Morning Watch, May 9
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May 9, 2008
Further gains in crude prices and weakness in financials push futures lower Friday morning. AIG (AIG) and Citigroup (C) are in the news again with both stocks seeing lower prices in pre-market trading. Another focus Friday will be the international trade data, which the bulls hope will help lessen the losses seen this past week.
AIG shares are down nearly 8 percent in pre-market trading following the company’s earnings release. AIG announced that it lost $7.81 billion in the first quarter on continued problems in the credit markets. As a result of these problems, AIG is looking to raise $12.5 billion in new capital. The company will hold a meeting later this morning and the bulls are hoping the insurer can provide some positive news to offset its earnings results and several downgrades. AIG shares are trading near $40.75, not far from its 52-week low at $38.50.
Citi shares are also moving lower in pre-market trading, but only slightly. There are reports that the financial giant will announce plans to sell $400 billion in assets. Though this is an attempt to raise capital, analysts fear that it is a sign that further write downs are in store for the company. It will be interesting to see what Citi has in store when the company holds an analyst meeting later today. The stock is down more than 55 percent this past year, closing Thursday at $24.10.
Unfortunately for consumers and stocks, oil prices continue to move higher Friday. Crude for June delivery is up $1.75 a barrel this morning, trading near $125.50. A falling dollar continues to push money into commodities, despite the fact demand is not rising for crude and inventory levels of the commodity are above average. In economic news, the trade gap is expected to narrow a bit to $-60.8 billion from $62.3 billion in February.
Overall, the major market indices are lower this week, returning the middle of their trading ranges. It is possible for the bulls to win the week, but stocks would have to see some strong gains Friday. Currently, the Dow ($INDU) is nearly 200 points below its close from last Friday. Even if we are not in a recession, there are plenty of problems, most notably the credit crunch, and this is keeping the bulls from gaining strength.
Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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