Wall Street seeks anchor in ‘uncharted waters’
The arrival of March is unlikely to bring much relief to a stock market battered by bad news throughout February.
Trepidation is more like it after a month that saw the major indexes fall to their lowest levels in 12 years. The Dow Jones industrial average fell for the sixth straight month and is now worth less than half its record high of 14,164.53. All because no one has a clue about when the economy will begin to pull out of recession.
“We’re in uncharted waters right now,” said Joe Arnold, investment advisor at Dawson Wealth Management in Cleveland. “It’s like you have Vaseline on your fingers. People can’t quite grasp it.”
President Obama last week outlined a budget that called for spending as much as $750 billion more for additional financial industry rescue efforts on top of the $700 billion Congress authorized last fall.
The government also confirmed it would buy preferred shares from banks that can be converted into common shares, and the Treasury Department began a “stress test” on the country’s biggest banks to determine which might need more capital if economic conditions worsened. The test will use two economic scenarios to measure banks’ health, and the process is expected to be done by the end of April.
The government also agreed to boost its stake in beleaguered Citigroup to as much as 36% by converting the preferred stock it already holds to common stock. Although the conversion will dilute shareholders’ stakes, a wider equity base means better protection against future losses.
But investors are still worried that other banks including Bank of America Corp. are teetering on the brink of failure, and that their investments could take a major hit if the government is forced to orchestrate another deal like the one with Citigroup.
“The underlying macro fundamentals are all still intact,” said Scott Valentin, managing director at Friedman, Billings, Ramsey & Co. “You still have a very difficult operating environment.”
And a lending climate that is still far from what the economy needs to recover.
“Credit is the backbone of the economy,” he said.
A spate of economic readings is expected this week that investors will weed through for any signs of hope. Perhaps the most anticipated reports are the Federal Reserve’s beige book, its assessment of the economy by region, due Wednesday, and the Labor Department’s February employment report, due Friday.
Other reports of note include the Institute for Supply Management’s reports on the manufacturing and service sector during February; the Commerce Department’s reports on personal income and spending as well as construction spending; and the Commerce Department’s report on January factory orders.
On Tuesday, major automakers will report U.S. sales for February, while retailers will report February sales Thursday. Also scheduled is the National Assn. of Realtors’ January report on pending home sales, due Tuesday.
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At a glance
TODAY
The Institute for Supply Management releases its manufacturing index for February.
The Commerce Department releases reports on January personal income and spending and construction spending.
Atty. Gen. Eric Holder meets with Switzerland’s justice minister, Eveline Widmer-Schlumpf, to discuss U.S. allegations that Switzerland’s biggest bank helped Americans evade taxes.
Quarterly financial results are expected from American International Group, Dish Network, Live Nation and TiVo.
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TUESDAY
Major carmakers report U.S. auto sales for February.
National Assn. of Realtors releases pending home sales index for January.
Treasury Secretary Timothy F. Geithner testifies before the House Ways and Means Committee on the president’s budget proposal.
House Judiciary subcommittee holds hearing on Circuit City’s bankruptcy filing.
Senate Budget Committee holds hearing on economic and budget challenges.
Senate Banking, Housing and Urban Affairs Committee holds hearing on consumer protections in financial services.
House Budget Committee holds hearing on the president’s budget proposal.
Quarterly financial results are expected from AutoZone and MBIA.
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WEDNESDAY
The Institute for Supply Management releases its non-manufacturing index for February.
The Federal Reserve releases its so-called beige book report
on the nation’s economy by region.
Senate Homeland Security and Governmental Affairs Committee holds hearing on the failure of financial watchdogs.
Senate Budget Committee holds hearing on the president’s budget proposal.
House Ways and Means Committee holds hearing on the president’s budget proposal.
Quarterly financial results are expected from BJ’s Wholesale Club, Toll Bros. and Costco Wholesale.
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THURSDAY
Labor Department releases reports on weekly jobless benefit claims and on revised fourth-quarter productivity.
Commerce Department releases factory orders for January.
Mortgage finance company Freddie Mac releases weekly mortgage rates.
Treasury’s Geithner testifies before the House Budget Committee on the president’s budget proposal.
Senate Banking, Housing and Urban Affairs Committee holds hearing on American International Group.
Retailers report sales results.
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FRIDAY
Labor Department releases jobless data for February.
Federal Reserve releases consumer credit data for January.
