Perhaps the swine flu rage is the black swan which will be the catalyst to lead stocks down. Investors are raising cash as the concern for a greater slowdown in economic conditions will develop from the spreading disease. Should the sickness continue to spread, travel will decline and many industries will be affected.
The new shocking news is that Citigroup and BankAmerica need to raise more capital says the Wall Street Journal. If this is a surprise to anyone, then they must be living on another planet. The banking crisis is not over yet even then the financial markets are more stable. Many banks need to rid themselves of toxic assets and raise additional capital to bolster their balance sheets. The results of the stress tests should only confirm what we all know.
It is still earnings season and earnings are weak. U.S. Steel had lower volume and lower prices; Masco lowered its forecast; and Pfizer lowered its forecast. If companies continue to reduce forecasts, the markets will readjust their expectations and investors will sell stocks. We remain cautious and await more company earnings reports.
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