Why did financial stocks go up today (tues)?

Question

dead cat bounce?

Answer 1

the market goes up sometimes?

Yesterday's market movement does not have any of the makings to a dead cat bounce.

In addition to the FED comments, US Treasury Sec comments, and JPM comments, the key was that FRE and FNM stocks moved higher - a key indicator right now for the financial sector.

Oil prices fell sharply 2nd day in a row which was due to expiring cash contracts and moving to new forward contracts. The US Dollar (USD) also moved higher. All this helped the market move a bit higher.

Don't worry, the gains will be removed soon. We are in a Bear Market.

Most media thinks we are flirting with or barely in one as the S&P 500 sits near 20% decline. Welcome to the decline that started last November 2007. Bear Markets don't start with a 20% decline. There were signs of future trouble in June 2004 to 2006 when the FED began raising rates 17 times in 2 years.

We had plenty of notice of this disaster to come. Been talking about it since 2004, advising clients to get out of real estate by summer 2006, and short financials by spring 2007. Prev posts about it here too.

Oil would have prob gone lower for rest of the week, however oil up today on Iran's military missile testing.

http://www.reuters.com/article/topNews/i...

Answer 2

"Short Covering Rally"

Watch them as they approach their 200 day moving averages for another opportunity to short.

Answer 3

"The Federal Reserve may allow troubled banks to access emergency funds directly from the Fed through 2009, chairman Ben Bernanke said Tuesday at a mortgage lending forum"

The core issue with financials is liquidity, and capital ratios. Each time some news on one or the other surfaces it impacts the stocks greatly. For instance when an FI suggests that it has to raise capital to meet its ratios it dilutes current shareholders and drives the stock down. On the other hand each time an analyst or an insitution annouces that an institution has enough liquidity to meet its obligations the stock goes up. In this case since  the Fed is committing to continue providing liquidity to distressed institutions it reduces the risks for investors and therefore the stocks went up.