A negative tone was established in the market this morning when the
pending home sales report was released. Home sales fell 1.9% in
February, erasing any hope that the end of the housing market decline
had been reached. This sent the home builders index (XHB) heading down
in today’s trading. Then in the afternoon we got the FOMC minutes, and
for the first time, the FOMC committee members openly discussed
recession as being a very real possibility. Of course we knew already
that a recession was on the table, but the admission by the FOMC added
to the weakness of the markets today. Mostly because the Fed members
kept avoiding the recession word over the past month every time they
traveled the Country and spoke. And here they were discussing it as a
real thing now.
The full text of the FOMC minutes can be found here —-> FOMC MINUTES
The volume in the market remained very light once again. This has
become a ‘waiting game’ to see who is going to blink first. After
hours today brought us the biggest news of the day. United Parcel
Service (UPS) issued an earnings warning.
UPS: CUTS Q1 GUIDANCE TO $0.86-$0.87 (HAD SEEN $0.94-$0.98) V $0.94E
That’s all that was issued. We don’t know anything about forward
guidance or anything else yet, that will come when they issue their
earnings on April 23rd. But an earnings warning from the nations
largest package carrier is not a good sign for the economy. In many
aspects, it confirms what we already know to be happening to the
economy, but for many investors they need more proof. The UPS warning
was a substantial shot of proof. It will be very interesting to see how
the market plays this news tomorrow.
Also after the market close was an ‘unconfirmed’ report that
Citigroup (C) may be (or already has) selling up to $12 Billion of
their loans to private equity firms. The report goes on to say that it
was 90 cents on the dollar of what they were currently being valued at.
We need to see the facts so we can better understand this, but I have a
feeling it will not be good in the long term for Citigroup. Taking a
10% loss on loans says they were desperate to unload them. Did they
need the cash that badly? Could it be that they needed more cash and
were unable to get any more sovereign wealth funds to make another
investment in the company. All speculation at this point, but still odd
how this is unfolding.
Four days now the markets have been sitting on the edge of the
cliff, making very little movement. As Lisa stated earlier today shorts
are unwilling to cover, and buyers are just not there. With such little
movement in the major indices it makes it difficult to gauge the
direction of the markets.
