Monday, May 12, 2008
Just a Retracement or Something Worse.....
Worries about the credit markets and record high oil prices lead to losses on Friday and for the week (the first time in a month). The Dow fell 120.90 points to close the session at 12,745.88. The SPX lost 9.40 points to close at 1,388.28. We are in the green and looking ok.
News that American International Group (AIG) and Citigroup (C) continue to be hurt by write-downs took a toll on financials Friday and this led the entire market lower. AIG announced that it lost $7.8 billion and that it would raise $12.5 billion to firm its capital base.
Citi shares fell 2.76 percent to $23.63 after the financial giant announced it would sale half a trillion in assets! This is part of a major plan to cut costs, which also means that more job cuts are in store. More than 13,000 job cuts have already been announced since last summer..
Oil prices continue to put downward pressure on stocks with crude closing at yet another record high. Oil rose $2.27 a barrel to close at $125.96 after hitting a high of $126.25 intraday. A falling dollar continues to provide speculative premiums in oil, although global demand is also a factor. The problem is that when prices are high for energy, it can lead to a significant slowdown in consumer spending, especially when we there is already a soft labour market.
Economic news was at least positive Friday with the US trade gap narrowing to $-58.2 billion in March from $-61.7 billion in April. This was better than estimates for a reading of $-60.8 billion. Exports and imports declined during the month, but imports dropped more at 2.9 percent compared to 1.7 percent.
What is clear that if you draw a trend line on the SPX it should just bounce of the 1388 mark if you think this rally will hold. Any breach of that trend line would not be good news.
Lets see.
Until next time.
News that American International Group (AIG) and Citigroup (C) continue to be hurt by write-downs took a toll on financials Friday and this led the entire market lower. AIG announced that it lost $7.8 billion and that it would raise $12.5 billion to firm its capital base.
Citi shares fell 2.76 percent to $23.63 after the financial giant announced it would sale half a trillion in assets! This is part of a major plan to cut costs, which also means that more job cuts are in store. More than 13,000 job cuts have already been announced since last summer..
Oil prices continue to put downward pressure on stocks with crude closing at yet another record high. Oil rose $2.27 a barrel to close at $125.96 after hitting a high of $126.25 intraday. A falling dollar continues to provide speculative premiums in oil, although global demand is also a factor. The problem is that when prices are high for energy, it can lead to a significant slowdown in consumer spending, especially when we there is already a soft labour market.
Economic news was at least positive Friday with the US trade gap narrowing to $-58.2 billion in March from $-61.7 billion in April. This was better than estimates for a reading of $-60.8 billion. Exports and imports declined during the month, but imports dropped more at 2.9 percent compared to 1.7 percent.
What is clear that if you draw a trend line on the SPX it should just bounce of the 1388 mark if you think this rally will hold. Any breach of that trend line would not be good news.
Lets see.
Until next time.
# posted by Paul @ 7:12 AM 
