US stocks ticked higher on Wednesday after a deal was reached on an economic-stimulus package, though some energy and commodity stocks were weak as economic reports underscored the need for stimulus.
The International Energy Agency said US oil demand in December slid more than 6%, hurting the price of oil. Also Wednesday, markets digested reports showing that imports to and exports from both China and the US – the twin engines of the global economy – fell sharply. Stocks dipped midsession, but bounced after Sen. Harry Reid, Democrat of Nevada said Wednesday that a deal had been reached on a $789bn economic stimulus bill, adding that the Senate could vote on as soon as Thursday.
The Dow Jones Industrial Average, which slid 382 points in the previous session due largely to uncertainty about the Treasury Department’s unveiling of a rough plan to buy toxic credit bets from banks, was up 50.65 points (0.64%) to 7,939.53.
Banks regained some of their Tuesday losses even as executives were put on the hot seat in Congress: Bank of America was up 7.7% to $5.99 and Citigroup was up 7.5% to $3.60. The S&P 500 rose 6.58 points (0.80%) 833.74.
Bank stocks have plummeted since late last year despite a series of major steps by federal officials, with traders seemingly uneasy about anything that comes out of Washington.
While credit markets have improved from their late-2008 unprecedented freezing, equities are only narrowly higher than their low points of that year. Increasingly it appears equity investors are getting out of stocks completely and cautiously pushing into other asset classes with any funds they take from the sidelines.
Among other asset classes, Treasuries and gold futures were rallying and the dollar was gaining against the euro.
The NASDAQ ended 5.77 points (0.38%) higher at 1,530.50, though it was hurt by an 18% fall to $46.88 for shares of BlackBerry maker Research In Motion, which had been one of the tech stocks that held up best through the market’s downdraft in recent months.
Also hurting the Nasdaq was a slide for transportation stocks including airlines, truckers and even railroad companies. Among the biggest decliners was JB Hunt, down 6.6% to $22.79. While a rise in oil prices played a role in the weakness, a flood of notes have come in from analysts in recent weakness disparaging many in the transportation sector.
In economic news, Treasury Secretary Timothy Geithner told a Senate panel that the US financial system faces unprecedented challenges that require new and aggressive programs to help solve the ongoing crisis.

Read more »

Continued safe-haven demand amid worries about the global economy and financial sector underpinned gold futures, although the market remained within its recent trading range. Spot gold was last quoted at $858.95. Comex gold futures strengthened $8.70 (1.02%) to $858.80. Spot silver was last quoted at $11.41.
West Texas Intermediate was last quoted at US$42.27 per barrel.

Base metals continued to slide Thursday, as worse-than-expected US housing and jobs data weakened sentiment on demand for industrial metals.

Base metals on the LME finished mixed. Aluminium fell $8 (0.60%) to $1,335 while copper weakened $145 (4.46%) to $3,105 and nickel rose $125 (1.15%) to $10,975. Zinc dropped $20 (1.74%) to $1,130 and lead shed $18 (1.64%) to $1,053. Comex copper was last quoted at 138.10 US cents per pound.

US Stocks Retreat as Banking System Remains Under Fire
US stocks traded lower late Thursday as an afternoon bounce collapsed under the weight of more dire concern about the banking system and its impact on the overall economy.

Setting the tone in a volatile trading session continued to be the banking sector as insurers and regional banks were hit hard by concerns about their profits, while larger Wall Street bellwethers suffered from continued speculation there might be even more government oversight and directives from the incoming Obama administration.

The Dow Jones Industrial Average weakened 105.3 points (1.28%) to 8,122.8 as a morning release of job cuts and lower second-quarter earnings from bellwether Microsoft continued to weigh on the index. Read more »

Rising inventories and a technical selloff drove copper to a four-day low Wednesday, and aluminium to its lowest close since April 2003.

Base metals on the LME finished down. Aluminium fell $47 (3.38%) to $1,343 while copper weakened $100 (3.02%) to $3,210 and nickel dropped $425 (3.77%) to $10,850. Zinc shed $75 (6.12%) to $1,150 and lead lost $88 (7.56%) to $1,070. Comex copper was last quoted at 141.90 US cents per pound.

Gold futures closed lower on a day when the dollar firmed against the euro, but the metal was mostly sideways during an “inside day” on a daily chart. Spot gold was last quoted at $854.70. Comex gold futures slid $5.10 (0.60%) to $850.10. Spot silver was last quoted at $11.27.

West Texas Intermediate was last quoted at US$41.32 per barrel.

The yen rose to a seven-year high against the euro and a 13 1/2-year high against the dollar Wednesday after the expiration of a large options contract.

Bank of America Worries Loom

US stocks popped into the green Thursday afternoon as traders used the psychologically significant level of 8,000 for the Dow Jones Industrial Average as an entry point, though investors still fretted about Bank of America’s capital needs.

The Dow Jones Industrial Average climbed 12.4 points (0.15%) to 8,212.5.

Shares of BofA were down by 18% at $8.38, off their low at $7.35 after a report that the largest US bank by assets could require government assistance to absorb losses from its Merrill Lynch acquisition. Shares of the bank pared their losses after a report that the US might guarantee $100bn to $200bn for BofA. Citigroup, which rushed into the sale of a controlling stake in its brokerage recently to raise capital, was off 19%.

The Dow hit its low for the session around 12:40 EST, off more than 200 points at 7,995, with the move marking its first intraday trek below 8,000 since Nov. 21. The Dow recorded its low of the current bear market on Nov. 20, when it closed at 7,552.

The Standard and Poor’s S&P500 increased 1.1 points (0.13%) to 843.7.

The financial sector remained the fulcrum of a volatile market, leading moves up and down.

From an earnings standpoint, JPMorgan shed 17 cents to $25.74 after posting a profit of 7 cents a share for the fourth quarter. Earnings fell 76% from a year ago and Chief Executive Jamie Dimon said loan demand “is dropping rather dramatically.”

Many veteran traders and analysts believe the market is likely to test its lows in the coming weeks, though there is some disagreement over whether the old lows will hold, considering the continuing flurry of fourth-quarter profit reports that are likely to contain more nasty surprises.

The Nasdaq rose 22.2 points (1.49%) to 1,511.8 though it was hurt by a 3% drop in Apple on worry about the health of CEO Steve Jobs. He had said late Wednesday he would take a medical leave from the company.

Commodity prices fell, hurting the energy and industrial sectors. As demand in economies worldwide seems to weaken with each data point, markets are pricing in a “deflationary” phase, where the prices of all assets decline, reducing incentive for investment and trade.

For Australian ADRs listed on the NYSE, BHP Billiton firmed $1.23 (3.19%) to US$39.78, Rio Tinto Plc added $3.42 (4.12%) to US$86.42, ResMed advanced 26 cents (0.68%) to US$38.36, Telstra Corporation improved 20 cents (1.67%) to US$12.20, Telecom Corporation of NZ dropped 18 cents (2.74%) to US$6.38 and Westpac climbed 14 cents (0.26%) to US$53.95.

In economic news, US producer prices fell last year for the first time since 2001, while the number of idled workers filing new claims for jobless benefits in the last week resumed an upward trend. One piece of news not as bad as feared, Read more »

From the New York Times entitled “Buy America. I Am”, here are the oracle’s wise words in full!

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Just to give an idea of what has happened, here are the falls over the past 15 days.

The DOW is down 25% in 15 days

The SP500 is down 28% in 16 days

The NASDAQ is down 29.5% in 15 days

In Australian, The XJO (ASX200) is down 20.6% in 15 days

“The world is at severe risk of a global systemic financial meltdown and a severe global depression,” warned Nouriel Roubini, a New York University economist known as “Dr Doom” for his foresight in predicting the crisis.

“The US and advanced economies’ financial systems are now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof,” he wrote in his newsletter.
Not the sort of stuff which instills confidence is it?