Bank Index

  • This column does not intend to highlight the action in the banking stocks every day — it’s just that they remain the most active, most volatile and most fraught with peril. Shares of major financial-services companies, from investment banks to commercial giants to regionals, lost ground in trading after Goldman Sachs analysts (fresh off their own firm’s reasonably solid earnings report) said the banking crisis isn’t close to over, and that “we believe that a broad based rally in bank shares is unlikely in coming months.” The firm reiterated its underweight stance on the regional banking industry, anticipating acceleration in credit losses and the need for an additional $65 billion in capital for companies in the sector. “The gist of it is, you don’t have a healthy economy if you don’t have healthy financials,” says Anthony Conroy, head trader at BNY Convergex. “There seems to be no end in sight right now.” Looking at a more specific name, shares of Regions Financial fell 7.2% after the company was downgraded by FBR analysts, who said the company will continue to see a rapid deterioration in credit.

    • Wal-Mart

  • It may be good for Wal-Mart Stores Inc. that the retailing colossus has elected to pare back capital expenditures while it is still enjoying healthy profits, even in an economic downturn. But that can’t be good news for the economy. The discount retailing giant saw its shares decline by 1% in trading today, after the company said it will reduce its planned store openings by more than one-third and said capital spending would fall to the low end of its expected range of $13.5 billion to $15.2 billion. Business is strong at Wal-Mart, as the company in May posted its largest rise in monthly same-store sales in two years. “It may be more profitable for shareholders, because don’t have to expand on all these capital outlays,” says Steve Goldman, market strategist at Weeden.
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    Gold topped out in March, and has not approached its old highs despite inflation worries.
  • Investors have become increasingly concerned about inflation, judging by the rising expectations for interest-rate increases, the steady rise in bond yields, and the economic data itself, which shows inflation increasing at a faster pace than the Federal Reserve would like. But one commodity hasn’t followed, and that’s gold — the one many still consider the ultimate inflation hedge. Gold peaked in late March after it pushed past the $1000 per troy ounce level, and has since slipped back, firmly in a range around $875 to $900 an ounce through most of June. Some of this may reflect seasonal factors — gold has had the tendency to weaken in the summer — but Brent Hoffman, commodity broker at MF Global, says the Fed’s efforts to try to jawbone the dollar higher and talk aggressively about fighting inflation may be holding back the gold bulls for now. However, if the Fed, as expected, leaves rates unchanged at its coming meeting, and inflation indicators worsen, gold might “perk up a little bit,” he says. “It might take until the end of July or well into August before it starts to trend higher, but my opinion is you’re going to see gold above $1100 in 2008.”

    • Goldman Sachs

  • What’s certainly become clear as this credit crunch has meandered along is that Goldman Sachs Group Inc. is no longer “the tell” when it comes to the financial stocks, having seemingly decoupled from its brethren. Headed into Tuesday action, shares had lost 3.3% since the beginning of August, roughly the beginning of the credit crisis. By contrast, Lehman Brothers is down 56%, Merrill Lynch is off by 48%, and Morgan Stanley is off by 34%. And of course, everyone knows what happened to Bear Stearns Cos.