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Financial News Overview

3/10/2010

Over the past few days, some financials in which the government has a large stake (AIG, Citigroup, Fannie Mae and Freddie Mac) have rallied strongly. Over the course of 5 sessions, AIG has shot from roughly $25 per share to approximately $36 per share. Citigroup has surged from $3.40 to over four dollars per share; Fannie Mae and Freddie Mac have shown similar, strong upside patterns. Part of the explanation is that Citigroup has engineered a successful offering of $2 billion in securities (trust preferred offering) and that this would allow it (and others) to free themselves from heavy federal backing sooner than previously expected. In other words, investors hope Washington will soon become less of a factor in the financial sector. There is however also speculation that the government is about to impose new short selling restrictions on names it backs, thereby igniting a short squeeze.

This week's first economic data was released today, showing that wholesale inventories declined 0.2% in January (consensus estimate: an increase of 0.2%). Some market observers believe that a reduction in wholesale inventories is a positive sign, in that it suggests that demand for products has increased rapidly in a growing economy. On the other hand, a decline in wholesale inventories can lead to a lower GDP.

In other key economic news, the US Treasury budget for February came in with a deficit of $220.9 billion (consensus estimate: $222.0 billion). Comparison: The deficit recorded one year ago (i.e., in February 2009) was smaller, coming in at $193.9 billion. Market observers suggest that neither the wholesale inventory data nor the Treasury budget had any clear bearing on today's equity trading action.