Tag - Vcbi

This morning it was reported that payrolls declined at a faster than expected rate and the unemployment rate rose to 9.5%. Neither of these are good news, and the stock market responded with a sharp sell-off. The Dow Industrials fell 212 points or 2.5%, the Nasdaq dropped 49 points or 2.67%, the S&P 500 fell 26 points or 2.8%. Small caps tend to lead, and today was no exception - the Russell 2000 was down 18 points or 3.5%.

Because we are heading into a holiday weekend, volume was on the light side.

Declining stocks outpaced advancing stocks by a 4 to 1 margin. The biggest loser on the day was Discovery Labs (Nasdaq:DSCO). The stock was cut in half after the FDA delay evaluation of the company's infant respiratory distress drug, Surfaxin.

Other top declining stocks include another biotech, Sepracor (Nasdaq:SEPR) which dropped 18% after it released disappointing trial results for a depression drug. The decliners list was littered with regional bank stocks too, including Park Bancorp (Nasdaq:PFED) down 25%, and Starling Banks (Nasdaq:STBK) down 17%.

Ironically, several regional banks made today's top advancing stocks list. Crescent Banking Co. (Nasdaq:CSNT) led the way with a 47% gain. OakRidge Financial Services (Nasdaq:BKOR) rose 25% and Virginia Commerce Bancorp (Nasdaq:VCBI) rose 17%.

NaviSite (Nasdaq:NAVI) rose 23% on heavy volume on news of a lawsuit settlement. And Matrixx Initiatives (Nasdaq:MTXX) rounds out the big winners with a 18% gain.

*****And so it begins. I'm talking about earnings estimate revisions for banks. And yes, they are headed lower. First up is Morgan Stanley (NYSE: MS). Credit Suisse analyst Howard Chen was expecting a profit of $0.80 a share. Now he says a $0.40 loss is more likely.  

Oppenheimer's Chris Kotowski dropped his expected $0.20 per share loss to $0.94 per share.  

Ironically, part of the reason for the downward revisions is Morgan Stanley's credit quality. But even this is misleading. Accounting rule changes earlier this year allowed falling prices for a company's debt to be treated as a profit on the assumption that the company could show a paper profit by buying back debt at a price lower than what it was sold for.  

Make sense. If you sell a bond at $1 and can buy it back for $0,50, you've essentially made $0.50. But of course, no banks actually did this. They didn't have the cash on hand to buy back debt, because one of the reasons a company's debt falls in value is because investors realize the company has assets that are worth less. In the case of the banks, these impaired assets are often non-performing loans or mortgage related securities.  

As these assets fall in value, the banks have to hold more loss reserves. That, of course precludes them from buying back their own debt.  

*****It should be obvious that accounting rules allowing banks to treat falling prices for its own debt as profits is a complete sham. The measure is a bookkeeping trick designed to let the banks appear healthier while they get their act together. It's just buying time.  

Will it be enough time? I don't see how that's possible, and I've outlined my reasoning over the last few days. Basically, unemployment is still rising (the unemployment rate hit 9.5% today) and the improvement in the housing market appears to be temporary based on foreclosure sales and government mortgage assistance. Some see "green shoots" here. I don't. 

*****There's at least one IPO market getting ready to heat up. No, it's not the U.S. It's China. As many as 100 Chinese companies may be getting ready to list their shares in Hong Kong. And many will come calling for inclusion on U.S. indices as well.  
The first company that will float their shares to the public will be a holding company that's constructing high-speed railroads between Shanghai and Beijing. The $5 billion China expects to raise will go to expand other railways. 
Bloomberg reports that since China announced its $585 billion stimulus plan, it's more than doubled its spending on railroads.  

This is more evidence that China is one of the few countries in the world that can actually grow its economy without taking on massive debt. I view this as very bullish and it's why I've been recommending Chinese stocks frequently in my SmallCapInvestor PRO advisory service. To discover what we're buying to take advantage of China's stimulus spending, click HERE. 

*****Here's TradeMaster Daily Stock Alerts' Jason Cimpl with his weekly video chart analysis. I've really been enjoying his analysis. And his TradeMaster readers enjoy the profits it leads to. But I'd like to hear from you.

*****Finally, I want to wish everyone a great 4th of July holiday. And if you're driving, do it safely. Let's get everyone home safe. I'll talk to you on Monday.

AmericanWest Bancorp. (Nasdaq:AWBC), Insight Enterprises, Inc. (Nasdaq:NSIT) and Barrett Business Services, Inc. (Nasdaq:BBSI) were among the new 52-week lows established during Thursday's trading among companies with market capitalizations or values under $750 million.

Monarch Casino & Resort, Inc. (Nasdaq:MCRI), The South Financial Group (Nasdaq:TSFG) and Virginia Commerce Bancorp, Inc. (Nasdaq:VCBI) were also among the 52-week small-cap lows.

Here are today's 52-week small-cap lows:

Virginia Commerce Bancorp Inc. (Nasdaq: VCBI) reported second-quarter earnings above analyst estimates Monday.

For the three months ended June 30, the commercial bank reported earnings of $6.9 million, or $0.28 per share, compared with earnings of $6.3 million, or $0.25 per share for the second quarter of 2006.

Seven analysts surveyed by Thomson Financial expected second quarter earnings of $0.26 per share.

“Obviously the results were better than expected, “said Stifel Nicolaus analyst Megan Malanga. “Virginia Commerce posted lower loss provisions than forecasted due to the mix of loans and credit quality trends that were generally favorable.”

Despite a challenging banking environment, Virginia Commerce said it saw a 66% decrease in loan loss provisions, and increases of almost 20% and 14% in loans and non-interest income, respectively.

The Russell 2000 (NYSE: IWM) is the most bullish of the major indices so far today, while the Dow Jones Industrial Average (INDU) is within reach of 14,000. At 1:03 p.m. ET the Russell 2000 had added 2.59 points, or 0.31%, to 851.06. The Dow was up 32.68 points, or 0.23%, to 13,983.66.

The bulls went into action as soon as the opening bell rang, following news earlier that the U.S. producer price index, which tracks the price of domestically produced goods, fell at a seasonally adjusted rate of 0.2% in June, according to the Labor Department.

Economists were projecting an increase of 0.1%.

The statistics suggest that inflation has not picked up despite a tight labor market and the higher price of oil, which is currently at $74 a barrel. The unemployment rate is at 4.5%.

Shares of Virginia Commerce Bancorp Inc. (Nasdaq: VCBI) climbed 4.86%, or $0.79, to $17.05 Monday morning after the bank reported second quarter earnings above analyst estimates.

For the three months ended June 30, Virginia Commerce reported second quarter earnings of $6.9 million, or $0.28 per share, compared with earnings of $6.3 million, or $0.25 per share for the second quarter of 2006.

Seven analysts surveyed by Thomson Financial expected second quarter earnings of $0.26 per share.