Tag - NYSE:WFC

Many had feared that TARP funds, doled out to select banks by Uncle Sam to stave off another Great Depression, would never be returned - or that the borrowers would only pay back pennies on the dollar.  With Bank of America’s $45 billion re-payment, $116 of the $205 billion injected directly into banks has now been repaid, along with about $10 billion in dividends and interest.  Looks like the American taxpayers may in fact not get the raw end of this deal after all.  Or does it?

I am increasingly skeptical of the Obama Administration’s plans for repaid TARP funds.  The Treasury now estimates that TARP will lose $200 billion less than expected, and Washington fat cats are starting to get possessive over the ‘excess’ funds.

In his speech at the Brookings Institution on Tuesday, Obama outlined a number of initiatives that could be targets for redeployed TARP funds, including small business tax breaks, infrastructure spending, and consumer rebates of up to $12,000 for retro-fitting homes to use less energy.

Now, these are stimulus programs.  And I agree that economic stimulus is in order.  But this is a different need then saving financial institutions that were wandering through the Valley of Death.  While many Americans’ homes are ‘troubled assets’ given the plunge in property values, energy-efficiency retro fits are not the financial crisis that TARP funds were originally intended to address. 

Energy efficiency should be a national priority, and we do need infrastructure spending (small business tax breaks for new hires is a scam – if companies have an economic reason to add employees, they will).  But regardless of where you stand on these issues, the point is that this debate is separate from TARP.

Ben Bernanke summarized TARP’s purpose in a speech delivered shortly after TARP was passed in 2008:

“…Notably, the legislation establishes a new Troubled Asset Relief Program, or TARP, under which the Treasury is authorized to purchase as much as $700 billion of troubled mortgages, mortgage-related securities, and other financial instruments from financial firms…

…The TARP's purchases of illiquid assets from banks and other financial institutions will create liquidity and promote price discovery in the markets for these assets…

…The interests of taxpayers are carefully protected under this program. First, the Congress has required extensive controls and oversight to ensure that the allotted funds are used appropriately and effectively. Second, the $700 billion allocated by the legislation is not an authorization to spend but rather an authorization to purchase financial assets…”

Ultimately, the American taxpayer should be paid back in full, with interest and capital gains.  The TARP money grossly inflated our national deficit, and should now be used to pay that deficit down so that our children and grandchildren will not be on the hook for inherited problems.  Already, interest on the loans has accumulated and needs to be paid.    

If Congress really wants to restore faith in the financial system, it should send a check to every American taxpayer based on excess returns, if they materialize, from TARP investments.  That’s how investments are supposed to work.  And if Americans want to spend their capital gain on caulk and new windows, that’s great.  But those that don’t shouldn’t foot the bill through TARP.

Now don’t get me wrong, I agree that job creation is critical to get our economy back on track,  and that job creation needs to begin with small businesses – those that have created 65% of new jobs over the past 15 years.  But let’s not mince TARP and job creation.

Stocks reversed early gains today as the second quarter comes to a close with more of a whimper than a bang. Jobless rates remain high in major metropolitan areas with the Labor Department reporting today that rates rose for this past May against the year ago same period in all 372 metropolitan areas that it tracks. Areas hit hardest include those with major manufacturing centers that feed into housing construction. While overall U.S. unemployment climbed to 9.4 percent in May, hardest hit is El Centro, California with a 26.8 percent rate. |

Consumer Confidence Report numbers, as reported by the Conference Board, further the fear on Wall Street as investors had expected the numbers to hold steady from April and May gains, however the index for June stands at just 49.3, down from 54.8 in May.

All of the major U.S. markets were down today with the Dow closing at 8,448, the Nasdaq trimmed by half a percent to 1,835, and the S&P 500 giving up 8 points to close at 919.

The Russell 2000, a composite index of the 2,000 largest small-cap stocks, closed down today at 501, for a loss of 1 percent.

Bright spots among small-cap stocks were lead by Annapolis Bancorp (Nasdaq:ANNB) up 38% to close the day at $3.80; Novavax (Nasdaq:NVAX) up 31% on news that Spanish pharmaceutical company Rovi will use Novavax's "Virus Like Particle" technology in the development of a vaccine for H1N1, also known as "swine flu"; LightPath Technologies (Nasdaq:LPTH) up 27%; Plumas Bancorp (Nasdaq:PLBC) up 25%; and Jacksonville Bancorp (Nasdaq:JXSB) up 23%.

While small-cap financial showed leadership today, large cap financial stocks like Bank of America (NYSE:BAC), Citigroup (NYSE:C), HSBC Holdings (NYSE:HBC), and Wells Fargo (NYSE:WFC) were down or up less than one-tenth of one percent.

The leader in small-cap price decliners was Cubic Energy (AMEX:QBC), down 30% on ongoing debt concerns with Wells Fargo Energy Capital. Cubic Energy was followed by Raser Technologies (NYSE:RZ), down 27%; Sunrise Senior Living (NYSE:SRZ), down 23%; and Northeast Bancorp (Nasdaq:NBN), down 21%.

*****If today had a lot going on then yesterday was downright boring. On Monday, around 10:30 AM, the S&P 500 rose above 924. By 12:30 PM, it rose to 927.99. Ignore the first hour of trading (when the S&P 500 made a comparatively wild 8-point swing), and the S&P 500 was confined to a 4-point range for 5 ½ hours.

Days like this make watching paint dry sound exciting. And as I'm typing this note, it's down about 1.3%.

And TradeMaster technical analyst Jason Cimpl tells me it could be like this all week as we head into a holiday weekend. If you want to catch a replay of his video that gives insights into this week's market direction just visit here. (or go to trademasterstocks.com/videoreport)

Great. But that's summer trading for you…

*****The Case-Shiller home price index, which measures home prices in 20 U.S. cities, showed that home prices fell 18.1% in April. And that was better than expected!

Of course, the index was only half a percentage point better, which most likely falls within the margin for error. Still, the results prompted the senior economist at Wachovia, Mark Vitner, to say "It is looking a bit better…[t]he largest declines are probably past."

And David Blitzer, chairman of the S&P index committee said, "While one month's data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in some of the regions…"

*****At first glance, these comments might seem a little, um, out of touch with reality. After all, how can anyone think that an 18% decline in home values is good?

The reason is that its foreclosure sales that are driving the Case-Shiller Index lower. Close to 5 million seized homes may be sold this year. To add some color, according to Bloomberg, 73% of all home and condo sales in Las Vegas in May were foreclosure re-sales.

73% -- that is an amazing number. And because these homes get sold at fire-sale prices, the affect on the overall housing market is dramatic.

*****That foreclosed homes are finding new owners is what's prompting economists to say prices may be stabilizing. And once prices stabilize, then the erosion of household wealth stops. And, then, maybe consumer spending picks up.

At least that's how the story goes...

There are some problems with this rosy scenario. Falling home and stock values claimed around $13.9 trillion in household wealth since 1997. That means there's a long way to go just to get back to break even. But with unemployment expected to persist above 7% for the next couple of years, where is the buying pressure for homes and the earnings power for public companies going to come from?

It's easy to imagine investors buying foreclosed property at discounted prices. But that doesn't mean the same level of demand exists for regular home sales. In fact, I'd go so far as to say there's no way demand for homes will be sustained beyond foreclosure sales.

*****Banks are taking losses as they clear bad mortgage loans from their books. That means banks will have room to make more loans - but will people want them?

Again, I suspect not.

That means banks will struggle to make up the losses and keep earnings growing. And with earnings season right around the corner (Alcoa (NYSE:AA) kicks earnings season off on July 7) investors should be on their toes.

P.S. A reader sent in an email yesterday asking about China and whether it's a good time to get back in. After last year's sell-off Chinese stocks are moving back up. If you missed the first China bull, this is your second chance. I've just finished a stock research report on 3 China-based stocks that every investor should have in his or her portfolio. Find out more here.

Stocks were up today in reversing the downward trend from the week with leadership from financials and healthcare. Most notably blue chips JPMorgan Chase & Co. (NYSE:JP), Goldman Sachs (NYSE:GS), Pfizer (NYSE:PFE), and Merck (NYSE:MRK) were up. Rounding out the leaders in financial were Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC).

The Dow ended the day's trading session up 0.69% to close at 8,555 while the Nasdaq declined 0.02% and the S&P 500 saw gains, closing at 918, up 0.84%.

Small-cap bellwether Russell 2000 Index, representing the 2,000 largest small-cap stocks, closed up 0.36% to 509.

Leading small cap gainers reflected the broader push top leaders in financials including National Penn Bancshares (Nasdaq:NPBC) up 31.4%; American Capital (Nasdaq:ACAS) up 27.1%. Other gainers include Myriad Pharmaceuticals (Nasdaq:MYRXV) up 15.7%; Nelnet (NYSE:NNI) up 30.5%; and Talbots (NYSE:TLB) up 16%.

Small-cap decliners were lead by Liz Claiborne (NYSE:LIZ) down 25.9%, on forecasts of larger than expected losses. The company gave no indication for the larger losses other than the message from all apparel companies that consumers are cutting back on what they consider nonessential purchases. Liz Claiborne reported a loss of 37 cents per share in the first quarter, excluding one-time items. Analysts had forecast 33 cent loss per share for the second quarter. No guidance was provided by the company as to what the revised forecast might be. This played into investor concerns as sellers look to unload shares as reflected in higher than normal volume.

In other news concerning Liz Claiborne, the company announced yesterday that it intends to offer $75 million in convertible senior note due 2014. It is the company's intention to use the proceeds to pay down a portion of borrowings under an amended credit facility. 

*****10 banks have paid back $68 billion in TARP loans. Including some smaller banks that have already repaid loans, the total is now over $70 billion. Even though the repaid money was raised from secondary stock offerings, which dilute shareholder value, it's still something of a positive sign, I suppose.

Now, what's going to happen to the money? Will it sit in the TARP fund? Will it be used to back other loans to small businesses?

This is an inflation issue. The money supply has increased by around $1 trillion in the last year (much of the bailout "funds" have been loan and asset guarantees that haven't increased the money supply, yet). It's the Fed's job to contract the money supply to keep price inflation in check.

This is the problem with creating money - you have to be willing to "uncreate" it at some point. With unemployment as high as it is, inflation is not yet a concern. But that will change eventually, and the Fed will have to have the resolve to contract the money supply when the economy starts showing signs of life.

As we've seen in the past, an economy that gets hooked on liquidity is very hard to wean. I personally have my doubts as to whether this Fed will be able to avoid the Greenspan legacy of allowing asset bubbles to form. So we want to be ready to profit form whatever asset bubbles arise in the future.

This is one of the topics we'll be discussing in next Wednesday's Video Conference. It's titled Inflation Busters: Discover the Stocks to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6:00 P.M. It's free to attend, you can sign up HERE

*****Stocks are trying to put an end to the sell-off that started with Monday's big decline. The S&P 500 is within a few points of its 200-day moving average. It's also less than 20 points from its 50-day moving average.

One of the simplest trend following systems focuses on the crossover of the 50-day and 200-day MA. When the 50-day MA crosses above the 200-day MA, it signals a trend change from bear to bull. When the 50-day MA falls below the 200-day MA, it signals a change from bull to bear.

So, the current trading is very significant to technical traders. The S&P 500 is flirting with a major buy signal. It should be noted that the Nasdaq flashed the moving average crossover buy signal a few days ago. I would view the moving average crossover on the S&P to be confirmation of the Nasdaq signal.

*****Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, isn't waiting. He's expecting a strong bounce and recommended 3 upside positions to his readers yesterday. One of them, the Direxion Technology Bull (NYSE:TYH), is a leveraged ETF that seeks triple the daily gains on the Russell 1000 Technology Index. That trade finished the day with a 3% gain.

Don't forget the new Daily Profit feature - Jason will give us another video chart analysis session tomorrow. In last Friday's edition he pretty much nailed this week's trading so I can't wait to see what he has to say about next week.
 
*****I'm itching to recommend a new stock to Daily Profit readers. We did pretty well with Graham Corp (AMEX:GHM) and Hovnanian (NYSE:HOV) earlier in this rally. 

I can't say I feel comfortable recommending Molecular Insight Pharmaceutical (Nasdaq:MIPI), but the story that came out yesterday is pretty darned interesting. The biotech announced that it can both detect and treat prostate cancer with its imaging agent, Trofex. And instead of the usual 5 tests including MRI and ultrasound, Molecular Insight can collect the necessary data for diagnosis within 2 hours of the Trofex injection.

The stock was up 42% to $6.24 yesterday. Of course, like most small biotechs, Molecular Insight is burning through cash like a teenager at the mall. But if this technology is viable, the stock will go a lot higher than $6.24.

Just thought you'd like to know…talk to you tomorrow.

Early morning weakness in the markets was made up during the afternoon trading hours. The Dow closed just slightly down at 8,497 for a loss of 0.09%. The Nasdaq was up 0.66% for a close of 1,808 and the S&P 500 lost 0.14% to close today at 910.

Small-cap stock investors were rewarded with a 0.65% gain on the Russell 2000 index, a composition of the 2,000 largest small-cap stocks, that closed at 507 today.

Pharma continued it's leadership position in small-caps with Molecular Insight Pharmaceuticals (Nasdaq:MIPI) up 41.3% today as money continues to move into healthcare stocks. Blue Chip pharma stocks followed their upward trajectory, though not nearly as much as small-caps put in, with Abbot Laboratories (NYSE:ABT) up 2.7%, Merck (NYSE:MRK) moved up 1.5%, and Johnson and Johnson (NYSE:JNJ) posted a 1.2% gain.

The other small-cap leader in pharma was Savient (Nasdaq:SVNT) up 35.5% after receiving the recommendation from a panel of arthritis experts who suggested the Food and Drug Administration approved Savient's new gout drug. By a vote of 14 to 1 the panel recommended that the firm's drug, KRYSTEXXA, be granted marketing approval by the FDA. The action date for the FDA's decision is currently set for August 1, 2009.

Other small-cap gainers for today include Alvarion (Nasdaq:ALVR) up 18.3% on news of its $100 million contract with Open Range Communications; Cayman Islands based United America Indemnity (Nasdaq:INDM), a provider of property and casualty insurance products, up 16.4%; and Connecticut based MTM Technologies (Nasdaq:MTM), up 42.8%.

Decliners were lead by Star Scientific (Nasdaq:STSI) which shed 73% off it's opening price to close today at $1.13. Star lost its patent suit against No. 2 cigarette maker RJ Reynolds Tobacco, a unit of Reynolds American (NYSE:RAI). It alleged that RJ Reynolds had infringed in its patents related to the way of growing and treating tobacco plants to prevent nitrosamines from forming. It's believed that in reducing nitrosamines that the cancer-causing agents in tobacco can be significantly reduced. The jury ruled not only that the patents were invalid, but that they should not have been issues. Star said it would seek a new trial or appeal to the U.S. Court of Appeals.

Other small-cap decliners were lead by financials including National Penn Bancshares (Nasdaq:NPBC) down 23.2%; First Financial Service Corp. (Nasdaq:FFKY) down 18.5%; and Provident Community Bancshares (Nasdaq:PCBS) down 16.4%. Larger capitalization bank shares were not immune to the sell-off in financials with Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC) all declining today.

*****On Monday, an influential bank analyst raised his price target for Bank of America (NYSE:BAC) to $19. That implies a 40% jump for BAC. Curiously, this particular analyst didn't cite any improvements to the business or strength in the bank's balance sheet. Rather, he based his analysis on improving investor sentiment.

I don't know about you, but I'm not running out and buying a stock - especially a bank stock - just because investors feel better. No, I'm going to need to see actual evidence that conditions for banks are improving before I wade into those murky waters.

So far, the improvements we've seen in bank fundamentals have been based on accounting changes and government stimulus for the housing market. These measures don't fix the problem; they simply make the symptoms look better.

*****To underscore this point, S&P just cut its ratings on 22 banks because of the potential for further weakening in the sector. The S&P analyst had this to say:

"We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions…Financial institutions are now shedding balance sheet risk and altering funding profiles and strategies for the marketplace's new reality. Such a transition period justifies lower ratings as industry players implement changes."

Bank of America was not among the banks whose outlook was cut by S&P. And I don't care. So long as the sector is weak and the economy is struggling I'm not going anywhere near banks stocks, improved investor sentiment or not.

*****I know Cold War politics are long over, and that Russia and the U.S. are no longer vying for supremacy, but I still can't help thinking "In your face, Russia" when I read that dollar denominated bonds sold by Russia, China and Brazil performed far better than bonds denominated in those countries own currency.

Russian and Brazilian bonds lost money. China's yuan denominated bonds posted small gains. In every case, dollar denominated bonds made money.

It should be obvious that the BRIC countries (Brazil, Russia, India and China) demand that the world's reserve currency should be manipulated to weaken the influence of the dollar is pure politickin'. Or in the words of a currency strategist quoted by Bloomberg, "It's not up to politicians to determine which currency will be the world reserve currency…In the end the market decides it."

In this case, it should be apparent that the market has spoken.

*****So I won't buy their debt, but I will buy Chinese stocks. Yesterday,   SmallCapInvestor PRO added another Chinese stock to the portfolio. China's one of the few countries in the world that's posting any growth. And investors should absolutely own some Chinese stocks right now. If you want to find out what we're holding in SmallCapInvestor PRO just click HERE.

After starting the day pointing to a lower open, the DJIA closed up just slightly by 0.02% at 8,764.49 after bank shares helped to offset bad news from McDonald's (NYSE:MCD) and Apple (Nasdaq:AAPL).

The S&P 500 close down just 1/10th of one per cent at 939.14 and the Nasdaq close down just 0.38% to 1,842.40. The Russell 2000, the bellwether index for the 2,000 largest small cap stocks shed 5.57 points for a loss of 1.05% to close at 524.79.

Small cap leaders for today included Park Bancorp (Nasdaq:PFED) up 46.27%; ArtiCure (Nasdaq:ARTC) up 35.48%; and MFRI Inc. (Nasdaq:MFRI) up 32.24%.

Another more well-known small cap gainer today was SLM Corp. (NYSE:SLM), known to those with student loans as Sallie Mae, with a gain of 19.97% after TV personality Jim Cramer called SLM a "speculative stock of the year". We'll see if SLM suffers the "Cramer effect" endured by so many other stocks over the years.

Small cap decliners were lead by two technology firms: Edgewater Technology (Nasdaq:EDGW) down 14.48% and VeriSign (Nasdaq:VRSN) down 14.19%.

*****I don't like to accuse people of lying. Those are fighting words. But after last night's 60 Minutes interview with Fed Chief Ben Bernanke I am compelled to say that I don't think he's telling the truth about America's banks.

The interviewer asked point blank if Bernanke believed our banks are solvent. Bernanke responded with an unblinking, unflinching "yes."

Of course he used the recently performed "stress tests" as his measuring stick. And that's where the problems begin…

*****The stress tests were supposed to assess each bank's viability if economic conditions worsen from where they are now. So you would expect for inputs into the formulas to reflect an even more dire economy - unemployment at 12% instead of 9%, mortgage default rates of 7% instead of 4%, that kind of thing.

Unfortunately, the stress tests didn't do that. The unemployment rate used in the tests was reported to be 8%. We passed that a month ago. The stress tests used a loss rate for subprime mortgages of 21% to 28%. But 40% of subprime mortgages are currently over 30 days late. And they could hit 55% according to one industry expert, a far cry from 21%...

So when the Fed required banks to raise an additional $75 billion to strengthen their capital base, it wasn't so the banks could stay afloat if things get worse, it was so they could survive right now.

Seems to me, the economy could easily get worse. Then what? The Fed will require the banks to raise more money?

*****In early March it was Citigroup (NYSE:C) that really got this rally going. You may recall Citi CEO Vikram Pandit announcing gleefully that Citi was going to turn a profit for the first quarter. There's been much rejoicing ever since.

At the time, I speculated that Citi was, um, full of it. I surmised their profits were based on mortgage modifications, credit card debt modifications and such. In other words, I believed at the time that Citi wasn't feeling the positive effects of new lending business, but rather, was creating revenue by re-casting existing loans. In other words, I thought it was basically an accounting trick.

(Of course, just because I was skeptical didn't stop me from squeezing substantial gains from stocks as they rallied. All of my advisory services, SmallCapInvestor PRO, Top Stock Insights, TradeMaster Daily Stock Alerts and Recovery Portfolio thoroughly beat the market so far this year.)

*****Good ol' Bloomberg. They ran an article on Friday that not only confirmed my suspicions about banks accounting practices, but now, I'm considering a bank or two, which would have been inconceivable just a week ago.

The change came on April 2nd, just three weeks into the rally. The Financial Accounting Standards Board changed the rules. Banks now have greater freedom to value assets how they choose. And what's more, banks can recognize losses on some assets without counting the write-downs against earnings. And you'll recall it was the write-downs that were a big issue for banks starting at the end of last summer.

Banks are also helped when the value of its own debt falls. So when the bonds they've sold go in the tank, the banks can actually record the difference between the issues price and the current price as income, because they could theoretically buy the debt back at a lower price. Of course, no banks are doing this, but it's estimated that Citi generated $2.7 billion in pre-tax revenue from its own impaired debt. (Think about it, your assets go down and you book it as a profit? Try that with your home and a friendly I.R.S. man will pay you a visit.)

One of my colleagues, Martin Weiss, estimates that without these and other accounting rule changes, Citi would actually have lost $2.5 billion for the 1st Quarter.

And it's not just Citi. Bloomberg also reports that Wells Fargo (NYSE:WFC) boosted its capital base by $2.8 billion by simply re-valuing $40 billion of bonds.

Joseph Stiglitz, economist at Columbia University, believes the government is trying to buy the banks time to earn their way out of this mess. Clearly, he doesn't believe Bernanke is telling the truth. But it's worse.

If banks' ability to hide losses is enhanced, and nothing is really done about the losses on the books that remain, banks will remain unwilling to do much lending, which will keep them from increasing earnings and also impair the economic recovery.

*****Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, took 5% gains on the iShares China ETF (NYSE:FXI). This is one of the investments he covered in the video I gave you last week. You'll recall I promised to tell you when he sold…

You can find out more about TradeMaster Daily Stock Alerts HERE.

That's it for today.

P.S. If you're interested in discovering profits from more China opportunities, be sure to request your own copy of my new report, "Going for Growth: 3 Top Chinese Stocks to Buy NOW". It's available HERE.

Small Caps putting up the biggest gains at press time (2:30 P.M. Eastern) include La-Z-Boy (NYSE:LZB) up 36.2% after an upgrade to strong buy from Raymond James, Atlas Pipeline Holdings (NYSE:AHD) up 30.2% after announcing a joint venture with Williams (NYSE:WMB) to expand Atlas's presence in Pennsylvania, Tivo (Nasdaq:TIVO) up 51.1%, Human Genome Sciences (Nasdaq:HGSI) up 16.7%, and Applied Signal Technology (Nasdaq:APSG) up 16%.

Big decliners include energy darling Valero (NYSE:VLO) down 18.3%, CVR Energy (NYSE:CVI) down 17.4%, Frontier Oil (NYSE:FTO) down 14.9% as crude oil inventories spike to 2.9 million barrels based on data from the U.S. Energy Information Administration.

Yesterday's darling stock, Green Plains Renewable Energy (Nasdaq:GPRE) was one of today's dogs lose 16.2% as volume slows from Monday and Tuesday's trading sessions.

As of press time (2:30 P.M. Eastern) all major indices are off with the S&P 500 leading the decline by a 2.0% drop, followed by the Dow sloughing off 1.5% and the Nasdaq down 1.4%. The Russell 2000 Index, comprised of the 2,000 largest small cap stocks was down 8.5 points, or 1.61% to 518.13.

*****Russia is grumbling. Seems they are not happy that rising debt, slow growth and record Treasury bond sales are dragging the U.S. dollar down. In fact, Russian president Medvedev is calling for some kind of global currency to replace the U.S dollar as the world's reserve currency. (Sound familiar? Like he's taking a page from the Chinese?)

In an interview with CNBC on Monday he said, "We need some kind of universal means of payment, which could create the basis of a future international financial system…"

Of course, this is a horrible idea. As one analyst put it, "It took decades for the euro to be established. I can only imagine how long it would take for the BRIC countries to put together a currency."

*****It's an investing truism that the financials always lead the stock market. Recall that it was bullish comments from Citigroup that kicked off this rally back in early march. And I'm sure nobody needs reminding that it was the financials that kicked off the worst bear market in 80 years.

When the S&P 500 and the Nasdaq blew through their 200-day moving averages on Monday, the financials were out in front. But today, even though the major indices finished with slight gains, many financials finished in the red.

American Express (NYSE:AXP) dropped nearly 5%. JP Morgan (NYSE:JPM) lost 4.46%. Wells Fargo (NYSE:WFC) lost 4% and Citigroup (NYSE:C) lost 4.88%.

Bank of America (NYSE:BAC) is about the only major financial stock to finish in the green, and that was a 1.7% gain. In fact, the Financials SPDR (AMEX:XLF) failed to make a new recovery high along with the Nasdaq and S&P 500.

So what gives? Why have the financials underperformed, and why were they weak today?

*****One clue comes from the Healthcare Select SPDR (AMEX:XLV). As you may know, healthcare stocks are considered defensive stocks. That's because their revenues are seen as being stable as healthcare is a necessary, as opposed to discretionary, expense.

In difficult markets, institutional investors will park their money in healthcare stocks as a way to maintain exposure, but lower risk.

If we compare the Healthcare SPDR XLV to the Financial SPDR XLF, we see an interesting divergence starting on May 8. Healthcare has been trending up since that date. And the Financial SPDR has been trending down. To me, this looks like sector rotation.

It appears that institutional investors are moving money out of aggressive financial investments and into defensive healthcare stocks. When the institutional investors start playing defense, individual investors should pay attention.

*****Technical analyst for TradeMaster Daily Stock Alerts, Jason Cimpl, thinks the rally has about another week before we start seeing some downside. And for good measure, he recommended that his readers take their 29% profits on Fushi Copperweld (Nasdaq:FSIN). This trade took less than 3 weeks. Nice job, Jason.

Jason is still holding the two stocks you may have learned about from the TradeMaster video I included in yesterday's Daily Profit. In case you entered either trade, you should know that Jason has recommended a stop loss for FXI at $35.15 and UNG at $12.60. If you missed the video, you can check it out HERE.