OTCPicks Market Blog

October 22, 2008

Wall Street had another rough day today with the Dow losing 514 points on worries that the global economy is rapidly weakening. The primary worries have shifted from the credit crunch to worries about corporate earnings as global markets envision rough times ahead.

The U.S. dollar has soared recently and today hit a multi-year high against other major currencies. The strengthening dollar has caused oil, raw materials and commodity prices to plummet in recent weeks. The price of oil is tied to the U.S. dollar so as the dollar rises oil will typically fall. The following chart shows the DJ US Oil & Gas index vs. the US. Dollar index for the last 5 months which shows the divergence of the paths taken by the U.S. dollar vs oil.

October 21, 2008

Equity markets had a nice positive day on Monday as credit markets showed signs of thawing. A critical measure of lending between banks, the three-month Libor rate fell significantly providing signs that credit is again beginning to flow freely and renewing investor hopes that the worst of the financial crisis may be over.

You may not have heard much in your investing lifetime about the Libor rate but have been hearing your fill about it for the last month. Libor stands for the London interbank offered rates and measures what banks charge each other for overnight, 1 month, 3 month and longer term loans. Over the last month as credit has tightened up and banks started refusing to lend to anybody and the credit system froze up. Thanks to the aggressive actions of global central bankers in the last few weeks the credit crisis seems to be easing. Their actions have included activities to pump dollars into the monetary system to pump up liquidity, give various types of loans to banks, take equity stakes in banks, offer to buy up bad loan portfolios, took an equity stake in AIG, offered higher FDIC account protection levels and similar guarantees for Money Market accounts, and many other relevant activities. Thankfully these confidence building efforts have finally begin to have effect in the equity markets as investors try to get their nerves back under control and see a little stability in equity markets.

October 15, 2008

Wall Street had yet another dismal day today as the Dow dropped 733 points as very weak and bleak economic data stoked fear and uncertainty in the markets. Investors are evidently worried that all the U.S. and global financial efforts will not be enough to stave off a severe recession.

In addition to the Dows 733 point drop today, the Nasdaq was down 8.47%, the S&P 500 was down 9.03% and the Russell 2000 Small Cap Index was down 9.47%. Since Monday the Dow has given back 86% of its 936-point Monday gain. The S&P's two day retracement has been 92%, and the Nasdaq has given up all of its 195-point Monday gain.

October 13, 2008

Stocks around the world experience biggest one day rally in more than 75 years on Monday as the DOW jumps 936 points or 11.6 percent. Morgan Stanley also jumps 87% after nailing down an agreement from Japan's Mitsubishi UFJ Financial Groups for a $9B investment for a 21% stake in the company.

The S&P 400 rose 104.13 point to 1,003.35 snapping an eight-day losing streak, it's longest since 1996 and rebounding from an 18% decline in the last week alone and down some 40% since market highs last October.

Goldman Sachs Group Inc. rallied 25 percent today to $111 after dropping 31 percent to $88.80 last week. Bank of America Corp. climbed 9.2 percent, while Citigroup Inc. added 12 percent. Wachovia climbed 13.6 percent after the Federal Reserve approved the $12.46 billion takeover of the U.S. bank by Wells Fargo & Co.

October 8, 2008

Today, major central banks around the world joined together to slash interest rates to assist global credit markets and provide yet another support for the troubled financial and credit markets.

It took a while for the markets to digest this coordinated move by major central banks and sent major market indexes on a wild ride throughout the day but most moved into positive territory as the day progressed only to get slammed again in the last half hour of trading. The volitility indicates that markets are still nervous that the coordinated interest rate cuts around the world will still not be enough to contain the credit crisis, but there was some bargain hunting going on today as investors snapped up shares after five straight losing trading sessions.

October 6, 2008

Last Friday congress passed the $700B financial bailout bill and sent it to the President who summarily signed it. It seems that global markets did seem to think that the bailout would save us from a nasty global recession. On Monday global markets endured huge selloffs and a bear market turned into to full-blown panic selloff around the world.

Also, on Monday oil prices plunged, and international stock markets around the world got hammered. Investors rushed for the safe haven of government bonds and gold. Oil dropped to an 8-month low below $88 a barrel on fears that a recession will reduce demand for oil and gas.

October 3, 2008