FN: I've pointed out some of the divergences over the last few weeks that are mentioned in this Bloomberg article.
Banks Falling 23% Since May Foreshadow S&P 500 Slump (Update1): "Declines of more than 20 percent in regional banks and homebuilders and the failure of transportation companies to erase their annual loss may be signs the rally in the Standard & Poor’s 500 Index is about to fizzle.
Smaller lenders in the gauge lost 23 percent since climbing to a four-month peak on May 8, while builders tumbled 26 percent from May 4, when they reached the highest level since October. Concern that mortgage rates, credit losses and foreclosures are increasing spurred retreats in the companies forecast to be among the biggest beneficiaries of $12.8 trillion in government stimulus spending.
Slumps in bank stocks foreshadowed previous declines in the S&P 500 as investors focused on real-estate losses that curbed lending. Regional banks’ 51 percent plunge over 28 days starting Dec. 8 came a month before the S&P 500 began a 28 percent slump to a 12-year low of 676.53. The lenders’ all-time high in February 2007 occurred seven months before the S&P 500’s record.
FN: I pointed out three times that banks had stalled, rolled over and were threatening to break down in:
Financials: Charts Say "Decision Time",
Update1,
Update2.
"If housing and credit led us into all this, they will have to stabilize," said Mark Demos, a Minneapolis-based money manager at
Fifth Third Asset Management, which oversees $18.7 billion. "There’s a growing concern that they’re not out of the woods. Less bad does not equal good."
Speculation government spending will end the first global recession since World War II helped push up the S&P 500 by 15 percent since March 31, the biggest quarterly increase since 1998. Financial shares gained the most among the S&P 500’s 10 industry groups, rising 35 percent. Futures on the index rose 0.6 percent to 920.60 at 7:12 a.m. in New York today.
Stocks began to decline three weeks ago as economic reports spurred speculation the U.S. economy isn’t recovering fast enough to justify the S&P 500’s 36 percent advance since March 9.
