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The Dow Futures Report

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Financials Commodity Stocks Pressired

Tue, Mar 31 2009, 06:11 GMT
by Paul Brittain

Alaron

EQUITIES FALL BACK THROUGH PRE RALLY LEVELS AS US GOVERNMENT REJECTION OF AUTOMAKERS TURNAROUND REVIVES SPECTRE OF BANKRUPTCY, FINANCIALS COMMODITY STOCKS PRESSURED.

US Equities began the 1 st week of the month on a familiarpattern, staging strong gains as the expectation of dismal governmentreports on employment and the sense of an overdue pullback for therecent run up in stocks took hold of the major indices today.Financials and automaker s led the markets lower as Treasury SecretaryGeithner stated that a number of currently distressed financialinstitutions may need additional financial support, even as the TARPfunds available continue to be drained down. The Secretary stated thatapproximately $135 billion of the $700 billion is left and the prospectof further request for funds is not out of the question.  Thereemergence of concerns regarding further bailout of financialinstitutions hit Citigroup, Bank of America, and Wells Fargoparticularly hard. All of the banks suffered double digit percentagefalls today. The sector came under early pressure after Europeanintervention to shore up domestic lenders help to rekindle fearsregarding the security of global financial institutions.

The greatest stone around the neck of the equitymarkets today was the negative sentiment fueled by the rejection of theturnaround plans proposed by General Motors and Chrysler. The sectorwas already reeling from the uncertainty posed by the forcing out of GMCEO Rick Wagoner. A particularly strong tone taken by the USAdministration proposed the notion that US automakers must not bebecome “wards of the state” and that if unable to formulate workablestrategies and alliances, declaring bankruptcy was a viablealternative. While acting as a catalyst for the markets pullback, thenotion of one or more of the 3 major US automakers declaring bankruptcyappears to have more of a tone of resignation than financial panic.Equity markets may be seeking further clarification for the rational ofthis stern stance. Traders should be careful for a “clarification” ofthis statement which could leave a wider shade of gray for theautomakers to maneuver within. Industrial and energy stocks alsodeclined as energy prices dropped over 7 % in the wake of a perceivedover estimation of world demand as well as a significant rise in thevalue of the US dollar.

Technically, June Dow Futures should find its first support level at7349, with key support remaining in place at 7260. Market should seekto fill in gap left from 7601, with movement above this level settingup for a possible rally to 7970.

Published on  Tue, Mar 31 2009, 06:15 GMT