Markets all fell 2% today on slowing global growth and downgrades of the banks by Moody’s. Goldman Sachs (GS) added to the downward pressure releasing a note to short the S&P 500 until it falls 5% and could see 1,285 on the index. The S&P 500 has seen lots of resistance around the 1,348 level. After today we’ve given back most of the gains we have seen of recent.
After all is said and done this looks a lot like a capitulation moment in the market. If Goldman Sachs is right we could see another bloody day tomorrow. Although if the last two years are any guidance we’ll continue to see erratic volatile markets, and snap back rallies that can reverse the losses are just as likely.
So what can reverse the current market trend? Basically a coordinated central bank easing effort is needed. Although it seems the FED is going to have to stay on the sidelines and it will be up to the ECB, Bank of England, Bank of Japan, and the People’s Republic of China to lead the way.
Spain and Italy still remain sharply in focus and the problems in both those countries are getting deeper. Spanish banks need more money and someone other than Italy needs to start buying Italian debt.
Simply put debt problems can’t be fixed with further debt.
Today saw large correlation where all assets fell. Oil, gold, silver, copper, equities… everything was down. A number of global reports on various economies all came out worse than expected.
Interestingly one stock that was up on the day was Facebook (FB) which was up 0.73% to close at $31.83. If the stock gets knocked down sub $30 it could pose a good time to begin a position in the company.
If we do get another 2-3% down leg in the markets look to scoop up some miss-priced equities preferably high dividend yielders and companies that are in oversold territory, but just keep your seatbelt on cause the one thing investors can expect is a roller coaster in equity prices. Remember its hard to call a bottom so don’t get down on yourself if you don’t get your buys right on the dot.
The DOW (INDU) lost 250.82 points, the S&P 500 (SPX) lost 30.18 points, and the Nasdaq (COMP) lost 71.36 points.
Gold dropped $50.30 to close at $1,565.50.
Oil fell 3.99% to close at $78.20 a barrel which is an eight-month low.
The 10-Year Note rose pushing the yield down to 1.62%.
Banks with global capital operations received downgrades from Moody’s highlighting why D&D prefers regional banks and alternative financials like Visa (V).
Banks that got downgraded:
Morgan Stanley (MS) gets cut 2 levels was feared to be cut 3 levels
Bank of America (BAC) gets cut to BAA2
Citigroup (C ) cut to BAA2
Goldman Sachs (GS) cut to A3
Credit Suisse (CS) cut 3 levels
UBS (UBS) cut 2 levels was also feared to have been cut 3 levels
Barclays (BCS) cut to A3
JPMorgan (JPM) cut to A2 from AA3
BNP Paribas (BNPQY) cut to A2
HSBC (HBC) cut 1 level could have seen 2 levels
Societe Generale (GLE) cut to A2 from A1
Lloyds (LYG) cut by 1 notch
Deutsche Bank (DB) cut to A2
Only HSBC and Morgan Stanley got cut less than what Moody’s originally forecasted for the maximum downgrade.
Morgan Stanley up 3+% in after-hours trading after they only got the 2 notch cut and not the 3 notch cut.
Bank of America climbed 1% after the Moody’s review