US Markets Update, What's coming this week?

U.S Markets were closed on Monday, May 24th 2009, on account of Memorial Day. Due to the upcoming long weekend, markets saw low volumes last week and ended the uncertain week lower, with both Dow and S&P500 reporting weekly losses. Markets were weak also due to fresh warnings that S&P may downgrade the credit rating of U.S and U.K

Dow ended at 8277 down 5.69% for the week.

S&P500 ended at 887 down 1.8% for the week. 

Nasdaq ended at 1692, only index positive for the week.

This week we may see some initial trouble in world markets due to  North Korea's successful Nuclear Test. Other key economic data coming this week, which may influence the markets are: 

May 26, Tuesday: Consumer Confidence data for April will be released. 

May 27, Wednesday: Existing Home Sales data for April will be released.

May 28, Thursday: New Home Sales data for April will be released. 

May 29, Friday: The revised GDP forecast for Q1 will be released. This data is traditionally known to be a Market Mover. 

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US Markets Report, Bank Stress Test, Obama's 100 days of Presidency

U.S. Markets ended the week on the positive note with the Dow Jones Industrial Average closing at 8076:

Up 1.5% for the day, Down 0.68% for the week, Down 7.98% YTD

The Nasdaq or better known as Technology Index did fairly well in comparison closing at:

Up 2.55% for the day, Up 1.27% for the week, Up 7.44% YTD

The broad S&P500 Index closed at 866:

Up 1.68% for the day, Down 0.39% for the week, Down 4.10% YTD

This upcoming week there a lot of events which will influence the markets:

April 29: Marks the 100th day of President Obama's Presidency. A report card of sorts will be presented. Where market, american public as well as media from around the world will be scrutinizing the new president's policies and performance.

April 29: The GDP number or the rate of growth of american economy will be released on Wednesday.

April 29: The FED will give its Interest Rate decision

April 30: Personal Income and Spending information for the consumer for the month of April.

May 1: U.S. Auto makers report car sales for the month of April.

May 4: The Treasury Bank Stress Report is released.

There is far too much hype around this piece of information. It is not that a lot will be known at the end of day about the true health of each of the banks and it is well known that nearly all banks will get a clean report. But Wall Street has raised its expectations and there is much expectation which may lead to uncertainty and volatility in the market for this week. Banking stocks will be under the scanner and one can expect wild swings in the share prices.

How all this affects Indian Markets?

This is a short spread trading week with only 3 active trading days. There is expiry on wednesday the 29th which will be our last day of the week. Thursday and Friday markets will be closed. Elections results and speculations of who will form the next government will lead the market sentiment next week.

Over all I will be cautious in my moves this week.

-Tushar

stockezy.com

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Is economy close to bottoming out?

Did the stock markets smell it ahead of others? The Indian economy is close to bottoming out, says leading research outfit Nomura.

After four quarters of consecutive declines, the index which measures real M2 money supply, non-oil imports, equity returns, repo rate, real bank credit, industrial output and tourists rose in first quarter (Q1) of fiscal 2009-10 suggesting pick-up in economic activity.

Nomura uses a composite leading index (CLI) to identify turning points in the growth rate cycle. The index which had fallen from near 102 levels in September 2007 to 99, shows a breakout from current levels and seems to be rising upwards.

Since the CLI has a lead of two quarters over non-agricultural GDP growth rate-the pick up in Q1 suggests some pick-up in economic activity from the third quarter, feels Nomura economist Sonal Varma.

“Export and production data in several Asian countries (including India) have continued the improvement seen in previous months,” chief analyst Allan Von Mehren of Dankse Bank, Denmark’s largest bank.

Purchasing managers’ index for new orders show that after falling in mid-2008, the index for India has recovered significantly.

However, the recovery for the economy may not be very quick. Nomura says the decline in real GDP growth (the latest data available are Q4 of fiscal 2008-2009 ) will continue in first six months of 2009.

“We forecast real GDP growth to trough in the second quarter of FY09 at 4.5% year-on-year, led by inventory de-stocking and a further weakening of output in the services sector.”

But it maintains that overall, the turnaround in the leading index is positive . “We interpret it as a sign that the Indian economy is now close to bottoming out,” the Japanese outfit said.

Meanwhile, Citigroup economists feel that consumer price index could fall from 9.6% levels in Feb 09 to 5-6 % range soon as good monsoons could see new crop coming in. While latest inflation data pegs the WPI at 0.3% for the week ended 14 Mar, however the consumer price index (CPI) - released on a monthly basis - remained at neardouble-digit levels, up 9.6% in Februray 09.

“Given the base effect and new crop coming in, it is now consensus that normal monsoons will result in the CPI moderating to 5-6 % levels. Importantly , food articles comprise 14% of the wholesale price index but 57% of the CPI,” Citigroup economists Rohini Malkani and Anushka Shah said. - ET

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How to better the current economic situation in India

Economic Times in an article today reported that the based on the lower the expected Inflation numbers (0.44% ) the Reserve Bank of India must further cut its Repo, Reverse Repo and may be CRR rates to provide necessary stimulus to the economy. We all remember that RBI already has cut its rates to record minimum, the latest cut being announced on March 4th, which led to repo rate being brought down from 5.5 to 5%, and the reverse-repo down to 3.5% from 4%.

What do the rate cuts serve to achieve? - Encourage banks to ease consumer and business borrowing by offering lower lending rates.

Well this makes sense in theroy, but is the consumer ready to borrow? Is he or she ready to invest in a car or home or decide to increase their discretionary spending? I do not think so.

The consumer has retreated in to a shell, from where it is difficult to spend money. But why are they consumers so wary of spending? The underlying problem is the fear of uncertainty about tomorrow. If we take a back in to the past 6-8 months, the words slowdown and/or recession were being mocked at in India. The so-called pundits helped build a wall around peoples minds telling them that India will remain more or less unaffected by the ills of the credit crisis plaguing US and much of the major economies. This mis-information shrouded us for taking precaution and preparing ourselves for the upcoming misery. And when the truth dawned up on it was too late to take any evasive action and because it was so sudden the impact has been far more worse.

But who is to blame for all of this. The pundits, the media, the newspapers, TV programs? The onus lies on each and every one of us. If it is our hard earned money we are investing in the market, then we cannot blame someone else for our losses. We had to stay more informed and follow information without verifying and applying logic to it. In one way we cannot even trust the government. If you remember the speech in Feb-08 from P Chidambaram he was very confident of India continuing on the pace of 8-9% fiscal growth. Even 6 months in to 08 the finance ministry did not forewarn or raise flags of possible reactions to the credit crisis of US and Europe.

Today the condition is so bad that business big or small, individuals rich or poor, in one way or other are feeling the pinch. The Elections provide another reason for the consumer to push oneself further deep in the shell. The announcement of the Third Front, Mayawati being projected as the prime ministerial candidate, Congress and BJP not being strong enough to win a majority leads to many investors to believe that the economic stimulus, change in fiscal policy needed to fight the downturn may not be able to come till July-August time frame.

So should the RBI cut rates again? Will this have a big impact on the current state of the economy? Will bank easing borrowing rates encourage people to buy new homes or new cars?

It is the weekend, definitely something for all us to think about !

You can find me at Stockezy.com - or tushar@stockezy.com

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A video on real situation in US.

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A Video on the US Real Estate Downfall.

Here is a video I came across on youtube and would love to share with you guys . You can actually come to know whats happening in US Sub Prime Crises. How the home prices have fallen down beatting their assumption that home prices always go up. They have come down !

Happy Investing !

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US Auto Industry and the Bailout.

The Article appeared in Associated Press this Sunday.

“Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

"It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy."

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent the weakened U.S. auto industry from collapsing.

But the deal fails to happen.

Yesterday The Bush administration’s $14 billion automaker bailout plan and other alternatives lack the votes to pass the Senate, as lawmakers seek to beat a deadline to keep General Motors Corp. and Chrysler LLC from collapsing.

GM and Chrysler are in a race against the clock as they need federal aid to keep from running out of cash early next year. Pressure is mounting on GM as a small number of parts makers ask for payments in advance, people familiar with the matter said.

Effect -

Yesterday US markets tumbled. Asia opened weak and went down drastically. But Indian markets out perform the other Asian Markets.

Europe has opened weak, with GM stock opening at a 50% lower price than the last trade.

First it was believed that the effect would be short lived but the effect won’t get over fast as the conditions so prevail.

Video –

Martin Feldstein opposes the automaker bailout.

Video: Harvard economist Martin Feldstein says a managed bankruptcy is preferable to the current bailout proposal.

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US economy in recession .

The United States economy is now in recession, according to the National Bureau of Economic Research. It says that the recession began in the United States in December last year. As per the bureau the number of people in jobs has fallen every month this year.

Speaking at a forum for the leading American companies, the Fortune 500, the treasury secretary, Henry Paulson said that it is a challenging time that the right steps are taken to move out of recession.

The Governor of California has called an emergency meeting of the state legislature to discuss the state`s USD 11 billion deficit. He has already declared a state of emergency which will allow the legislature to change the existing budget.

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S&P maintains credit watch on Citigroup after govt bailout

Global credit rating agency Standard and Poor's has maintained a credit watch with negative implications on troubled financial giant Citigroup INC , after it received a multi-billion dollar rescue package from the US government. 

"We expect the support to reduce impact of deteriorating asset quality on the ratings and help to restore confidence in the company. As a result, we no longer believe that ratings would fall more than one notch by year-end," Standard and Poor's credit analyst Tanya Azarchs said. 

"However, we would provide our stand-alone assessment of creditworthiness, which excludes government support. This assessment could be lower than the issuer credit rating, to reflect the potential for substantial asset-quality deterioration," Azarchs added. 

S&P maintained credit watch with negative implications on the counterparty credit rating of 'AA-' on Citigroup Inc. 'AA-' refers to an investment grade rating but involving a higher degree of long-term risk. 

"The guarantee package on 306 billion dollar of assets provided by the US government as well the equity investment, are, in our view, a clear message of support for this and other systematically important banks, the agency said. 

"In our view, the immediate package is sufficient to limit the downside risk represented by the troubled assets. It should also remove the causes of a crisis of confidence that could have overtaken the organisation," it said. 

The US government is investing in $20 billion of preferred stock that is redeemable at Citigroup's option for common stock or cash.

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Indian market outlook and daytrading ideas for 25th Nov.

Indian Markets ended flat yesterday.

US markets yesterday rallied as US Gov has plans to rescue Citigroup INC.

Europe was up at an average of 10%.

So expect Indian markets to rallie sure shot.

More over Asia is trading positive.

Today Sensex is bonded to cross 9000 Mark.

Support for Sensex is at 8700 and 8450 and resistance for upmove is at 9350 and 9600

and Support for NIFTY is at 2650 and resistance for upmove is at 2860 and 3100.

Day trading Ideas.

ITC

Buy above 173 for targets of 174.85 and 175.90

Sell below 169 for targets of 167.85 and 167.10

Punj Lloyd

Buy above 143 for targets of 146 and 148.15

Sell below 140 for targets of 138 and 136

RNRL

Buy above 41.90 for targets of 42.50 and 43.15

Sell below 40.50 for targets of 39.40 and 98.60

Suzlon

Buy above 48 for targets of 49.50 and 51.50

Sell below 45 for targets of 43.50 and 42

Happy Investing.

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Barack Obama wins historic US election and will he be able to change the American Economy.

"Barack Obama wins the 44th US elections and is elected as a new President of US after defeating McCain."
"He is the first Black President for US"
"The win by Mr Obama, son of a black father from Kenya and white mother from Kansas, marked a milestone in US history. It came 45 years after the height of the civil rights movement led by Martin Luther King."

Over midnight the US residents gather outside White House to cheer him.
He is in talks to improve the financial crises on the Wall Street and has also saluted the US Army force which is in Iraq as well as in Afghanistan.
Americans are betting on him to change their country forever and give it a new direction.
Mr Obama has promised to restore US leadership in the world by working closely with foreign allies and dropping some of the policies that made Mr Bush an unpopular leader at home and abroad.

How will the change in President affect the US economy ? (Both Positive and Negative)
A - New President brings new hopes .
He brings new policies and reforms.
His style of leadership.
Welfare towards home country and other countries too.

How will India benefit ?
India and US share a good relationship. He will bring a change.
There are various types of economical cycles and their structure. In Cyclical structure every country is depended on each other say for example if US goes in recession the countries exporting to US may also follow in its route.
The conditions at present are not good due to subprime crises. When the conditions in US change Indian conditions are bound to change.
Thus the cyclical economic structure will ensure a positive move in Indian when the economic condition in US change. This can happen over a period of time.
I congratulate Barak Obama.
Cheers.
Picture Source - Hollywoodtoday.net

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