Stock Market Summary - May 9th 2008

We will have the full wrap up with some new charts over the weekend. The day ended down with some additional indicators showing a weakening economy. The credit crisis was thought to be over, AIG showed us it is not. When Bear Stearns imploded in March everybody forgot about the economy, thinking everything was all about credit problems only. But, retail sales clearly show a significant trend towards bulk purchasing, discount store buying for groceries, and rapidly rising credit card debt. Signs of a consumer that is stressed to the limits.

Now we add the increasing oil costs and still unabated rising food costs and this only gets worse. Those who have thought that the 2nd quarter of this year was going to be a rebound in the economy will be surprised that it will very likely turn out to be worse than the 1st quarter. And stocks have been trading on the premise that the 2nd quarter things would improve, guess again. The market is starting to think about this and as we are seeing the money slowly being taken back out.

We will have more over the weekend..

Tonight after the close we got this off the wire…

FDIC CLOSES ANB FINANCIAL; BANK IN ARKANSAS WITH $2B IN ASSETS, $1.8B IN DEPOSITS
- http -> www.anbfinancial.com Banks states itself as AR’s first internet bank - Assets will be transferred to Pulaski Bank & Trust as of Monday.
- FDIC states it will need to expense about $215M in Federal Insurance costs to depositors (12% of total deposits) This is the third bank shut by the FDIC in 2008.

Stock Market Close

What started as a down day, ended as a down day.  A couple of spikes today, but they were brought right back down. Volume is still quite low on a six-month average.  Daytrading, while watching your back, remains my mantra.  The US dollar remains in trouble and gold isn’t giving up it’s gain today. 

FDX (Federal Express) Cuts Q4 forecast:

  DUE TO ENERGY COSTS:  NOW SEES Q4 EPS $1.45-$1.50 V $1.69E  (PRIOR GUIDANCE RANGE HAD BEEN $1.60-$1.80)
- FDX says fuel costs up 7% since its previous forecast

That’s quite a cut in guidance.  I really don’t think rising fuel costs are going to abate any time soon.  The proposals coming out of the government are not going to be effective.  Let’s hope they will finally deal with this "oil" problem before it’s too late.

Market Update

Things are looking pretty weak here.  "Hanky-Bernanke" better come out with some announcement soon.  Perhaps, "A chicken in every pot, an iPod in every hand, free ice cream and candy, pony rides, AND we’ll pay your mortgage for 10 years."  Yep, that could do it.

STIFEL NICOLAUS CUTS AIG TO HOLD FROM BUY (TIMING UNCERTAIN)
- Stifel cites "massive uncertainty" surrounding the future performance of the company both on an
  operational and investment basis

No offense Stifel Nicolaus, but didn’t you think last quarter was more than a first clue.

NEW JERSEY REPORTS APRIL CASINO REVENUES $365.5M, -7.9% Y/Y
- TRMP Marina, Plaza and Taj Mahal $74.1M v $80.2M y/y

Well, I’m not surprised.  All the gamblers are on Wall Street.

Market Update 1:30pm ET

Citi’s CEO is saying the company is "well capitalized" and they are only raising capital because there is opportunity to do so.  He says that in this environment having excess capital is a strength.  The CFO says they intend to wind down assets in the mortgage portfolio and reduce exposure in banking and fixed income.  Also, says they will increase exposure in other areas, including commodities (nothing like being late to the party).  The next few quarters are unlikely to be in line with averages and they expect an increase in credit costs.  He also says:

- Will be able to wind down assets from $500B to less than $100B in two or three years, but process may take longer.
- Over the next years will generate $40B extra capital.

The CEO says the company is ‘long the world, and heavily overweight emerging markets’.  I’m not even going to pretend I understand this blather!

ED (ConEd) files two proposals to raise power rates in New York state .  Lovely.  First, maybe they should figure out how to keep the power on!
- first plan seeks $654M in added revenue, alternative proposal would increase revenue by $567M

The dollar continues to weaken and so do the indices.  Should be an interesting afternoon.

Pre-Market Update May 9,2008

MAR US TRADE BALANCE: -$58.2 V -$61.0BE
- Prior revised from -$62.3B to -$61.7
- Imports declining 2.9% M/M, the most since Dec 2001, to $206.7B
- Exports fell 1.7% M/M to $148.5B

So far, in AIG’s Conference Call, the CEO says they raised the dividend as an expression of their view of long term strength in the company.  He says the credit downgrades are manageable.  They are filing for a rate increase for the US auto insurance business.  Life insurance is performing well outside of the US.  They expect mortgage insurance and loan units to be affected into 2009 by credit market and housing weakness.

Futures are down, along with the dollar.  European markets are down, as well.