, Everest Re Group Ltd, Exactech and Express Scripts.
Faro Technologies, First Financial Bancorp Ohio, First Merchants Corp, First Solar, FirstService, Flextronics, Flowserve Corp, FMC Technologies, FormFactor, France Telecom, FTI Consulting, Genco Shipping & Trading Ltd, General Dynamics, General Maritime Corp, Genesee & Wyoming, Geron, Goodyear Tire & Rubber, Green Mountain Coffee Roasters, Grupo Aeroportuario del Pacifico SA, Grupo TMM S.A. and GSI Commerce.
Harman Int’l Industries, Hatteras Financial Corp, Heritage Financial, Hess Corp, Highwoods Properties, Holly Energy Partners LP, Horace Mann Educators Corp, Human Genome Sciences, IAC, Independent Bank Corp, Innovative Solutions and Support, Interface, Int’l Coal Group, Internet Brands, IRIS Int’l, ITC Holdings Corp, Itron, JDSU, John B. Sanfilippo & Son and Jones Apparel Group.
Kaiser Aluminum Corp, KB Financial Group, Keithley Instruments, Kirby, Lender Processing Services, Lithia Motors, LoopNet, LSI Corp, Mahanagar Telephone Nigam Ltd, ManTech Int’l Corp, Marine Products Corp, MarketAxess Holdings, MasTec, MeadWestvaco, MedAssets, Medco Health Solutions, Medifast, Merchants Bancshares, Meredith Corp, MGIC Investment Corp, Molina Healthcare, Moody’s Corp and MPS Group.
National Penn Bancshares, Navios Maritime Holdings, New Jersey Resources, New York Community Bancorp, NightHawk Radiology Holdings, NutriSystem, NV Energy, O2 Micro, Oceaneering Int’l, Odyssey Healthcare, O-I, Olympic Steel, Oneok, Orchids Paper Products Co Del, O’Reilly Automotive, OSI Pharmaceuticals, Patni Computer Systems, PepsiAmericas, Plexus, Praxair, ProLogis, Provident Financial Holdings, Pzena Investment Management, Quantum Corp, Questar Corp and Qwest Communications.
Realty Income Corp, Regis Corp, RenaissanceRe Holdings, Reynolds American, Rockwell Automation, Rockwood Holdings, Rogers Communications, Rollins, RPC, RTI Biologics, Rubicon Technology, Ryland Group, Sangamo BioSciences, Sanofi-Aventis, SAP AG, Scana Industrier ASA, Sealed Air, Selective Insurance Group, Semiconductor Manufacturing Int’l Corp, Shutterfly, Siemens AG, Silicon Laboratories, Siliconware Precision Industries Co Ltd, Skechers USA, Southern Co, Spherion Corp, SPX, Starbucks, Steiner Leisure, STMicroelectronics, Stralasys, Sunoco Logistics Partners L.P., Super Micro Computer, SurModics and Symyx Technologies.
Taubman Centers, Telmex Internacional SAB de CV, Teradyne, Tetra Tech, Textron, The Medicines Co, The Navigators Group, Thomas Weisel Partners, Time Warner Cable, Time Warner, Titan Int’l, Tollgrade Communications, Tompkins Financial Corp, Town Sports Int’l Holdings, Trinity Biotech, Trinity Industries and Tyco Electronics.
United Microelectronics Corp, United Rentals, Universal American, Universal Stainless & Alloy Products, Unum Group, USA Mobility, Varian Medical Systems, Varian, Vectren Corp, Vina Concha y Toro S.A., Virage Logic Corp, ViroPharma, Visa, Walter Industries, Waste Management, WGL Holdings, Whiting Petroleum Corp, Willis Group Holdings Ltd, Wintrust Financial Corp, World Acceptance Corp, Wright Express Corp, Wyeth, and Wyndham Worldwide.
The following economic reports are due: Mortgage Applications Refinance Index, Q1 Advance GDP (the consensus expects negative 4.6%), U.S. Energy Dept. Oil Inventories for April 24, and April Federal Open Market Committee (FOMC) interest rate decision.
The following Q1 earnings were reported: Time Warner (TWX) came in at 45 cents versus an estimated 38 cents, Aetna (AET) reported 96 cents versus an estimated 93 cents, Avista (AVA) showed 57 cents versus an estimated 52 cents. And Burger King (BKC) met Q3 estimates of 34 cents but has trimmed its Q4 outlook because of swine flu.
Get Sam Collins’ Daily Trader’s Alert e-mailed straight to your inbox each morning before the opening bell absolutely FREE!
In addition to getting instant access to his Daily Market Outlook, you’ll also receive, in the same e-mail, his Trade of the Day so you can start your day off right by positioning yourself for profits!
Click here today to sign up today for Sam’s FREE Daily Trader’s Alert!
Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
