Dow 11,858 S&P500 1,279 Nasdaq 2,643 Gold 1,415 Oil 101
Another week, another set of issues in Japan (NYSE:EWZ) and Libya. Markets got slammed Monday through Wednesday, then recovered some ground as the NCAA Men’s Tournament started on Thursday with the blessing of St. Patrick.
Now, for the 15 reasons markets moved this week:
1) Japan’s (NYSE:EWJ) disaster has some investors and traders preparing for a stagnant market or worse. However, one of the great ironies of disasters is their economic generating properties. If there’s billions of dollars in damages, that’s how much economic activity will be needed to make Japan whole again. One major beneficiary in the Energy (NYSE:XLE) sector will be Solar (NYSE:TAN). With nuclear out of the cards for as long as the eye can see, companies such as First Solar (NASDAQ:FSLR) and GT Solar International (NASDAQ:SOLR) will be sprinting down the field with less competition. Other beneficiaries include Coal (NYSE:KOL), Natural Gas (NYSE:UNG), and — gasp –Oil (NYSE:USO). For a detailed list of the top companies in the Solar sector, check out This Sector is Shining Bright on a Down Day for Markets.
2) Transportation stocks got their teeth kicked in. The events in Japan and the Middle East are creating a lot of space for pessimism. One of the most sensitive sectors to a global slowdown would be transportation. Today, investors abandoned stocks such as CSX Corporation (NYSE:CSX), Kansas City Southern (NYSE:KSU), FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS). Don’t Miss: 3 Defensive ETFs to Hedge a Market Pullback.
3) Back to Japan. Big Japanese companies are losing access to manufacturing and shipping facilities. Toyota Motor (NYSE:TM) said it will lose $72 million a day as it lost 12 plants tied to its world-class lean operating platform. Other companies affected include Honda Motors (NYSE:HMC), Sony (NYSE:SNE), Hitachi, Ltd. (NYSE:HIT), Mitsubishi UFJ Financial Group Inc (NYSE:MTU), and Nissan Motor Co., Ltd. (NSANY).
1) Japan (NYSE:EWJ) is not over. Wall Street hates unknowns. So long as Japan continues to change on a day to day basis, a certain crop of investors will sell first and ask questions later. A look at charts of the Nikkei after the Great Hanshin earthquake in 1995 shows investors may be taking the right path as markets sold off for 5.5 months. But investors are overlooking the incredible economic catalyst of rebuilding one of the world’s great countries. You can sell General Electric (NYSE:GE) indiscriminately today, but you better believe they will be there under contract to rebuild. We’ll have to wait to see if markets settle down tomorrow or whether volatility (NYSE:VXX) is back.
2) Libya and Saudi Arabia are still unstable. Remember the Middle Eastern Crisis? It’s not over. Libya is engaged in heavy battle not far from one of the most important ports for Oil (NYSE:USO) transport. And Saudi Arabia still has problems with protests, rage, and Bahrain. Paradoxically, Oil got slid almost 3.5%. Investors even disposed of Oil & Gas giants like Exxon Mobil (NYSE:XOM) even amidst an upgrade by Goldman Sachs (NYSE:GS). Don’t Miss: 3 Defensive ETFs to Hedge a Market Pullback.
3) The Fed is holding rates steady. No surprise here. The FOMC is painted into a corner if economic activity takes a hit from higher gas prices and a slowdown in Japan. That could keep mortgage rates low enough for the real estate market (NYSE:IYR) to stabilize. Add a reasonable National Association of Home Builders report, and Home Building stocks (NYSE:XHB) such as Toll Brothers, Inc. (NYSE:TOL) and D.R. Horton, Inc. (NYSE:DHI) exploded to the upside.
1) Japan (NYSE:EWJ) is about as scary a situation as possible. Fukushima is the center of the world at this point, and reports on Japan’s wire indicate problems are not contained at the nuclear power plant. General Electric (NYSE:GE) has been dumped on fears of legal liability for the design and construction of the facility at issue, and you better believe the Japanese government will look for a scapegoat (and deep pockets) once the situation stabilizes and the blame game begins. The next BP (NYSE:BP)? Possibly. But there is still hope for a successful rebuild.
2) US producer prices are heating up and housing starts are drastically slowing down. Ironically, the best thing that could happen to the housing market is a slowdown in adding new supply. But don’t tell that to Homebuilders (NYSE:XHB) who got slammed today. And the last thing producers need is higher input costs as the economy remains as fragile as a Hollywood ego at the Oscars. Hey, let’s all focus on the NCAA Men’s Basketball Tournament and everything will seem fine … for a few days.
3) Apple (NASDAQ:AAPL) had its tiara dented. Ready for a complete shocker? The iPad2 is sold out, yet some Excel jockey over at JMP Securities (who??) downgraded Apple. On a more important note, tablet computing rival Motorola (NYSE:MMI) announced the new Xoom WiFi will compete at Apple’s price point and run on Google’s (NASDAQ:GOOG) Honeycomb OS. All this added up to a staggering 4.4% one day drop for Wall Street’s darling.
1) Japan (NYSE:EWJ) had their first positive development. However, the US did encourage citizens to leave Japan and Japanese residents in Tokyo have been fleeing in fear. Shorts covered their EWJ positions on the prospect of the nuclear crisis ending, but there wasn’t enough reason to attract serious buyers considering this disaster is far from over. However, there was relief for shares of Toyota Motors (NYSE:TM), Sony (NYSE:SNE), and Honda Motors (NYSE:HMC). Don’t Miss: The 10 Highest Risk Nuclear Power Plants in the US.
2) Widely watched economic indicators flashed positive signals. Weekly Initial Jobless claims are seen as a leading indicator for the larger BLS Unemployment number, so the 4% drop to 385,000 was cheered by Wall Street. Then FedEx (NYSE:FDX) announced earnings and offered strong comments about the global economy. Core CPI also came in tame, so it removed worries about inflation.
3) Oil (NYSE:USO) stormed back above $100 while Banks (NYSE:XLF) may get their groove back. Although the media has been obsessed with Japan (NYSE:EWJ), Libya is still amidst a horrible civil war and tensions continue to escalate in Bahrain. Oil (NYSE:USO) gushed a huge 3.57%. Then at the end of the day the WSJ reported “The Federal Reserve intends to inform some U.S. banks (NYSE:XLF) on Friday that they passed a new round of stress tests and are free to raise dividends for the first time since the financial crisis.” That’s great news for JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC).
1) The G7 intervened to save the Yen. Japan (NYSE:EWJ) needed a savior, and the G7 obliged. Let’s see if the weekend can bring some complacency to a situation that was upgraded to a Level 5 nuclear emergency. Don’t Miss: The 10 Highest Risk Nuclear Power Plants in the US.
2) Cisco (NASDAQ:CSCO) announced a dividend. Have you noticed Cisco’s (NASDAQ:CSCO) stock keeps making 52-week lows? Management has. So, today the tech giant declared their first-ever dividend to prevent Wall Street from dumping the stock. Cisco will be paying shareholders $0.06 per share. On another tech note, Apple (NASDAQ:AAPL) was subject to some bear raids on rumors that Steve Jobs will step down as CEO for health reasons. Maybe it’s simply Jon Bon Jovi getting revenge?
3) Banks (NYSE:XLF) are back. Remember when credit markets were frozen? Ah, time heals everything. Today the biggest banks (NYSE:XLF) announced dividends approved by the Federal Reserve after suspending dividends to accept TARP assistance. Read a complete breakdown of the action in this post “Banks to Shareholders: Here’s Your Dividends Back“.
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