For Banks, Concerns Continue

It wasn’t a donnybrook, but the seesawing action in the market was a lot of fun to watch yesterday, particularly since stocks fought off general apprehension and the sudden reversal of the price of crude oil.

Moreover, the financials were sinking like a rock but the broad market found a way to move into the plus column ahead of the closing bell. Of course, it helps to have hot sectors that have become default places to park money. Things have changed: Back in the day investors’ parked money in times of uncertainty in the most boring stocks in the market, like utilities, banks and blue chip names.

Utilities are still boring but have been on a magnificent run over the last five years. On the other hand, blue chips have been hit or miss and banks are the epicenter of concern these days, especially heading into the next round of earnings, as more and more admit they have no idea about risk exposure and losses. Yesterday it was Key Corp (KEY) and the day before it was UBS (UBS). Judging from the volume in some of the big losers in the space it would appear investors don’t think Lehman Brothers (LEH) has a clue either. 
 

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On a related note, Lehman was under pressure yesterday in part because of comments by hedge fund manager David Einhorn, who said the investment bank would need to raise another $6.0 billion to make it through the crisis. It must be noted that Mr. Einhorn’s fund, Greenlight Capital, has a large short position. In this day and age when everyone talks up his or her positions (read: book) investors are still reacting first--as if news flashes from independent resources--and asking questions much later.

Five-Year Utilities Chart

Click to enlarge

Lately Thursdays have been big sessions for investors keeping track of the employment situation but today initial jobless claims will probably take a backseat to petroleum inventories.

Yesterday crude was drifting on the logical assumption supplies are still piling up but then an economist from Morgan Stanley opined that crude could “easily” reach $150.00 a barrel. In addition to the inventory news investors are bracing for the next move by the Movement for the Emancipation of the Niger Delta, which promises to celebrate the first year anniversary of Nigeria’s president with car bombings and other forms of terror attacks. And I thought President Bush was unpopular.

Realistically none of the news out today should move the needle but this isn’t the real world anymore.