Stocks Slide, Nobody Blames Banks

Lost in the official history that Monday's broad stock selloff was the result
of Standard & Poor's decision before the opening bell to lower its oulook in
U.S. debt to negative is the fact that it didn't look like such a great day
for stocks to begin with. Before the S&P announcement, the mood was darkened by
several developments – talk that Greek debt would have to be restructured
(yes, that hasn't gone away) and another of those
beat-on-earnings-light-on-revenue quarterly reports from Citigroup (NYSE: C ),
which followed disappointing reports last week from JPMorgan Chase (NYSE: JPM )
and Bank of America (NYSE: BAC ). Could it be that after the tepidness apparent
in the reports from that Holy Trinity that investors have become wise to the
idea that nothing could be further from the truth than the notion that financial
stocks are ready to help propel the broader market higher? In fact, the opposite
seems more likely to be true. With the SPDR Financial Select Sector (NYSE:XLF)
exchange-traded fund falling 1.3% on Monday, mega-bank stocks are essentially
flat in 2011 – not to mention being down 4.6% since April 6. By day's end,
the Dow Jones Industrial Average had lost 140 points to 12,202, the Nasdaq fell
29 points to 2735 and the S&P 500 slipped 15 points to 1305. Funny things those
small-cap-driven speculative rallies – they always seem to have their days of
reckoning. As economist Dean Baker pointed out, it also seems strange to lay the
selloff at S&P's feat considering investors, presumably the same one who trade
stocks, decided after the initial "shock" that they ultimately wanted to
snap up dollars (as compared to euros) and 10-year Treasuries at a lower yield
(now 3.37%). (As an aside, Baker makes the solid point that S&P is a little
short on credibility these days, or at least should be. This, after all, is the
outfit that rated subprime-backed securities as investment grade, while giving
Lehman Brothers, Bear Stearns, and Enron top ratings until those companies fell
off a cliff). Of course, there is always gold and silver, which quietly pushed
their way to yet another all-time and 31-year-high, respectively). Silver is now
up more than 60% since late January – and S&P had nothing to do with it.