The stock market continues trending downwards, trading currently near its lowest level in more than a year. A number of factors contributed to today’s tumble. – Negative comments by analysts on General Motors Corp. (NYSE: GM) sent shares of the largest U.S. automaker to their lowest level in more than 30 years.
– Brokerages cut their earnings estimates or downgraded investment banks Citigroup (NYSE: C), Merrill Lynch (NYSE: MER) and Goldman Sachs (NYSE: GS).
– Belgian-Dutch bank Fortis announced plans to shore up its finances with measures worth more than $12 bln.
– Disappointing outlooks from technology bellwethers Oracle Corp. (Nasdaq: ORCL) and BlackBerry maker Research In Motion Ltd. (Nasdaq: RIMM) further soured investors’ moods. The company issued Q2 EPS guidance below consensus ($0.84-0.89 vs the $0.90 FC consensus with its shares trading down more than 13%) making the tech sector one of the steepest decliners.
– The gloom was compounded by OPEC’s President who was quoted as telling “that oil could rise to between $150 and $170 per barrel this summer before pulling back later in the year”.
Today’s confluence of bad news overshadowed the NAR’s report that existing home sales rose 2% month-over-month to a seasonally adjusted annual rate of 4.99 million, registering this way only the second increase in almost a year. Also, the final first quarter GDP reading indicated the economy grew at 1.0%. But, that’s understandable – doom and gloom is what the Street is really after.
Despite the mantra so eagerly professed by the Street , we won’t suffer the “deluge”. The broad stock market will hold its own. This is based in my view of the continued strength of industrial commodity prices other than oil. Furthermore, strength demonstrated recently from smaller stocks versus large-cap stocks, is a phenomenon associated with market bottoms, not bear markets as many are purposely, right now suggesting. In the last 50 years, no bear market has ever begun with the secondaries outperforming the blue chips. It is ridiculous the way valuations in the market are currently being handled and openly manipulated. Treating all co’s as if they all fall strictly under the financial sector makes no sense at all.
Lastly, let’s keep in mind that 2008 is an election year, everything that has significance to the consumer/investor will be highlighted by the mainstream media and blown up into a major political issue. Oil is w/out question one of them.
Consider the following similarities between oil in the present and oil during the last election year in 2004. In 2004 crude soared 53% ($36 to $55) in only 4 months….In 2008 crude soars 60% ($85 to $135) in only 4 months…quite a coincidence!!!!