Over the last few weeks, FSLR sold off significantly. It dropped from the $150 area to the low $100 level. The 52 week low is $85.28. If the $100 level holds, the stock is poised for a short term bounce. Resistance is likely around $140, its old support level. From a risk return viewpoint, the stock looks attractive at current prices. Furthermore, the Obama administration is highlighting renewable energy as part of its plan to rebuild America.
Call it what you want, this former financial powerhouse is being taken over by the government. The Treasury Department said it would convert as much as $25 billion of preferred shares into common stock as long as private holders agree to the same terms. The conversion would give the U.S. government a 36 percent stake in the bank. In reaction, C is trading below $2 today, hitting a new 52 week low of $1.51. The talk of the next candidate to be nationalized is Bank of America. This process is needed in order to repair the country’s financial system.
Despite jobless claims hitting record highs and durable goods orders dropping for six consecutive months, equity markets opened in the positive. Stocks are attempting to recover after the sharp sell off over the last two weeks. It seems that investors are hoping that more injections from the US government into the banks will eventually solve the credit crisis. Looking at the S&P 500, the index is bouncing off its 52 week low of 741. A positive sign is that the index manages to break through the 800 level. The 50 day moving average remains a major resistance level. Bulls need to see this level break on the upside.
2008 is a year GM would like to forget. Due to a collapse in the credit markets and vehicle sales, the automaker lost $30.9 billion last year. Even after receiving $13.4 billion in U.S. aid, CEO Rick Wagoner is reported to ask for another $2 billion to get through another month. GM might ask for a further $16 billion to continue operating in 2009. According to GM’s viability plan, slashing expenses and debt should be enough to enable the automaker begin repaying its federal loans in 2012. With so much debt on its books, equity dilution is guaranteed to occur. For the investor, it’s best to avoid GM stock.
Compared to most other stocks, XOM have been holding up very well. Even with oil prices at depressed levels, the company still managed to pump out billions in profits. Imagine the profits that XOM will generate once the price of oil recovers. Support for the stock is around $68. If this level breaks, the stock is poised to retest the 52 week low of $56.51. Resistance is at the 200 day moving average, or $79. Due to the great uncertainty lingering in the markets, XOM is likely to trade within this range. Buy the stock in the high 60s and sell in the high 70s.
HNZ, maker of Heinz ketchup and Ore-Ida potatoes, maintained its forecast for full-year earnings. The company said sales of its key brands held up. HNZ have been generally doing well in the current recession as consumers eat more at home and frequent less at restaurants. The stock is bouncing off its 52 week low of $31.66. At yesterday’s close of $33.77, the stock is yielding 5.20%. Given its sound fundamentals and attractive dividend, HNZ looks quite attractive. In the current environment, this is a stock to buy on dips.
Since last week, the selling in the equity markets have been relentless. The noose hanging over the markets is whether banks such as Citicorp and Bank of America will be nationalized. Along with this uncertainty, weak economic data continues to pound corporate profitability. Equity markets have not been this low since 1997. The prevalent question is whether the markets have reached their lows? A clue is that investor pessimism reaches its climax. People are giving up on stocks and throwing in the towel. Even bargain hunters have given up. We are not at this point yet.
In tonight’s televised address, President Obama needs to talk up the economy in order to provide some hope for Americans. If not, the talk of economic gloom and doom will be self fulfilling. Obama has passed three significant initiatives: a $787 billion stimulus bill, a bank rescue plan, and an effort to limit home foreclosures. In his address, he needs to encourage lawmakers and voters to believe the plan can work, according to political analysts and economists. After all, the President has gotten his economic-stimulus legislation and it is not necessary to scare people about the economy. At this point, some hope is greatly needed.
U.S. financial regulators pledged to put additional funds into the nation’s major banks to prevent their collapse and will this week start examinations to determine if they have sufficient capital. Banks that require additional funds after the so-called stress tests that cannot raise the money from private investors will be able to tap additional money from the taxpayer. Government funds would be in the form of “mandatory convertible preferred shares” that would be exchanged into common equity “only as needed.” If this scenario takes place, 40% of Citicorp shares could be owned by the government. At this point, the major banks are too big to fail. The US government will do whatever it takes to keep them going. Though nobody will admit it, this is the nationalization of banks.
According to GM’s best-case scenario, the company will be profitable in two years and will have paid back taxpayers by 2014. The speedy payback plan is based on the assumption that Americans will increase their car-buying rate to a wildly optimistic 18.3 million annually by 2014. It seems that GM is also expecting credit to be widely available, home values to substantially appreciate and to see working Americains enjoy healthy wage gains. The reality is that the economy will take some time to recover. It will likely be more of an “U” than “V” shaped recovery. Most industry analysts expect unit sales to climb to 13 million annually by 2014. GM will probably ask for more money from US taxpayers.
