Before The Bell: Housing Hints and Bank Margins
Investors are worried that banks will stop lending.
According to Bloomberg, contracts to buy previously owned homes likely declined in February. The National Association of Realtor's index of signed purchase agreements, also called pending home sales, is expected to fall 1% according to median forecasts. Among the reasons for the decline, lower property values and tighter lending standards are causing many buyers to delay purchases. These figures are considered leading indicators because they track the contract signings as opposed to purchase data, due later this month, which reflect closings that typically occur between one and two months later. For context, read Professor Kevin Depew's Five Things You Need To Know.
From the Bull Pen: Should the index come in above expectations, bulls can play the upside with the homebuilders ETF (XHB); near-term sell-stops can be set below the 200-DMA ($22.52).
From the Bear Cave: Should the numbers come in below, bears can play the downside in the Dow Jones Real Estate Index (IYR); buy-stops above $70.
Thin Margins Fueling Recession Fears
According to Bloomberg, banks with thin safety margins could exacerbate the effects of an economic downturn. Capital ratios for the largest institutions such as Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC) are at risk because of potential credit downgrades. Should these downgrades occur, these institutions would have to curtail lending or face high scrutiny from regulators because their levels would fall below regulatory benchmarks. Analysts are concerned that this cutoff in lending would increase the effects of a mild recession to a much more serious one. For another perspective, read Jeff Saut's Rally Time!
From the Bull Pen: Bulls can consider stocks in the pharma space such as Schering-Plough (SGP). Jeff Saut said even if all the sales from Zeitia and Vytorin go away, the stock is still worth in the mid-$20's. Sell-stops can be set below $16.
From the Bear Cave: Those bearish can play the downside in the retail ETF (RTH); buy-stops above the 200 DMA ($96.60).
For more ideas, see Minyanville's Spotlight Stocks.
Quick Check Around the World
Asian trading closed with the Hang Seng -1.09%, Nikkei -1.49%, Sensex -1.08%, Taiwan -0.65% and Shanghai +0.36%.
A quick look towards Europe finds the CAC -1.11%, DAX -1.37%, FTSE -1.02%
As of 8:40 AM EST, S&P futures are lower -6.7 points to 1365, and Nasdaq futures are down -13.5 points to 1852.
A Look At Commodities
Commodities are lower. Crude oil is down -0.63 to 108.45. Gold is lower -8.70 to 914.00. Silver is down -0.375 to 17.475, and copper is off -9.75 to 389.70.
The dollar index is higher +0.118 to 72.319.
On the Radar
10:00 Pending Homes Sales (m/m): -0.8% cons
10:00 IBD/TIPP Economic Optimism: 42.5 prev.
2:00 Minutes of March 18 FOMC Meeting
Click here for the full trading radar.
Good luck, Minyans! Have a great day!
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