The Financials Have Been Leading the Market
Mar 14, 2010
Posted by Jody Eisenman | Filed under Uncategorized
Although the market was mixed on Friday, the Dow Jones Industrial Average and the S and P 500 are both up about 8 per cent in the last five weeks. However, the real action has been in the financials. The financial ETF (XLF) has gone from 13.51 to 15.54. Here a list of some of the more prominent financial stocks:
Stock Symbol 2010 low Mar 14 close
Goldman Sachs GS 148.72 174.96
Morgan Stanley MS 26.16 29.91
Citicorp C 3.11 3.97
C actually traded as high as 4.20 on Friday before selling off in the afternoon.
One of the major reasons for this run up is that the major banks have been able to almost mint money under the scenario of very low interest rates. Simply put, they are able to borrow funds are almost zero (check the interest you’re getting on your checking and savings accounts) and lend it at a huge spread. Mortgages are running at 5-6%, and credit debt are running as high as 20%. Many of these banks have fully repaid their TARP money from the government.
In the broader market, I see at least two hurdles the market must overcome to trade higher. First, is the Fed meeting on Tuesday. Second, is that on a technical basis, is bouncing up against a potential double top in the 1150-1200 area. The comments from the Fed on Tuesday could go a long away to indicating whether we will break through or pull back.
