Credit Concerns, but What Keeps Stocks Up?

In case you haven't noticed, there's a rather large concern in the banking community over what's being described as a credit crunch.

For the uninformed and misinformed (no shame there, it's a complex matter), here is a good article outlining the details. Banks and associated financial firms are about at their breaking point, with more bad news coming out of the sector every day.

Today's gems came first from Bear Stearns (BSC), which posted a $859 million loss after paying preferred dividends, or $6.90 per share for its fiscal 4th quarter. It was the first quarterly loss in the company's 84-year history. The firm took a $1.9 billion writedown in the quarter on mortgage-backed securities.

The second credit-related story was from the world's largest bond insurer, MBIA, Inc. (MBIA), which revealed the company's exposure to various collateralized debt obligations (CDOs) stood at more than $30 Billion, greater than the company's net value. Shares plunged 7.07 to 19.95, off more than 26% at the close.

Despite the continuing flow of discouraging news, the major indices all held on for small gains.

Dow 13,245.64 +38.37; NASDAQ 2,640.86 +39.85; S&P 500 1,460.12 +7.12; NYSE Composite 9,622.27 +36.20

Advancing issues actually scored ahead of decliners for a change, 3707-2676, though new lows continued to dominate new highs, 589-119.

Oil and gold moved down marginally; silver ended up 12 cents at $14.34.

Today's smallish gains were still within the range I mentioned on Monday (12,950-13,300 on the Dow) and stocks traded in their narrowest channel of the week.

Investors may be holding out for some good news, though it's difficult to discern from where any happy notes may be sounded other than from the street urchins playing Christmas tunes. The market is set up once again for a Friday splashdown, though heading into a pre-holiday weekend, it's dicey to predict such things. However, there doesn't seem to be any underpinnings to the market at this juncture. The only good news was that the government pegged 3rd quarter GDP at 4.9%, but that number is suspect and overshadowed by initial unemployment claims jumping up to 346,000 for the preceding week.

Further troubling was the Philadelphia Fed General Economic Index, which slumped to a figure of -5.7 when forecasters were expecting a reading of 7.0. The number was the worst since April of 2003.

Still, stocks hang on, investors hope for the best, but there's an overwhelming feeling that a major sell-off could occur at any moment. What the exact time and trigger will be is still a matter of speculation, but there's more and more certainty that selling stocks will be all the rage sometime soon.

NYSE Volume 3,451,063,250
NASDAQ Volume 1,960,417,875