SubscribeDaily Futures Commentary April 22, 2009
Wednesday, April 22, 2009
U.S. Treasury Secretary Geithner calmed the equity markets yesterday with favorable comments regarding the U.S. banking system. In his comments he stated the vast majority of U.S. banks are well capitalized. He also tried to squash rumors that several banks have inadequate capital levels. The general theme surrounding his commentary was that banks have enough money to keep lending, but that bad debts are slowing the recovery. If anything his commentary encouraged traders to take on a little more risk.
The phrase “stress test” should be heard often over the next two weeks. Although the official stress test results are not due until the first week in May, the government is expected to talk to each bank regarding the results. The market could trade under both bearish and bullish rumors over the next two weeks as traders speculate who has enough capital and who is inadequate.
The real concern for these banks should be the unemployment rate. Most bank analysts agree that the results of the current stress test could shift dramatically if unemployment increases dramatically. For example, at 14% unemployment several of the banks that …
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