Tim Geither (Treasury Secretary) will unveil a plan for the remaining $350B of the approved Troubled Asset Relief Program (TARP) Monday or Tuesday of this week. He will also outline his overall plans for the banking bailout which may mean additional funds or programs. This comes on the heels of an impressive bank led rally which started after capitulatory selling mid morning Thursday. Rumors of the elimination or modification of mark to market accounting, a method which forces banks to write down assets to reflect market conditions, helped fuel the rally.
Additionally Congress will be voting on the economic stimulus plan which will be in the range of $850B. The vote thus far has been along partisan lines as Republicans have been disappointed with the apparent lack of tax cuts in the bill. President Obama has stressed immediate action in hopes to prevent a “catastrophe”.
The combination of the Treasury announcement with the stimulus bill has made shorting the overall market and specific sectors (banks, retail, and housing) risky for the time being. The rally last week may have been simply short covering with some long speculation; however any rally follow through this week will likely be Wall Street approving of the plans released by the government. There may be an opportunity to “sell the news” and could be an entry point depending on the selloff in some of the bank stocks that rallied so strongly at the end of last week.
GE’s Board of Directors approved a 31 cent dividend. CEO Jeff Immelt said that the company would review future dividends with respect to the economic conditions, apparently leaving the door open for a dividend cut. GE has also been in the news regarding the possibility of losing their AAA credit rating. Immelt has also stated that he is prepared to run the company regardless of any changes to the rating.
The market shrugged off another terrible jobs number of near 600K lost jobs in the month of January alone. This brought the unemployment number up to around 7.5% with many analysts still expecting the number to grow to around 8.5%-9.0%.
Earnings this week: KO, PEP, NYX, TAP, IR, AMAT, GENZ,
| Index | Last Week % P/L | Last Month % P/L | YTD % P/L |
| SP 500 | 5.17 | -4.20 | -3.84 |
| DJIA | 3.50 | -5.58 | -5.65 |
| NASDAQ | 7.81 | -0.46 | 0.93 |
| SP 400 | 8.04 | -1.94 | -0.73 |
| Russell 2000 | 5.58 | -5.59 | -4.63 |
| XLF (Financials) | 8.78 | -18.35 | -21.81 |
| USO (Oil) | -0.88 | -15.24 | -14.80 |
Disclosure: I own BAC, CPL, DIS, WFC, GE, SSO, USO, WMT, and VZ – 85% invested long
Links:
http://www.cnbc.com/id/29051240 - GE Article
http://www.cnbc.com/id/15906175/ - Earnings Calendar
http://www.cnbc.com/id/29061745 - CNBC Weekly Outlook
http://online.wsj.com/article/SB123404707960860295.html- WSJ Bailout Article
