Customer Service 1 (888) 261-2693
Advanced Search

Financial Stocks May Have Finally Hit a Bottom

By Jeff Clark
Thursday, March 13, 2008

One of my favorite cartoons when I was a child was Mighty Mouse. It was about a mouse that had Superman-like powers – X-ray vision, the ability to fly, superhuman strength, etc. Mighty Mouse was also a ruthless fighter. One of his favorite moves was to fly up to just under a much larger opponent's chin and throw a blinding flurry of punches that left the enemy reeling.
 
Ben Bernanke must have liked watching Mighty Mouse, too. On Tuesday, our esteemed Fed chairman donned a pair of yellow tights and a red cape, stood proudly outside the steps of the New York Stock Exchange, and shouted, "Here I come to save the day."
 
He then unleashed a flurry of knockout punches that sent stock and bond bears reeling from the pain.
 
In short, Mighty Ben saved the mortgage market from a meltdown.
 
The Fed agreed to be the buyer of last resort for AAA-rated mortgages. Banks and brokers can now approach the Fed with AAA-rated mortgage debt and swap it out for AAA-rated Treasury securities at 85 cents on the dollar.
 
In other words, the Fed is willing to be a buyer in a market that had no bids. This is a HUGE development. And it quite likely signals the beginning of the end of the credit crunch.
 
Let's be clear... It's not all sunshine and lollipops from this point forward. We're still going to see billions of dollars in write-downs from bad mortgages. We're still going to see overleveraged financial firms teeter on the brink of bankruptcy. And we're still going to see crippled consumers struggle to meet their credit-card payments.
 
But the risk of high-quality, credit-worthy assets crumbling in price because no one is willing to buy is now gone. Gone, too, should be the risk of bankruptcy for companies being forced to liquidate these assets at fire-sale prices in order to meet margin calls.
 
So it's no surprise financial stocks were the main beneficiaries of Tuesday's historic rally. Financial stocks are down an average of 40% or more from their highs of last year. They're overdue for a bounce. The Fed's action on Tuesday, however, may suggest we'll see something more than a bounce. We may have finally hit a sustainable bottom for the sector.
 
If not, then we may need Mighty Mouse to throw a few more punches after the Fed meeting next week.
 
Best regards and good trading,
 
Jeff Clark




Recent Articles
Market Notes
Chile rides commodity boom... Chemical & Mining and Banco de Chile at new highs.
 
Aerospace giant Boeing loses $40 billion contract to Airbus... down 33% since July.
 
$110 oil crushes airlines... Alaska Air, US Airways, Frontier, Pinnacle, Northwest, SkyWest, American, and Delta Airlines at new lows.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1223.12 -0.1% +10.6%
Oil 38.22 -0.2% -0.3%
Gold 139.11 +0.8% +22.3%
Silver 29.51 +3.2% +62.6%
US-Dollar 79.17 -1.3% +4.3%
Euro 1.33 -0.8% -10.4%
Volatility 18.02 +0.1% -15.2%
Gold Stocks 590.99 +1.6% +25.5%
10-Year Yield 2.94 -2.7% -15.5%

World ETFs
Symbol Price
Change
52-Wk
USA 122.76 -0.1% +10.6%
Canada 30.56 +0.2% +18.0%
Russia 21.98 +0.2% +17.2%
India 37.92 +0.2% +19.4%
Israel 16.76 +0.4% +10.4%
Japan 10.69 +0.5% +7.0%
Singapore 13.71 -0.2% +18.1%
Taiwan 14.92 +1.0% +20.2%
S. Korea 57.19 -0.2% +21.5%
S. Africa 72.26 +0.5% +29.7%
China 43.84 -1.3% -3.3%
Lat.America 53.21 +0.1% +9.2%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.74 +0.1% +20.2%
Big Pharma 63.99 -0.2% -3.2%
Internet 72.58 +0.7% +25.0%
Semis 16.18 -0.3% +26.4%
Utilities 31.19 -0.3% +1.8%
Defense 18.47 -0.3% +8.9%
Nanotech 10.08 +0.5% +1.3%
Alt. Energy 10.24 +1.6% -2.0%
Water 18.62 +0.7% +13.8%
Insurance 16.08 -0.4% +19.0%
Biotech 20.56 +0.1% +26.6%
Retail 19.59 -0.6% +26.6%
Software 24.65 -0.6% +22.7%
Big Tech 53.85 0.0% +22.1%
Construction 13.20 +0.8% +14.8%
Media 13.73 +0.7% +24.7%
Consumer Svcs 67.38 0.0% +23.4%
Financials 55.01 -0.1% +5.7%
Health Care 63.90 -0.6% +1.2%
Industrials 63.51 -0.1% +19.3%
Basic Mat 74.64 +0.4% +27.8%
Real Estate 55.35 +0.1% +21.8%
Transportation 91.39 -0.4% +23.9%
Telecom 22.65 +0.3% +16.8%