Monday, April 14, 2008

Quiet Day Keeps Stocks in Range

Stocks zigged and zagged in a tight range on Monday (85 points in all on the Dow), but eventually ended the day on an unpleasant note as investors line up for earnings reports from major companies.

The most salient news was from Wachovia (WB), the latest victim in the ongoing banking/finance/credit crisis, posting a first quarter loss of $393 million or 20 cents per share. The nation's 4th largest banking outfit announced a cut to its dividend from 64 cents to 37.5 cents and is actively pursuing a $7 billion cash infusion through the sale of common and preferred stock, a highly dilutive - and desperate - plan.

Shares of Wachovia were hammered, losing more than 8% on the day.

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Overall, the news was pretty ugly, though largely expected, thus, the market's tepid reaction. Oddly enough, while the US equity market barely budged from the break-even line, indices around the world were roiled even before the Wachovia news, though especially the far-Eastern markets. The Nikkei and Hang Seng both lost more than 3%. European markets sustained losses of roughly 1% overall, while the US markets were essentially flat.

Whatever there is to the correlation between world markets, it seems that the US generally fares better, even though it is the bearer of most of the bad news. How far risk has been spread comes into play, as does the relative strength/weakness of currencies and economies. The confounding issue is that with all the weakness in the US economy, stocks still have not responded in a cascade of losses. Maybe the upcoming spate of earnings reports is about to change that dynamic.

Dow 12,302.06 -23.36; NASDAQ 2,275.82 -14.42; S&P 500 1,328.32 -4.51; NYSE Composite 8,922.84 -13.27

Stock sellers didn't miss any opportunities on Monday. Losing issues outnumbered gainers, 3827-2396. New lows ramped up to 277, to just 84 new highs. That gap continues to expand, signaling another downturn dead ahead for the major indices and stocks in general.

Crude oil gained $1.62 to $111.76. Gold advanced $1.70 to $928.79; silver added 10 cents to $17.79.

The lull in the markets is surely a temporary phenomenon as investors await all-important earnings reports. But, more shocks to the system like that which Wachovia delivered today will not be taken lightly much longer. We're close to a turning point and unless some major companies defied the markets and sentiment in the first quarter, life on Wall Street is going to get a heck of a lot cheaper very soon.

NYSE Volume 3,565,027,000
NASDAQ Volume 1,640,094,875

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