Troubling price trends: Financial stocks vs. Dow Chem's plan
A few items of note from around the markets:
--Worse even than March, and March was bad: The list of financial-company stocks falling to new multiyear lows is getting longer. On Wednesday it included insurer American International Group, Bank of America Corp., Wachovia Corp., Downey Financial Corp., KeyCorp. and bond insurer MBIA Inc. As this earlier post notes, the BKX index of 24 major bank stocks now is a hair’s width away from a new low.
As I noted last week, many investors have been hoping that the stock market’s March lows marked the worst of the selling brought on by the housing crash and its fallout. Broad market indexes still are above their March nadirs. But if investors’ faith is ebbing again in the health of big financial companies, it implies that the Federal Reserve hasn’t done enough, after all, to rescue the financial system from its own excesses.
--As if the Fed doesn’t have enough troubles: Bernanke & Co. want the markets to believe that the jump in inflation caused by higher energy and food prices will be damped sooner than later. Doesn’t sound that way from Dow Chemical Co.’s announcement Wednesday that it will raise prices up to 20% because of "rising energy, feedstock and transportation costs." And when you sell $54 billion a year in chemicals, plastics and other products, your double-digit price increases are going to be felt in a lot of places on this planet.
--Sticking with bonds over stocks: The stock market rallied briskly in April, but U.S. investors’ favorite mutual fund last month was a bond fund -- the Newport Beach-based Pimco Total Return fund, which sports a 2.7% gain year to date. The fund took in a net $2.5 billion in fresh cash (new sales minus redemptions) in April, according to Financial Research Corp. The Pimco fund, with $128 billion in assets now, also took in the most cash of any fund in the first four months of the year ($11.6 billion). In other words, many investors continue to stress relative safety of principal over the chance to catch an upward turn in stocks. By contrast, the five most popular funds in the first four months of 2007 all were big-name stock funds, while Pimco Total Return ranked 16th in that period.
--Goodbye IHOP, hello . . . say what? Glendale-based IHOP Corp. is changing its name to DineEquity Inc. effective Monday, the company announced Wednesday. IHOP, parent of International House of Pancakes, last year bought the Applebee's chain. So IHOP alone no longer cuts it for a corporate moniker, CEO Julia Stewart said. "Our name change to DineEquity reflects the promise of our newly combined company," she said. Well, it does at least roll off the tongue a little easier than IHOP. The company's stock ticker symbol also will change, to DIN.