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Top Finance Co-op Employer Event Recap

rl323 — Fri, 05 Mar 2010 15:28:58 +0000

This past Tuesday, March 2, the Drexel Finance Association (DFA), Drexel Investment Group (DIG) and Undergraduate Career Services hosted its annual Top Finance Co-op Employer Event.

Representatives from Susquehanna International Group (SIG), Goldman Sachs Private Wealth Management*, PENN Capital Management, CIGNA, New York Life, and Northwestern Mutual presented on the benefits of their company’s respective Co-op program. For the latter part of the evening, students were invited to network and learn more about these great opportunities.

Attendance was extremely high, so on behalf of all the sponsoring organizations, we hope you enjoyed the event and continue to take advantage of the College’s great networking and recruiting resources.

*In attendance, but did not present on behalf of the company–networking only

DIG AP Presents: The Weekly View

DIGEXEC — Mon, 25 Jan 2010 12:55:25 +0000

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Click link above to read this week’s edition of The Weekly View

The Recap by Kevin Maloney
Equity markets reacted strongly this week to negative fundamental data, with the NASDAQ falling 4.83%, DOW losing 4.19%, and the S&P 500 losing 4.65% on the week. Two major events catalyzed the downturn of last week, beginning with the tightening of the usually aggressive lending policies in China Wednesday, and news of proposed legislation by President Obama to restrict investments that banks can make Thursday. (WSJ) The news regarding potential changes in American banking policy led the way down for US equity markets early Thursday, with NASDAQ leading the charge with a loss of 1.4% on the way, making Thursday the largest single day drop since last October. Friday would bring no remorse, as JP Morgan (JPM) led the way with a slide of 9% between Thursdays open and Fridays close for a consecutive punch to both Financials and the rest of the broad equity markets.

The CRB Commodity Index lost 2.1% on the week, adding onto what has been a 5.3% slide in 2 weeks, with Oil leading the way down at 4.4% loss on the week. Precious metals also lost value, with gold closing the week’s pit session at $1089.70 per ounce, down 2.5% on the week. The US Dollar in turn continued to gain strength specifically from expectations of Chinese restrictive monetary supply, as seen particularly on the EUR/USD spot price, dropping from $1.4386 and ending the session at $1.4163 (indicating USD strength). The USD did show signs of weakness around mid-week after proposed legislation came out from the Obama Administration that would require harsher regulation and restrictions on banks, specifically disallowing them from investing in hedge funds or private equity funds.(Reuters)(WSJ) Uncertainty around this proposal led to an increase in the EUR/USD (signifying USD weakness) as well as increases for the Japanese YEN, which typically benefits from such uncertainty.(Reuters)

The name of the game as read in last week’s recap continues to be “Uncertainty.” Since March 2009, equity markets in particular have been on apparent cruise control, continuing along their upward path in spite of negative fundamental reports on underlying value. The markets provide a big picture view of our dynamic economic environment based on future expectations, regardless of whether those expectations are 10 years, 10 months, or 10 minutes out.

In any case, one circumstance that one can always rely on for palpable, if not immediate consequences to Commodity, FOREX, and Equity Prices is Government Action. Look for its continued effect as Federal Reserve Chairman Ben Bernanke’s nomination for 2nd term takes place, the same week as key politicians stated they would not support his nomination. As for the potential effect this could have on the markets, Warren Buffett quipped “Just tell me a day ahead of time, so I can sell some stocks.” (The Washington Times)

The Outlook by Steve Romasko
For this Week: Expect more of the same

This week has the potential to resemble that of last week—uncertainty will lead the market as investors (i) look toward revenue growth in this week’s earnings for an indication on the health of the consumer, (ii) assess economic data (particularly advanced GDP numbers, unemployment, and the FOMC’s rate decision), and (iii) continue to weigh the implications of the Obama Administration’s planned regulation on financial institutions.

While the bulk of last week’s earnings came in better than expected with respect to the bottom line, Wall Street was less impressed with top-line figures (see JP Morgan, Citigroup, Morgan Stanley, and Wells Fargo for specific examples) and reacted to the reports by initiating a broad-based selloff. The selling pressure started on Wednesday, despite a major victory for the markets on Tuesday after Republican Scott Brown unexpectedly won the election in Massachusetts; simultaneously breaking the filibuster for Democrats in the Senate and bringing healthcare legislation to a halt. Following the election news, President Obama’s scathing announcement on regulatory reform coupled with earnings from Bank of America, Morgan Stanley, and Wells Fargo, and the uncertainty over the reappointment of Ben Bernanke as Fed Chairman caused investors to reassess their appetite for risk–selling pressure only accelerated through the end of the week, sending the S&P 500 down 3.9%, recording its worst week since October 2009. The index is now down 2.1% YTD.

This week will be even more earnings-intensive than last week as reports are due from a variety of major companies spanning all sectors. Pay particular attention to Apple and Halliburton (Monday); Delta, DuPont, EMC, Johnson & Johnson, Sun Microsystems, U.S. Steel, Verizon and Yahoo (Tuesday); BlackRock, Boeing, Caterpillar, ConocoPhillips, Qualcomm, UAL and United Technologies (Wednesday); AT&T, Altria, Amazon.com, Bristol-Myers Squibb, CA, Colgate-Palmolive, Eli Lilly, Ford, JetBlue, Lockheed Martin, Microsoft, Procter & Gamble, Raytheon, 3M and US Airways (Thursday); and Chevron, Honeywell and Mattel (Friday).

Emphasis will also be placed on several key economic reports as well as the Federal Open Market Committees’ statement coming on Wednesday detailing the Fed’s strategy going forward. Investors will be looking for any implications on the timing of interest rates. Also, the World Economic Forum will get underway on Wednesday, taking place in Davos, Switzerland.

DIG AP Presents: The Weekly View

DIGEXEC — Tue, 19 Jan 2010 12:26:06 +0000

click link to read this week’s The Weekly View

The Recap by Kevin Maloney
After 4 weeks of posting weekly gains, equity markets posted their first week of losses as traders and investors took their first short term profits of 2010 with the NASDAQ losing 1.26%, S&P500 dropping 0.78%, and large caps outperforming as the Dow drifted down 0.08%. The sell off may have been overdue, as the markets have continued to rally against reports of further fundamental instability. Initial losses last week began early Tuesday, with the S&P 500 dipping to $1132.50 before recovering in full force Wednesday, however Friday would prove to be a difficult day to digest. JP Morgan led the way down for Financials, missing projected revenues by $1.06 billion during earnings calls that led to the domino effect of losses early Friday morning. The Bureau of Labor issued its monthly report the Friday beforehand (Jan.8), tallying 85,000 jobs lost in the month of December, keeping overall unemployment steady at 10%. Retail Sales also fell for the month of December, falling off 0.3% during the holiday season as fundamentals continue their inverse relationship to equity market performance.

The US Dollar posted another week of spectacular gains against the Euro as one short term sign of recovery during the months of November and December continued last week. The EUR/USD fell from $1.4450 to $1.4380 during the week (downward move indicating USD strength, although the dollar’s value still has a long way to retrace its losses of the past year. As expected with positive movement in the dollar, energy and precious metals fell, with oil prices dropping from $82 a barrel to a low of $77.50 on Friday, and gold falling from $1152 to $1130 during the week’s sessions.

Uncertainty continues to pervade the individual investor’s sentiment, personified by calls for new bull and bear markets penned on numerous blogs and other news media. The need for palpable evidence of recovery may still be keeping a large amount of investment capital on the sidelines. From a macro perspective, major banks continue to hoard cash or cash equivalents far above the Fed’s Required Reserve Ratio for their own protection from market downturn, but simultaneously prevent a strong step forward by keeping potential loans away from customers and businesses to invest. The story of the past week continues to be “Mixed Messages.”
Calendar

The Outlook by Steve Romasko
The Story this Earnings Season: Top Line Growth & the Consumer
This season, look for analysts to be concerned with revenue growth rather than overall results. During the height of the crisis investors were satisfied with bottom-line earnings performance, as their main concern was company survival and sustainability, and less so about market growth. Now that we’re under a new year, have a fresh performance start, and it is evident that a crisis has been averted; investors are becoming more critical of company performance. This was manifested in last week’s results, particularly JP Morgan (JPM), who quadrupled analysts’ estimates, earning 10x higher than a year ago with respect to the bottom line, but missed on revenue projects of $26.81 billion, reporting actual revenue of $25.2 billion. JPM’s results became the driving catalyst in Friday’s market, sending the S&P 500 and its own stock down 1.08%, and 2.26% respectively, snapping a 7-day winning streak for the broad index. Digging deeper into the results, JP Morgan’s earnings were rather dismal; almost all of their performance was attributable to market appreciation, while the lagging areas of their earnings primarily came from consumer-related segments. Jamie Dimon’s comments added to the negative sentiment of the earnings by citing that high unemployment, home price pressures, and a still-high level of loan loss provisioning are weighing on the business.
An argument can be made that the pullback in equities on Friday was a necessary correction after 7 days of gains, and was not entirely a consequence of the JP Morgan results. While the argument holds some truth, one would be ignorant to dismiss the results as mere noise. In my opinion, the significance on revenues this earnings season can either be validated or discredited Tuesday morning with results coming from Citigroup (C). Citigroup is a diversified bank that is known to have significant exposure to the consumer. As was the case with JP Morgan, analysts are going to be concerned with revenue growth and if Citi misses on the revenue line I would expect a prolonged market selloff. If the results show increased delinquency rates with regard to consumer products it can be inferred that if consumers aren’t paying down overdue debt balances they are most likely not making discretionary purchases. From that point, if consumers aren’t making discretionary purchases, then, it can be assumed that businesses are not making sales, and it is likely that they are not hiring. A lack of sales, leads to reduced overall earnings and subsequently lower growth. While it appears that unemployment has peaked at 10.2%, it seems plausible that job creation will be anemic until consumer confidence returns. A confident consumer leads to spending which ultimately greases the self-feeding mechanism and eventually leads to job growth. Remember, 70% of the GDP equation is attributable to the consumer. If Citigroup’s earnings show a distressed, frugal, consumer it is likely that the rest of the market will exhibit stress and reflect stagnant growth.

Also upcoming this week are several economic reports, particularly PPI data for December, the Conference Board’s index of leading economic indicators for December, as well as the Philadelphia Fed’s manufacturing index for January. In government, the House Financial Services Committee will conduct a hearing about compensation in the financial industry on Friday.

DIG presents: A Panel Discussion on Risk Management

DIGEXEC — Thu, 07 Jan 2010 20:48:54 +0000

DIG Presents: Options & Market Making with Group 1 Trading

DIGEXEC — Tue, 10 Nov 2009 04:44:55 +0000

Please join the Drexel Investment Group and the LeBow College of Business on Monday, November 16 at 6:00pm in Matheson 109 for a night with Group One Trading.

Group One Trading will be giving a presentation on their firm, how they trade on the Philadelphia Stock Exchange, and what it takes to be a bona fide options trader and market maker.

Group One will also discuss job opportunities available for both co-op and full time employment. There will be a short Q&A session and refreshments will be served. Resumes will be accepted.

ABOUT GROUP ONE TRADING: for more information on Group One Trading please visit www.group1.com

ABOUT THE DREXEL INVESTMENT GROUP: The Drexel Investment Group is a student-run organization geared towards making information about investing more readily available to the undergraduate students at Drexel University. We promote an active and motivated atmosphere that generally equates to success in the finance industry. We hope to broaden our financial knowledge through guest speakers, networking outings, tournament events, and internal programs that apply industry-standard methods and materials that will best prepare us for a career in the field.

Food & refreshments will be provided at the event. Group One Trading is a Drexel Co-op Employer.

For more information and future events, search for us on Facebook under “Drexel Investment Group” and visit our website lebow.drexel.edu/drexelinvestmentgroup

Interested in joining DIG? Signing up is easy! Email digexec@gmail.com with “Sign Me Up!” in the subject-line to receive event updates, market analysis and general information on the Drexel Investment Group.

Valuation and its Impact on Diversification

DIGEXEC — Fri, 25 Sep 2009 01:34:05 +0000

Please join the Drexel Investment Group on Wednesday, September 30 at 6:30pm in Matheson 109 for a presentation by Hirtle, Callaghan & Co. on the outcome of the financial crisis and its effect on portfolio allocations and strategies for institutional funds.

Speaker: J. Paul Dokas, CFA

Mr. Dokas is the Vice President of Investment Planning and Analysis at Hirtle, Callaghan & Company. Prior to his position at Hirtle Callaghan, he was the Senior Vice President and Senior Portfolio Manager at Delaware Investments where he managed $8 billion in investments. Previous to that, Mr. Dokas was the Director for Trust Investment at Bell Atlantic. He received his B.A. from Loyola College in 1983 and his M.B.A. from the University of Maryland in 1985. Mr. Dokas is a CFA charter holder and a member of Hirtle Callaghan’s Investment Policy Committee.

ABOUT HIRTLE CALLAGHAN & CO:
With $17 billion under direct supervision and recognition as a Top 50 Wealth Manager, Hirtle Callaghan is one of America’s fastest growing investment firms. Hirtle Callaghan delivers a unique, top-down approach to asset management that emphasizes the significance of strategy and risk management at every step of the investment process. Now in its 21st year, Hirtle Callaghan sets a higher standard of service to the investment market by offering complete objectivity, as well as the insight and discipline of a professional Chief Investment Officer, supported by a fully staffed investment department – an approach previously available to only the largest, multi-billion dollar family groups and institutions.

Food & Refreshment will be provided at the event. Hirtle Callaghan is a Drexel Co-op Employer.

For more information and future events, search for us on Facebook under “Drexel Investment Group” and visit our website lebow.drexel.edu/drexelinvestmentgroup

DIG Presents: The Weekly View 5-4-09

DIGEXEC — Tue, 05 May 2009 14:04:37 +0000

Outlook for the week of 5-4-09

By Ryan Wheeler

Will this Rally Hold Ground? I say “No”

When I look at the equity market and attempt to predict short-term movements, I look at a few different factors. I start by looking at the expected news flow in the coming week. The relative strength of the news (its ability to move the market) will usually give me a decent idea about whether the following week is primed for volatility. Next, I look at the past few weeks’ news, the strength of that information and how the market reacted to it. This tells me the mood of investors and how they are generally assessing the information. The last thing I look at is the bond market; specifically intermediate term Treasuries. I generally believe that monitoring relative movements of the bond market compared to equity indices can tell you a lot about what direction money is flowing (bonds to stocks or stocks to bonds).

Given this set of criteria, let’s look at next week’s market. To start, we have one set of news that will be very important in the eyes of the market; the “stress test” results. This release has the ability to swing the market in either direction quickly if it is good or bad enough. This type of news could be comparable to the days of senate votes on the stimulus bills or FOMC rate decisions. Second is the performance of the last few weeks. The market has been on a tare since mid-March, with the S&P 500 returning 29% since March 9^th. A run like that is pretty large for a market that has been down so much in the last 18 months. The only problem with using that 29% to measure recent performance is that it is a little inflated due to the low denominator caused by such a sharp decrease in the index price. Instead, I would rather use the recent performance relative to the peak of the market which was 1561 for the S&P on October 12^th 2007. Using that number, performance since March has only been roughly 12%. That number is still pretty large for such a short time period and such a high level of recent volitility. Lastly, we take a look at the bond market. The 10-year treasury yield has ticked to a high of 3.15% after trading between 2.46% and 3.02% since March. The entire yield curve has steepened since the Fed announced, or failed to announce, an increase in outright Treasury security purchases.

Looking at the above observations, I believe that the market is ready for a pullback. The stress test results seem to hold decently bad news for some names as seen by the leaks this weekend. Also, the market seems much more likely to dismiss some of the test results due to expectations of political motives, but any surprises could have a dramatic effect on stock prices. The performance in the last 2 months also gives the market a reason to sell off. Assuming some people have ridden the wave of this rally, they might want to book some profits in case of a return to negative performance. Lastly, the bond market performance in the last few weeks shows me that a lot of money has entered back into the equity markets for the bond market specifically. This indicates to me that the money that has gone to work in the equity markets has contributed greatly to the rally we have seen. This money is also very sensitive to treasury yields overall. If the Fed indicates a move to bring down the 10-year rate by purchasing more bonds, some of that money in the equity markets could flow right back into the bond market, causing the recent rally to be unsustainable.

Earnings

Although 70% of the S&P 500 has already reported, there are still some heavy hitters reporting this week. Below is commentary on a few stocks reporting this week:

Walt Disney (DIS): Disney will report on Tuesday and should be a good barometer for a mixture of economic conditions. Consumer Sentiment can be determined by looking at domestic volumes and hotel booking windows (amount of time people book before actual vacation). International economic health and confidence can also be gauged by Disney’s earnings. Back in mid-2008 when the dollar was cheap, international volume at Disney’s theme parks was very high. That phenomenon could be different now due to the weakening of many overseas economies. I expect that park volume will be down mildly as long as prices have decreased significantly and promotions have increased (obviously reducing margins) and advertising revenue from Cable Networks will be down. Overall, this could be a tough quarter for the entertainment giant.

American International Group (AIG): AIG will continue to be sensitive to the performance of their Credit Default Swap (CDS) portfolio, but could see some gains from their investment portfolios as many Fixed Income assets have done well in the last quarter. Also, in the release could be more information on the “accelerated” separation of AIU Holdings into its own entity that was announced recently. This update could clarify what businesses will ultimately be packaged in the spin-off and/or when the spin-off will occur. I am sure that timing is an important factor in going forward with this process, given that investors can’t be thrilled about buying anything from AIG without speculation of high risk or deception.

Alcatel- Lucent (ALU): Weakness across the majority of ALU’s business segments is expected, with the exception of the Services segment. Analysts see the possibility of contract updates as maybe the only positive outlook for this earnings report due to the continued negative impacts of ALU’s operations. Look for signs of turnaround in the wireless portion of the Carrier segment as a gauge of whether this company will be able to pull it together any time soon.

News Corp(NWS): News Corp will report on Wednesday and I don’t expect anything spectacular. At this point, anything good from News Corp will be surprising to me. Just about all of News Corp’s 8 business segments are expected to report double digit percentage y/y decreases in revenue and extreme margin contraction. The only light could be the Cable Networks segment which is about 23% over operating income. The worst performing segment will most likely be Newspapers which used to be 30%-35% of NOI in 2004 and has fallen to roughly 20% in 2008. This company needs to come up with a way to revamp their business model FAST.

CVS Caremark: In the CVS/Caremark report, look for information regarding the integration of Longs Drug Stores and updates on PBM sales. It is tough to assess the effects of unemployment on PBM revenues, but the 2010 selling season is about to get underway and we have already heard that CVS lost one contract estimated to be worth $1 Billon. Pricing for new contracts will also be a focal point for Wall Street as newer contract pricing has been falling and dragging down margins. Same Store Sales for the retail portion of the company should see some deterioration, but nothing to significant or unexpected. I don’t see why CVS would report anything lower than analyst expectations.

Economy

Construction Spending, Unemployment Non-Farm Payrolls and Pending Home Sales are all on the calendar for this week. Construction Spending is expected to decrease 1% from last month. Over the next 6-months to a year I expect Construction Spending to flatten out for a little while and then slowly start to increase again as residential and non-residential outlays start to net out and residential starts to really pick up late in the year. The employment situation, reported on Friday, is expected to show an increase in unemployment to 8.9% for April from 8.5% in March. The employment report also shows the change in average hourly wages compared to lat month. As I have said in previous newsletters, I think this is an equally important number to watch compared to unemployment. I believe that while people are losing their jobs at a high rate, more people are taking jobs at lower wages and people who are keeping their jobs are taking pay-cuts. Underemployment is a little harder to track than unemployment, but average wages give us a slice of the pie to analyze.

DIG Presents: The Weekly View

DIGEXEC — Tue, 21 Apr 2009 22:08:58 +0000

This week’s Newsletter only includes the Outlook portion. The Recap will be back next week.

Outlook

By Ryan Wheeler

I would be curious to get into the minds of some of the CEOs of top banks at this point. Needless to say, they have had a whirlwind of issues and struggles to deal with over the last 18 months, but there are still so many possibilities of what can happen. We are fully immersed in earning season right now, and banks are still the main focus. Along with earnings, we are hearing inklings of news about a stress-test progress report. While bank earnings have shown some signs of strength in certain business units, any negative reports from regulators about capital adequacy could rock the financial sector again. We are also getting mixed news about lending activity among banks who received tax-payer money through TARP. According to an article in today’s WSJ, bank lending in February dropped at a higher rate than the 2.2% month/month decline reported by the Fed on Wednesday. The Journal uses a different method of calculation that shows a 4.7% drop. For my purposes, those two numbers are ambiguous because we don’t know what the situation would have been like without the program (better or worse). The fact is that, at the current rates, mortgage refinancing is picking up, treasury rates are unattractive, and riskier-asset yields are begging for investors to play. People are slowly feeling out some of the “lower quality” bond issues for extremely rewarding yields. As that happens, Treasury rates will start to drop and the see-saw will start to balance out. Now I know what a lot of you are thinking… “It is not that easy” and “There are so many other things that need to happen first”. I agree. We are not in a position where this stuff is just going to fix itself. We have a long road of regulation fights, debt runoffs, liquidity program reductions (hopefully), and consolidation. All I am saying is that the laws of supply and demand along with market efficiency theories will play out over the next year.

Back to the real point of this newsletter; this week’s market. As I said before, we are in the middle of earnings season. This week, 140 stocks in the S&P 500 will be reporting the results from the first quarter. On this list are important names from every sector. Of the 50 or so companies that have reported so far, roughly 62% have beat analyst expectations (thestreet.com). What this says is that analysts are overestimating the negative effects of the economy on a large portion of the S&P. So what? Why is this important? As of now it is not a huge deal. If this trend continues though, it will then signal to me that businesses are becoming more strategic in finding ways to keep revenue up and/or lower costs. This does not necessarily mean that the market is truly oversold or that we are at a concrete bottom, but more-so that the economic theories that speak of innovation during the bottom of the business cycle are playing out. Looking back at previous recessions, some of the best companies have refined their operations and developed better value chains that carried them out of the recession to become market leaders. I think that will be a major theme for this recession.

A strong set of economic data will also be on the table this week. Leading indicators, durable goods orders, existing home sales and new home sales will bring more insight into the current state of the economy. Weekly jobless claims, an important number right now, will be released on Thursday. Hopefully this week’s economic data, coupled with earnings announcements and words from top Fed officials, will help the equity market continue its winning streak. Cross your fingers.

My newest tool for financial market study is the 1-month LIBOR – OIS spread which measures 30-day bank-to-bank lending rates in relationship to the overnight index swap rates. Basically what this spread tells us is the risk banks are expecting in the short-term and the rates they require to take on that risk relative to estimates for overnight rates over the next 30 days. For example, when banks think either the bank they are lending to is risky or the collateral they are backing the loan with is risky, they will charge higher rates for loans. This will effect the 1-month LIBOR more-so than the overnight swap rate, therefore leading to a widening in the spread between these rates. The spread can be viewed as 1) a liquidity expectation measurement 2) a credit risk measurement and 3) volatility expectation measurement. One important use of this spread is assessing the effectiveness of the Fed’s liquidity facilities over the last 2 years. These facilities were put into place to help improve the state of short-term credit markets; specifically interbank lending. Below is a chart that shows the LIBOR-OIS spread from July 2007 until April 2008. As you can see, the spread has been very volatile during this period. I will be mentioning this rate more often in my commentary, so I thought I would give you a primer.

Sorry for the late edition this week. Happy trading.

DIG Trading Competition – Trading Starts TOMORROW

Blake the Great — Wed, 15 Apr 2009 23:28:06 +0000

This message is to remind you all that are in the trading competition that trading starts TOMORROW! Don’t forget to put your orders in tomorrow and building your portfolio!

If you are not in the competition and still would like to, here is the information:

DIG Trading Competition sponsored by the LeBow College of Business
1st Prize – iPod!

Go to vse.marketwatch.com.

Click “Find a game to join” and type in DIG2009 – THIS IS CASE SENSITIVE

The password to join is dig2009.

Thanks, and good luck!

DIG Presents: The Weekly View

DIGEXEC — Mon, 13 Apr 2009 14:33:53 +0000

Click HERE to see the full report.

The Recap

By Steve Romasko

The S&P 500 ended the holiday shortened week up 1.7%, led by financials. Trade was volatile despite only four sessions that had a relatively small amount of news and economic reports. The upside move came despite Alcoa (AA) kicking off first quarter earnings reporting season on a weaker-than expected note.

On Tuesday evening, Alcoa reported a loss of $0.59 per share, $0.02 worse than the First Call consensus that called for a loss of $0.57. Alcoa said the sharp drop in revenue resulted from the impact of the economic downturn on the company’s end markets — automotive, transportation, building and construction and aerospace. Despite the miss, the results were better than many had feared, and as a result Alcoa finished the week with an 4.0% gain.

There were some upside earnings results, however. Wells Fargo (WFC) preannounced record first quarter earnings of approximately $3 billion and earnings of $0.55 per share, topping the consensus estimate of $0.23. Wells Fargo expects revenues of $20.0 billion, versus the consensus of $18.98 billion.

The news gave a healthy boost to financials, which ended up 15.9% on the week and provided a measure of confidence going into the coming week when JPMorgan Chase (JPM), Goldman Sachs (GS) and Citigroup (C) report their quarterly results. On a related note, life insurers also helped lift financials, gaining 15.9%, after it was reported that the Treasury will soon announce it will extend the TALF program to aid some life insurers.

Meanwhile, Bed Bath & Beyond (BBY) reported much better-than-expected fiscal fourth quarter earnings of $0.55, easily topping the $0.44 consensus estimate. This news, along with smaller-than-expected decreases in March same-store sales from Target , Kohl’s, JCPenney and Macy’s helped the S&P 500 Retailing Index to gain 4.7% on the week, making it up 17.7% this year. Wal-Mart, however, dropped 5.8% as it reported a disappointing same-store reading.

Sun Microsystems (JAVA), however, failed to participate in the week’s advance after media reports indicated that talks with IBM (IBM) broke down as JAVA executives felt the $9.40 per share offer — a 90% premium — did not fully value its stock. Of note, it has not yet been officially confirmed that the companies were in talks, although there have been a hefty number of reports that they were. JAVA fell 21.3% on the week.

In other notable corporate news, Pulte Homes (PHM) and Centex (CTX) reached a merger agreement valued at $3.1 bln, as the struggling homebuilders looks to cut costs in the face of an extend downturn in housing. The combined company would create the country’s largest homebuilder by revenue and market cap.

Economic data came in light this week—the number of new jobless claims for the week ended April 4 fell to 654,000 (consensus 660,000) from 674,000 in the prior week. While the downtick is welcome news, claims still remain at very high levels. Meanwhile, the level of continuing clams worsened to 5.84 million from 5.75 million in the prior week.

The February trade deficit dropped a sharp $10.2 billion to $26.0 billion from $36.2 billion in January. This resulted from a very surprising $2.0 billion increase in exports along with a not so surprising $8.2 billion drop in imports. The inflation-adjusted deficit compacted to $35.6 billion from $44.0 billion, which will have a positive impact on real Q1 GDP.

The minutes from the March 17-18 FOMC meeting didn’t contain any real surprises. Most members believed the credit markets still are not working well. In addition, the FOMC did not interpret the uptick in housing starts in February as a beginning of a new trend, though some members felt that there was only a limited scope for a further fall in housing activity. The latter is not all that reassuring, as housing activity is already at very depressed levels.

In other news, the SEC is looking at short-sale rules as many market participants have criticized the repeal of the uptick rule in late 2007. Despite the gloom-and-doom issued from masterminds’ George Soros and Marc Faber, the S&P 500’s advance marks the fifth consecutive weekly gain for the index, and a 28.5% rebound from its March 6 multi-year low. The market is still down 46% from its all-time high reached in October 2007.

The Outlook

By Ryan Wheeler

Wells Fargo reposted preliminary results that show hope for the rest of the financial sector. Specifically, Wells Fargo sited $100 billion in mortgage originations and another $100 billion in the pipeline which is extremely encouraging to me. We have seen such hesitancy in mortgage applications and bank lending over the past year and it has been clear that it would take significant increases in pipeline flow to get the housing market turned around. This week’s housing starts and building permit reports will also shed light on the housing demand in the past month. Look for a small pickup in housing starts due to the continued run-off in previous inventory. It is also worth looking at the ratio of new housing starts to existing home inventory to show where buyers are shopping. There is still a large inventory of existing homes to run off, but the confidence of builders in the intermediate term should be reflected in this week’s numbers.

There a few interesting earnings announcements to keep an eye on this week. Goldman Sachs has made it pretty clear that they will be taking steps to pay back the money they were allocated through TARP. I will be looking for language that explains how they plan on doing this and what their timeline looks like. JPMorgan Chase will probably not see too much increase in investment banking activity, but could make that up in new credit card issuance. Non-performing loans in the mortgage and credit card segments will reflect the quality of not only JPMorgan’s legacy assets, but the quality of Washington Mutual’s assets acquired in the deal.

In the tech sector, Intel should start to recognize some new revenue streams from netbook sales, offset by lower PC tower sales. I read a great analysis this weekend of the effects of electronics store closings (Circuit City, CompUSA) on Best Buy and other players that have survived the withering consumer spending trend. In summary, these leftover stores will be fairing well due to increased traffic, but that does not mean increased volume for the manufactures. Chip sales for the quarter will indicate the strength of distribution channels. It could be a tough quarter for Google as advertising revenue could easily be hit harder during the first quarter. The good news though is that Google continues to introduce new content to their network of online productivity tools. This rough time in advertising growth could be a great time for Google to increase market share over the last few standing search engines that are still competitive.

The performance of CSX is an important indicator of the state of capital goods and material spending domestically. After the sharp rise in oil prices at the end of 2008, many companies switched shipping modes to rail. CSX also stands to benefit from the stimulus plan when infrastructure spending gets underway. Materials to build roads, bridges, and buildings will need to be transported across the country and will mostly be transported by railway. Look for a combination of rail network consolidation and increased volume in the intermodal business segment.

Finally, the Fed will be in the spotlight again this week with the release of the last FOMC meeting minutes and Bernanke’s speech on Friday. As these events happen, watch the dollar and its reaction to any statements. We are getting to a point of high rates of inflow of dollars and the dollar has not fully reflected the situation. Usually when traders see more money coming into the economy, they run from the dollar in fear of inflation risk. I don’t know if this time they are just not comfortable with any other currency or if they feel as though the additional tender is already reflected in the price. Either way, the Fed’s language can always be interpreted to predict future actions and the market will react accordingly.

I have been a little confused recently in the level of oil prices relative to the available information you might use to predict oil movements. A little while ago I talked about my expectation of $50-$60 oil due to the cuts in supply by OPEC and lower capacity utilization in offshore rigs. Now that we have seen some of that supply come off of the table, it makes sense why we got to the $50 level. But I am not sure why we are still here. We are absolutely seeing lower demand and oil reserves are building. Companies are literally filling barges with oil and setting them out in the sea to wait for more demand. At some point, field storage tanks and these barges are going to fill up and oil companies are going to have to start letting go of barrels at lower prices. It is surprising to me that oil has not fallen to at least $45. We will see over the next few week s how the inventory levels look. I would expect them to even out a little this week and then possibly increase again next week.

No matter what your specialty or profession is, this market is full of interesting corners to focus your attention. If you are smart, you will read all sides of these arguments in the news. Every day it seems that I am confronted with a new way to look at the decisions that executives and policy makers are making. The best advise I have been given has been to resist the urge to dive into a theory or an assumption without first looking at the opposite side. This keeps me honest in my goal of understanding this environment and the possible consequences of wrong action.

Have a great week and I hope you are not too burned out from all of the family parties and festive spirit that holidays tend to bring.