For the second week in a row, the market experienced sharp drop off, which left the major indices all down around 6% year-to-date. The drag once again centered on last year’s worst performing sector - financials. By a quick calculation, the market cap of the top four US commercial banks combined is only $200 billion. Not long ago, the market cap of Citi alone is well above that. Without a healthy banking system that is willing to lend freely as before, it’s hard to see how the economy is going to recover quickly even with Obama’s massive stimulus package. I will be much surprised if there are no aggressive steps taken by the new administration towards the banking industry over the next several weeks.
Let’s take a look at the three key indicators: 1. VIX: closed at 46.11 compared to 51 yesterday; 2. The euro/yen cross: closed at 120 compared to 119 yesterday; 3. The TED spread: closed at 103 bps compared to 98 bps yesterday.
Financials and transportations were among the only major sectors that finished the session in red. Basic materials and consumer cyclical were outperforming. The CRB commodity index rebounded 1%. The US dollar was mixed against most major currencies. Treasuries dropped with the yield curve steepened. The three-month US LIBOR rose to 114 bps. The VIX index dropped 5 points. The market breath was positive on both NYSE and Nasdaq and the volume was neutral.

The market managed to post a small gain after falling as much as 2% earlier on. At its worst, the Dow briefly broke below the key 8000 level, which it lastly visited on Nov 21st. After gaining as much as 3.5% at the beginning of the year, the market has lost around 10% since then, which is a vivid reminder that we are still in a prolonged bear market. Other than fear of a deepening recession and hope of a strong recovery down the road, investors have to deal with a third element: confusion. Questions remain in at least following areas: 1). How the government is going to spend the rest of the $350 billion TARP fund and what kind of extra regulation that is going to be added to the original plan; 2). Obama’s economic team has just unveiled an $825 billion economic recovery bill with two-thirds spending and one-third tax cuts. Although it is widely expected that the Congress is going to pass the stimulus plan probably some time in February, there are still lots of uncertainties regarding the format and content of the bill between then and now; 3). Banks may need more capital to live through the current financial crisis, so do the “Big Three” auto makers. Where will the fund come from? How about other industries that are also struggling in the unprecedented economic slowdown? In short, the market will remain extremely volatile given so many uncertainties currently co-exist. 
Let’s take a look at the three key indicators: 1. VIX: closed at 51 compared to 49.14 yesterday. Earlier, it reached 55; 2. The euro/yen cross: closed at 119 compared to 119 yesterday; 3. The TED spread: closed at 98 bps compared to 97 bps yesterday.
Financials were among the only major sector that finished the session in red. Basic materials and technology were outperforming. The CRB commodity index was little changed. The US dollar was mixed against most major currencies. Treasuries rallied with the yield curve flattened. The three-month US LIBOR dropped to 108 bps. The VIX index rose 2 points. The market breath was positive on both NYSE and Nasdaq and the volume was heavier compared to previous sessions.

For the third time in the past four sessions, the market tumbled by more than 2%, extending the total year-to-date loss to more than 6.5% - the worst starting in 30 years. As the old saying “As January goes, so goes the year”, the next few weeks could be critical. There is nothing really new behind today’s broad drop: Almost all economic and earnings reports related to the final few months of 2008 are uniformly bad. As we mentioned earlier, the economy has most likely shrunk at a pace of 8 – 10% since December. Most economists, however, thought the overall GDP in 2009 would only decline by 1.5% with a sharp recovery happening in the second half. That consensus view can be in jeopardy if there is little sign of improvement towards the end of the first half.
Let’s take a look at the three key indicators: 1. VIX: closed at 49.14 compared to 43.27 yesterday. The VIX temporarily bottomed on Jan 6th while the market was peaking on the same day; 2. The euro/yen cross: closed at 117 compared to 119 yesterday; 3. The TED spread: closed at 97 bps compared to 99 bps yesterday.
All 10 major sectors finished the session lower led by financials, energies and basic materials. Defensive sectors, including utilities, consumer staple and healthcare, fared relatively better. The CRB commodity index tumbled 1.3%. The US dollar was higher against most major currencies. Treasuries rallied with the yield curve flattened. The three-month US LIBOR dropped to 108 bps. The VIX index rose 6 points. The market breath was negative on both NYSE and Nasdaq and the volume was neutral.

The market finished this Tuesday in a mixed fashion. The Dow was traded in a range of 150 points before finishing the session lower by 25 points while both Nasdaq and S&P 500 were up modestly. After the close yesterday, the Dow component Alcoa unofficially kicked off the latest earnings season. Most likely, the next three weeks will bring investors one of the worst earnings seasons in decades. Similar to the previous earnings seasons, it is more important to check companies forecast than what they have to say about the quarter just ending. Considering the great uncertainty in macro economy, I won’t be surprised if the majority of companies issue cautious views for this year. At the same time, the expectation has already been set to very low level and any positive guidance can trigger massive rallies.
Let’s take a look at the three key indicators: 1. VIX: closed at 43.27 compared to 45.84 yesterday; 2. The euro/yen cross: closed at 119 compared to 119 yesterday. The yen has gained 5% against the dollar and 7% against the euro over the past five sessions, indicating continuous unwinding in the yen carry trades; 3. The TED spread: closed at 99 bps compared to 110 bps yesterday. It is the first time in 5 months that the TED spread is back below 100 bps, showing great improvement in the credit market.
Most major sectors finished the session little changed. Consumer cyclical and transportation were among the biggest losers while energies gained most among major sectors. The CRB commodity index rose 0.7%. The US dollar was higher against most major currencies. Treasuries were mixed with the yield curve flattened. The three-month US LIBOR was closed at 109 bps. The VIX index dropped 2 points. The market breath was neutral on both NYSE and Nasdaq and the volume was neutral.

The market started the new week in a rather gloomy tone with the benchmark S&P 500 down more than 2%. Only seven trading sessions into 2009, the market has always dropped 3.7%, essentially giving up all gains since the Christmas Eve. Investors still try to determine whether the stimulus package will be able to offset the worsening economic reality. Obama’s tough stance towards Wall Street firms regarding how to use the remaining TARP problem has also weighed heavily on financials these days. Energies, meanwhile, were facing pressure as crude dropped back below $40 a barrel. Technologies, despite recent rebound in memory chip prices, were still trying to determine how the weakness in the broad economy would affect the spending, especially in the aftermath of last week’s warning from Intel. With the top three of the ten S&P sectors losing steams, it’s no doubt that the market is having trouble to add onto its 20% gain since Nov 20th.
Let’s take a look at the three key indicators plus the one credit indicator: 1. VIX: closed at 45.84 compared to 42.82 last Friday; 2. The euro/yen cross: closed at 119 compared to 122 last Friday; 3. The TED spread: closed at 110 bps compared to 120 last Friday; 4. The iTraxx basket spread: closed at 604 bps vs. 643 bps in the previous week. Conclusion: improving. It should be noted that most credit market indicators have gone back to pre-Lehman bankruptcy levels, which definitely is a positive sign worth paying attention to.
All 10 major sectors finished the session lower led by financials, energies and basic materials. Defensive sectors, including utilities, consumer staple and healthcare, fared relatively better. The CRB commodity index tumbled 4%. The US dollar was higher against most major currencies. Treasuries rallied with the yield curve flattened. The three-month US LIBOR dropped to 116 bps. The VIX index rose 3 points. The market breath was negative on both NYSE and Nasdaq and the volume continued to be on the light side.