Update #2/ Week of January 18, 2010

Good Morning Everyone and Happy Wednesday! We have a theme today . . . it’s raining, it’s pouring . . . Wall Street got out of bed this morning, bumped its head and fell to the floor . . . there goes my analogy. The stock market, after hitting fresh 52-week highs yesterday, is dropping like a rock (or a rain drop if you prefer). The Dow is down almost 200 points, the NASDAQ’s off by over 40 points. We’ll have to remember the high from yesterday on the Dow of 10,725 . . . because that may be the high point for some time, I’m thinkin’. The credit markets are rallying today, but secondary marketing investors are slow to jump on board. Look for this trend to continue as rates are better again today . . . but we still have a ways to go.

Stock traders are responding to an announcement from China’s authorities who ordered their big banks to curb lending for the remainder of the month. This move is perceived to be a move toward a tightening of monetary policy in an effort to keep a lid on inflation and an overheating economic recovery. This tightening of monetary policy, interpreted in our country as the Fed raising interest rates, is not an option for us here in the US. The VERY fragile economic recovery (as some would call it) is not ready for an interest rate hike, and we are not really experiencing any inflationary fears at this time.

Even still, China’s Shanghai Composite (their Wall Street stock price measuring equivalent) dropped over 3% on the news, and the European bourses followed suit. As for our country’s economic news releases . . . the December PPI was up a mild .2% month over month. This follows a surprise 1.8% jump in November. Excluding food and energy, the Core Producer Price Index was flat. See what I’m saying about inflationary fears? Housing starts for December were down, coming in at an annualized rate of 557K, when analysts were anticipating 572K. Yet, building permits sky rocketed to 653K (annualized) in December from 589K in November. This figure bested expectations of 580K permits . . . a sign that builders are expecting sales to pick up toward the end of this year and into 2011.

Bank of America reported a $5 Billion loss for the 4th quarter of 2009 . . . nearly double it’s losses in the same quarter of 2008. Loan write offs are the culprit still, and with foreclosures on the rise, it seems like this will be the case for some time. These losses are in line with expectations, but give us a reality check as to just how bad things are still in the financial industry. How many banks could absorb a $5 BILLION losing quarter? Not many.

Oil prices, after making a sharp recovery yesterday, are lower today by 2.4% to $77.06 a barrel. Gold prices are falling . . . down by almost $30. I will be in the office all day today, staying dry – call me here or better yet email me if I can help you. If the rain isn’t too bad tomorrow, I may get out and go make some calls. I’ll let you know in the morning. Have a terrific Humpday!