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Obama Admin. Set to Propose Largest Expansion of Government Tomorrow

REGULATE

PAPER: The Obama administration’s plan, described by several sources, would extend federal regulation for the first time to all trading in financial derivatives and to companies including large hedge funds and major insurers such as American International Group. The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities…

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Filed under: Economics, Politics, , , , , , , , , , , , , , , , , , , , ,

Obama to Meet With Heads of Goldman Sachs, JPMorgan, Citi and Other Bank Leaders

PAPER: President Barack Obama will meet with about a dozen U.S. bank leaders on Friday to talk about his administration’s plans to put the sector on a sounder footing, The Wall Street Journal reported late Tuesday on its Web site. Invitees include Goldman Sachs Group Inc. , J.P. Morgan Chase & Co. and Citigroup Inc. The meeting follows more than a week of controversy over large bonuses paid at American International Group Inc. , after the insurer received billions in federal aid…

Filed under: Economics, Obama, , , , , , , , , , , , , , , ,

Stocks Surge After Geithner Unveils Taxpayer Guaranteed Toxic-Asset Plan

US Session Key Developments

  • Treasury Announces $1 Trillion Toxic Asset Purchase Plan
  • S&P Surges 7.1%, Most Since Oct. 28, Biggest 10-Day Gain Since 1938
  • February Home Resales Rise 5.1%

Stocks Surge After Geithner Unveils Taxpayer Guaranteed Toxic-Asset Plan

Stocks surged 7.1% with the S&P 500 advancing by the most since Oct. 28 after U.S. Treasury Secretary Geithner’s toxic-asset plan jolted Wall Street. The sharp move ushered in the largest 10-day gain since 1938. Geithner’s plan will use $1 trillion to incentivize private investors to purchase many illiquid assets including mortgage securities and agency debt. The deal will employ 10% of this money to work as a taxpayer subsidy to many of these investors while also providing government guarantees in case the securities continue to falter. Not surpassingly, financials in the blue-chip index bulled-ahead 22.91%, marking a 50.1% advance in the sector over the last two weeks. JPMorgan and Wells Fargo performed the strongest gaining on average of 24% with Citigroup seeing its shares traded the most of any company in the index. But this rally may be short-lived. If the real economy continues to falter, the consumption habits of the public may continue to be dwarfed, disabling much wealth creation that would truly enlighten the banking sector.

Dow 30            7775.86                +497.48                  +6.84%
Financials in the blue-chip index rose surged 22.91%, led by JPMorgan’s 25% move. Industrials were the second-best performing sector with Caterpillar advancing 9.46%.

NASDAQ        1555.77                 +98.50                      +6.76%

Information Technology advanced 6.38% with leading names such as Microsoft and Cisco jumping 7.44% and 6.73%, respectively. Sun Microsystems was one of the few stocks that slipped, as investors took some of the profits earned from the IBM take-over news.

S&P 500         822.92                   +54.38                       +7.08%

Consumer Staples was the worst performing sector in the Standard and Poor’s index, managing to gain a still impressive 3.77%. Only seven stocks slipped on the day. Implied volatility on the index fell 2.66 points, or 5.8%.

Filed under: Stocks, , , , , , , , , , , , , , , , , ,

Geithner Will Work With Congress For More Money If Needed, He Says

U.S. Treasury Secretary is currently speaking at a conference in Washington where is offering his first words since word of his $1 trillion toxic asset relief program was leaked over the weekend. Within the last 30 minutes, the 47-year-old has stated that the economic crisis won’t end until the market takes on more risk. Despite the lack of risk-appetite seen in markets, he does see “hope” in corporate finance.

Today, the S&P 500 surged 7.1%, advancing 20% over the last two-weeks. This, however, does not indicate that the economy has been revived. After all “one day does not make a plan,” Geithner noted. But should markets come crashing down and see the economy slip further, Geithner will be willing to work with Congress if additional money is needed.

“The world is watching us” to stabilize the system, he said. Interestingly, the European Central Bank President, Jean-Claude Trichet, seemed to express the opposite sentiment about his jurisdiction. In an interview with the Wall Street Journal yesterday, the central bank chief stated that Europe does not need a fiscal stimulus to save itself from the global recession. The statement came just days after ThyssenKrupp, Germany’s largest steel-maker, announced it would be laying off 3000 jobs, the first of such lay-offs among the major companies in the region.

– LG

Filed under: Economics, Politics, , , , , , , , , , , , , , ,

Sell Financial Stocks, Says Bank of America Analyst and Hedge Fund After Historic Rally

WIRE: “The history of bubbles shows quite well that financial sector consolidation is inevitable,” Bernstein, Bank of America’s chief investment strategist, wrote in a research note. “Financial stocks will be attractive when the government tries to speed up that inevitable process. However, to the contrary, the government continues to attempt to stymie that inevitable consolidation…”

WIRE: BlackRock Inc.’s global macro fund, the world’s second-best performer over two years among hedge funds that invest based on economic trends, is betting against this month’s equities rally and buying bonds as a recovery from the worst credit crisis since the Great Depression falters…

Filed under: Stocks, , , , , , , , , , , , , , , , , ,

Stock Bargains Everywhere as ‘Bull-Market’ Begins, Says Analyst

WIRE: The next “bull-market” rally has begun and there are bargains in every emerging market, Templeton Asset Management Ltd.’s Mark Mobius said, refuting predictions that the equities meltdown will continue.

“You have to be careful not to miss the opportunity,” said Mobius, who helps oversee about $20 billion of emerging- market assets at San Mateo, California-based Templeton. “With all the negative news, there is a tendency to hold back…”

Filed under: Economics, Stocks, , , , , , , , , , , , , , , , ,

Centrally Planned Bonus System, Geithner Contrives

Politico: Treasury Secretary Tim Geithner will try to cut down on risky behavior by financial institutions by asking them to tie bonuses to the long-term health of the company rather than short-term gains, according to people briefed on his plans…

Filed under: Economics, Politics, , , , , , , , , , , , , , ,

Stocks Rally After GE Chief Says They Can Withstand Loan Defaults

US Session Key Developments

  • General Electric Can Withstand Loan Defaults
  • Housing Data Surprises to the Upside
  • Alcoa Slashes Dividend 82% to 3 Cents Per Share

Stocks Rally After GE Chief Says They Can Withstand Loan Defaults

Wall Street celebrated St. Patrick today by finishing the trading session deep in the green after General Electric’s Chief Executive Officer Jeffrey Immelt stated that the company had sufficient reserves to withstand loan defaults. The comments come as a relief after the conglomerate slashed its dividend three weeks ago for the first time since the Great Depression. Surprising Housing and Producer Price data surprised to the upside, leaving traders in an upbeat mood. The prices that manufacturers pay for raw materials rose 0.2% when excluding food and energy with economists expecting the figure to rise by only 0.1%. With these costs now higher, taxable income deteriorates, which in turn allows companies to be more profitable. Sentiment continued its upward trend after housing starts unexpectedly rose 22% in February. As such, KB Home, the fourth-largest U.S. homebuilder advanced 9.3% along with Home Depot, which rose 6.7%. The blue chips could have performed a bit stronger had it not been for an 82% dividend slash from Alcoa, the largest U.S. aluminum maker and a member of the Dow 30, which brought its quarterly cash payout to only 3 cents per share. Nonetheless broader optimism led Financials to perform the strongest. JPMorgan, Wells Fargo, and Citigroup all moved ahead by more than 7.0%.


Dow 30            7395.70         +178.73           +2.48%

The Dow fell in the minutes after opening bell only to rally from thereon. It closed near the day’s high with only one sector finishing the day down, Materials. The sector’s performance is not of particular surprise considering Alcoa’s stock tanked 8.66% after it slashed its dividend by 82% to 3 cents per share.

NASDAQ         1462.11           +58.09              +4.14%
NASDAQ stocks performed the strongest with Information Technology rallying 4.25%. Apple rallied 4.44% after it had let developers preview a beta of the iPhone OS 3.0, which includes cut and paste features and automatic updates.

S&P 500          778.12            +24.23              +3.21%

S&P 500 stocks saw every sector in the index rally by at least 1.74% with Financials surging 6.58%. General Electric was one of the most active stocks, trading 22.74 million shares after its CEO announced that it had adequate capital reserves to withstand loan defaults. The VIX fear gauge couldn’t find enough momentum to fall below the 40 mark; nonetheless it dropped 6.7% to 40.80. Overall, 476 stocks rose with only 24 finishing the day down.

Filed under: Stocks, , , , , , , , , , , , , , , , , , ,

Stocks Fail to Rally a Fifth Day After Profit Taking Brings Indices Down

US Session Key Developments

  • Bernanke: No More Bank Failures Under My Watch
  • American Express Reports Rising Credit-Card Defaults
  • Citigroup Surges 30.9% to $2.33

Stocks Fail to Rally a Fifth Day After Profit Taking Pushes Indices Down

Wall Street traded most of the day in positive territory with the Dow and S&P 500 rising as much as 2.34% before finally slipping into the red the session’s final hour. The early advance came after Federal Reserve Chairman Ben Bernanke said that he would not allow any banks from hereon to fail, in a 60 Minutes interview yesterday. Mid-day trading revealed bad financial news that seemed to have forced some of the selling. American Express erased an 8.1% advance after reporting rising credit-card defaults. Despite this, Citigroup surged 30.90% to $2.33 after having traded at $0.96 two weeks ago. Bank of America also rose, by 7.29% to $6.18. The session’s day was filled with mixed performance. In fact, only 210 stocks in the S&P 500 finished up while 286 ended down.

Dow 30                    7216.97                  -7.01                      -0.10%
The Dow opened the day and traded most of the day in positive territory, rising as much as 2.34% before profit-takers forced the index down into the red in the final hour of trading. Basic Materials outperformed, rising 3.60% while Health Care plummeted 1.26%. Citigroup was the most active stock after seeing 287.02 million shares of its stock traded through the New York Stock Exchange.

NASDAQ                 1404.02                  -27.48                   -1.92%
The NASDAQ performed the worst of three indices, spending most of the day in the red and rising by as much as only 0.96% but closing near the day’s lows. SanDisk may have led the slide in tech-stocks after a Bank of America analyst report downgraded the stock’s performance to ‘underperform.’

S&P 500                  753.89                     -29.38                   -0.35%
The S&P 500 had a mixed day, with only 210 stocks rising and 286 ending the day below par. The fear gauge, which shows the implied volatility of call options on the S&P 500, rose for a second straight day, by 3.25% to 43.74.

Filed under: Stocks, , , , , , , , , , , , , , , ,

Stocks Have Biggest 3-Day Gain Since Nov. On Bank of America Profit Outlook

US Session Key Developments

  • Bank of America’s Chief Says Company Profitable First Two Months
  • Retail Sales Better Than Expected
  • General Electric Rating Cut to AA+

Stocks Have Biggest 3-Day Gain Since Nov. On Bank of America Profit Outlook

Stocks in the S&P 500 posted the largest 3-day gain since November with a 10.96% surge since Tuesday after Bank Of America Chief Executive Officer Ken Lewis followed the footsteps of his counterparts at Citigroup and JPMorgan. Indeed, Lewis announced that his bank was profitable in the first two months of the year to reporters after a speech given in Boston. The recent trend of CEO profit announcements has allowed Financials in the S&P to rise 33% on the week. General Electric added 13% after losing its AAA credit rating by less than expected. The conglomerate slashed its dividend for the first time since the 1930s two weeks ago in an effort to save the company billions of dollars so that it could prevent its own credit deterioration. Wal-Market advanced 3.1% after government Retail Sales estimated that purchases from such stores had done better than economists had anticipated. The figure for February fell -0.1% while forecasts called for a -0.5% decline.

Dow 30                     7170.06                 +239.66                    +3.46%
Financials pummeled through the remaining short-sellers, surging ahead 13.07%. Even the worst performing sector in the index, Technology, moved up 2.0%. JPMorgan saw 31.73 million shares traded to end the day up $2.80 or 13.73% at $22.30.

NASDAQ                  1426.10                  +54.46                        +3.97%
Technology stocks have become a smaller portion of index after being one of the worst performing sectors in composite. Nonetheless, the industry rallied 2.85% with Apple and Intel jumping about 4.0%.

S&P 500                  750.74                    +29.38                        +4.07%

The S&P 500 had its biggest 3-day again since November, rallying 10.96% since the surge began. Every sector in the index shared the sentiment with Financials rushing ahead 9.94%. Implied volatility on the index dropped 5.57% or 2.43 points to 41.18, leaving the fear gauge under 50 for the fifth straight trading session.

Filed under: Economics, Stocks, , , , , , , , , , , , , ,

Stocks Surge Most Since late November, S&P Ahead 6.1% on Citi Optimism, ‘Uptick Rule’

US Session Key Developments

  • Citigroup to Have Best Performance Since 2007, Says Pandit
  • Sen. Barney Frank to Reinstate ‘Uptick Rule’
  • Financial Shares Surge 15.58%
  • Dow and S&P Stocks Best Performance Since November


Stocks Surge Most Since Late Nov., S&P Ahead 6.1% on Citi Optimisim

U.S. stocks surged by the most since late November after an internal memo from Citigroup’s Chief Executive Officer Vikram Pandit stated that his bank would be having the best quarter since 2007. The memo stated that the company realized a substantial gain in profits in the first two months of the quarter/year. Indeed, Financials bulldozed through any pessimism to finish the day up 15.58%. Citigroup shares showed the strongest performance, racing ahead by 38.10% to finish the day at $1.45. JPMorgan and Bank of America basked in the glory, rising 22.64% and 27.73%. General Electric also rose 20.0% on improved credit outlook. Surprisingly, comments by Senator Barney Frank of Massachusetts helped sustain the rally. During questioning of Federal Reserve Chairman Ben Bernanke, he stated that the “uptick rule” would be reinstated after having been removed in July 2007. The uptick rule requires that a stock rise in price before it can be sold short. Reinstating this rule would make the practice of borrowing and selling a stock, (short-selling) in order to profit from the fall in share prices, less accessible.

Dow 30                        6926.49               +379.44                  +5.80%
The Dow had its best day since Nov. 21st with financial shares jumping 20.96% ahead. Even the worst performing sector, Consumer Staples, rallied by 2.06%. All 30 stocks in the index finished the day in the green, with Citigroup, Bank of America, and JPMorgan performing the best.

NASDAQ                     1358.28                +89.64                     +7.07%
The NASDAQ performed the best of the three major U.S. equity indices. Information Technology also surged despite being hardest hit throughout yesterday’s trading session. Intel and Microsoft rose 10.92% and 9.70%, respectively.

S&P 500                     719.60                    +43.07                        +6.37%
The S&P 500 had its best day since November 21st. It surged ahead with only 13 stocks finishing the day in the red; only five of those lost more than 1.0%. The VIX volatility index plummeted, by 5.31 points or 10.70% to finish the day at 44.27. Short interest on the S&P

Filed under: Economics, Stocks, , , , , , , , , , , , , , ,

Stocks Give Back Yesterday’s Gains as Troubled Mortgages Rise to Nearly 12%

US Session Key Developments

  • JPMorgan Credit Outlook Slashed By Moody’s
  • Troubled Mortgages Jump to Nearly 12%
  • FDIC Chief Says Funds May Dry Up
  • Citibank Shares Trade Under $1

Stocks Give Back Yesterday’s Gains As Troubled Mortgages Rise to Nearly 12%

Stocks were pummeled today with Financials continuing their slide after President Obama’s mortgage bailout plan was revealed to benefit only those whose home loans were owned by Fannie Mae or Freddie Mac. Banks like Wells Fargo, which owns 16% of the mortgage market, will likely not directly benefit as a result. As such, any confidence that Obama’s plan would help stabilize the banks went down the drain. If that wasn’t enough to bring down the financial sector, JPMorgan’s credit outlook was slashed by Moody’s yesterday in after-hours trading. Indeed, the bank which was first hailed as a beacon of financial stability may now be in danger. The credit rating agency stated that JPMorgan’s health was at risk due to its direct exposure to bad loans and credit defaults.

Housing data continued to plague the industry. Data showed that Mortgage Delinquencies jumped 7.88% in the final quarter of 2008. Overall, nearly 12% of all mortgages are either late, delinquent, or are in foreclosure.

Sheila Blair, the Chairman of the Federal Deposit Insurance Corp. (FDIC) said that the pool of money that it holds to insure consumer banking accounts for up to $100,000 could dry up by the end of the year. In response to a swarm of letter that the corp. received as a result of FDIC fee increases she stated “without these assessments, the deposit insurance fund could become insolvent this year.” All this inertia led Citigroup, which was once the largest bank by market capitalization, to trade under $1 per share for about 40 minutes today. Shares of the embattled bank reached a low of 97 cents. Citigroup ended the day down -9.73% at $1.02 per share with JPMorgan finishing down -13.99% at $16.60.

Dow 30                   6594.44                      -281.40                      -4.09%
Every sector in the Dow Jones Industrial Average took a beating with Financials seeing the worst of the storm. The sector dove -12.90% with Materials tanking -9.08% with it.

NASDAQ               1299.59                       -54.15                          -4.00%
NASDAQ sector performance was more evenly distributed with Financials dipping -6.68% and Information Technology falling -3.58%. Microsoft and Cisco were the most actively traded stocks, declining -5.27% and -4.59%, respectively.

S&P 500                682.55                         -30.32                        -4.25%
The S&P plummeted as much as 4.9% on the day before profit-taking forced the index to close the day down -4.25%. The most active stock was JPMorgan which saw 33.61 million stocks traded as it fell -13.99%. The VIX volatility index jumped to 50.17 or by 5.49%.

Filed under: Economics, Obama, Stocks, , , , , , , , , , , , , , , , , , , , ,

OBAMA STRONG-ARMS CITI; REQUIRES UNSEATING BOARD

OBAMA REQUIRES UNSEATING OF CITIGROUP DIRECTORS

Bloomberg: The Obama administration will require Citigroup Inc. to raise private capital and make changes to its board of directors as part of an effort to strengthen the bank, according to people familiar with the matter…

NYT: Treasury Reached Deal to Take 30-40% of Citi…

Filed under: Economics, Obama, , , , , , , , , , , , , , , , , ,

CITI SPEAKS TO FEDS ABOUT GOVERNMENT TAKEOVER, 40% STAKE

FEDS SEEK 40% OWNERSHIP OF CITIGROUP COMMON STOCK

Convert $75 billion of preferred shares into common stock…


Within the last hour, the Wall Street Journal reported that the U.S. Government is seeking a large stake in Citigroup. The deal could yield a 40% transfer of ownership to the feds. Indeed, Citigroup could even convert $75 billion worth of preferred shares into common stock.

Friday saw significant volatility in U.S. equity markets as fears of bank nationalization ripped through the newswires. Equities had dipped to lows last seen in 1997. Then in the latter stage of Friday’s trading, White House Press Secretary Robert Gibbs stated that “this administration continues to strongly believe that a privately held banking system is the correct way to go” after being asked about the matter. As a result the markets quickly recouped the losses it had suffered in the morning before, slipping yet again.

Forex markets reacted to the news too. The U.S. Dollar quickly sold off against the Japanese Yen on Gibbs’ statements. With nationalization fears coming back to the headlines tomorrow’s markets may be quite chopping.

Citigroup finished Friday, 2/20/09 at $1.95, down $1.05 or 35%. At it’s low, the stock traded at levels seen in Nov. 1990, at $1.61 per share. – LG

Filed under: Economics, Obama, , , , , , , , , , , , , ,