Monday, April 20, 2009

Ugly day...

As I suspected investors have become increasingly wary of the bank "earnings" that keep rolling across the screen. Citigroup is down 30%+ since announcing earnings (although still up over 180% from the low), Bank of America fell 24% today after announcing more "earnings". There are two consistent themes moving two big sectors of the market:

1) The Banks - the profits that are being reported are almost all tied to trading activities at their investment arms. The banks took more risk in the first quarter and their trades mostly worked out. Traditional banking activities continue to weaken and the talk that the banks might need another $200 to $400 billion this year isn't helping their cause.

2) Tech - large technology companies seem to indicate that any "uptick" in demand (like Texas Instruments saw in some segments last quarter) was tied to inventory reductions and not an change in end user demand. This trend has been playing out across the tech sector in early reports and I think as people begin to realize that the green shoots Fed Chairman Bernanke sees might really be mold growing on last year's hay.

The momentum players had become exceedingly bullish last week which is usually a contrarian indicator that things may be about to change in the near-term. We'll see how things play out the remainder of the week.

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