Trading Stocks Online: Does the Ease of Use Make it More Dangerous?

The majority of American homes have at least one computer, and of those, most are connected to the Internet for at least one hour or more each day of the year. Because of the ease of having the entire world right there at your fingertips, more and more business is conducted from the home - from ordering Junior's birthday gift to performing job duties. It was only a matter of time before the financial world started grabbing some of the Internet action- now a large portion of every day's trading actions are performed online. Whether you go through a broker or execute your trade on your own, online trading can be an interesting way to manage your investments.

Because the Internet is there twenty-four hours a day, it can become very easy to get carried away by the whole online trading concept. Before you even log onto the first site, and before you even look at the first trade online, there are some things you must know and understand. Knowing these basics can make your online trading experience satisfying and hopefully, financially rewarding.

If you have never worked with stocks before it might be advisable to work with an online broker before going out on your own. The stock market should not be a learn-as- you-go experience, especially not with the current state of the economy. Do your research if you wish, but work with a broker until you are more confident in your own abilities.

You should talk with your broker about your own personal investment goals. Know what all of the risks are when dealing with the stock market. And by all means, know your own limits. Do not try to trade above your financial capabilities- if you choose the wrong stock, or the market fluctuates you can put your family in real financial danger.

Online trading can allow you to research and buy your stock in one simple step, or to do the research only, using a broker to buy the actual stock. Beyond the other tips that apply to all stock trading, both traditional and online, there are other special considerations for online trading, including knowing that you might not be able to instantly execute or cancel orders- both may be delayed by as much as a few hours. You also need to know if quotes and other information given is delayed or given in real time. (This will usually be clearly denoted on the stock site.) What are the limits to your trades- do you have a daily cap while working online? And because you are dealing with an entity that sometimes has technical issues, you must ask about website crashes and what that can mean to your ability to make or cancel orders.

Finally, before making your first trade with an online company, check out their privacy policy, find out about commission and transaction fees and review the customer service and complaint policy.

Article Written By J. Foley

Price Trading: Gambits, Tactics and Good Business Sense

Price trading can be tricky at best, even for the most astute financial mind. Watching the tracking trends of certain stock and thinking you have it predicted down to the last few percentage points of accuracy, only to have it fall completely off the charts, is not only heart breaking, it can also lead to financial ruin. Although trend trading can provide an educational leg-up on the competition, it does not always stop the trader from being faced with financial doom when a market takes an unexpected and therefore unpredictable header toward the basement.

The economy is in a major downward spiral, and most indicators are showing that, however some price trading charts are showing some stocks are in fairly stable shape. How this can be should be a puzzle to all but the most novice among us. The stock futures are showing down trends, and the realistic and responsible trader will adjust trading activity to reflect this.

Price trading charts are often confusing and more, they contradict themselves. Using financial software for analysis of these charts can help, but even that may prove to be ineffective when there is just too much data for the computer to sort through. Price trading can be lucrative, if you know what you are doing, and can make sense of what the market is doing.

With price trading, the main consideration is timing. You must make your move, no matter what financial instrument you are dealing with, at the optimum time to gain the best price. Knowing that there will be a huge demand on one stock in one week's time and holding onto that stock to sell during the rush makes sense, but selling it one week before the demand hits does not. As with any financial activity, especially with the current economic situation, you must know your limits and your financial caps. Do not exceed your own budgetary limits and put yourself at the risk for financial ruin. Do not make trades that you do not fully understand. Do your homework and the necessary legwork before beginning any trading activities. Work with a broker before heading out to take on the financial world on your own. Take educational seminars and read all of the financial information that is available to you, either in hard copy or online.

Do not allow yourself to get caught up in the thrilling rush of one or two successful trades. A little financial knowledge can be a bad thing, especially if it leads to risky, undisciplined behaviors on your part.

Article Written By J. Foley

Consumers feel better, and so does the stock market

12:29 PM, May 26, 2009

Consumers are feeling somewhat better, and that's making investors feel better too.

The stock market rose for the first time in a week today as unexpectedly strong consumer-confidence data sparked optimism that spending by Americans could support a hoped-for second-half economic recovery.

The Dow Jones industrial average is up about 175 points, bolstered by stocks of consumer-discretionary companies such as restaurant, hotel and clothing chains. Earlier in the day the blue-chip gauge was up by almost 220 points.

An index of consumer sentiment spurted this month to 54.9, its highest level since September, according to the Conference Board, a New York-based research group. That was up from a revised 40.8 last month and far outdistanced the 42.6 level anticipated on average by economists.

“While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us,” said Lynn Franco, who heads the organization’s consumer research center.

The increase, the third in a row since the index hit a low in February, partly reflected an improved perception of the employment market.

The so-called expectations index, a measure of the conditions consumers foresee in the coming months, surged to 72.3 from 51.

Investors hope that resilient consumers can help pull the economy out of recession later this year and pad badly bruised earnings at major retailers.

“Higher consumer confidence plus the boost to disposable income in Q2 from a tax cut and extra Social Security payments make it more likely that a 'breakout' number on retail sales will be recorded soon after the weak readings of the last several months,” economists at UBS wrote in a note to clients.

Consumer-discretionary stocks are up more than 3.5% today, the best performance among 10 major sectors tracked by Standard & Poor’s Corp.

Hotel chains are doing especially well. Starwood Hotels & Resorts Worldwide has climbed 8.8% today, Wyndham Worldwide is up 8.4% and Wynn Resorts is up 6.7%. In other sectors, Home Depot is 4.4% higher and JPMorgan Chase is up 5.6%.

But there is only so much that consumer confidence alone can help stocks. One reason consumers are feeling better is that their portfolios have rebounded sharply since stock indexes hit multiyear lows in early March. So today’s rally is relying on something akin to a perpetual energy machine.

Moreover, there are big questions as to whether consumers can come to the market’s rescue.

The most obvious is the continued free fall in housing prices, which was reinforced with new data released Monday.

The widely followed S&P/Case-Shiller index of home prices in 20 cities slumped 18.7% from March 2008 through March 2009. (Los Angeles was off 22.3%.)

More than that, the job market remains weak and consumers have boosted their saving and begun whittling their debt.

“The type of environment we’re in, and coming out of, is unlike anything we’ve seen in our lifetimes,” said Dan Greenhaus, market analyst at Miller Tabak & Co. in New York. “How consumers perform in a massive deleveraging phase remains to be seen.”

-- Walter Hamilton
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Day Trading For a Living

Some people love numbers, and the thought of learning a whole new language of technical jargon thrills them to no end. They think with the analytical side of their brain at all times, and can be counted on to see the big picture, no matter what else is going on around them. These people have the super speedy brains of a numbers-based genius, nerves than can be slightly shaken, but never stirred, and just a touch of brass; they are the perfect person to take on day trading for a living.

Do not get the idea that these are just some kind of young, hip cowboy types that roam in making trades at random, raking in the big financial rewards as they do so- they must truly know their stuff and they have to have an innate sixth sense ability before heading out into the day trading world. That world, by the way, is online, so heading out is a misnomer as well. Day trading activity takes place daily, online with the more short-term trades that they move quickly. They are literally traders, rather than investors, but can reap huge rewards in a relatively short period of time. Of course, day trading for a living does carry some fairly large monetary risks, so you must know a little about the market, your limits and what your loss cap is before even beginning.

Day traders do not always buy and sell their stocks in the course of the day, some may be held onto for a few days or even a week or more, in an activity commonly known as "swing trading". Doing day trading for a living will probably encompass both types of trading activity, especially on days when certain stocks are fairly flat. Knowing the trends of stocks is always a wise idea, and while the day trader moves quickly, without the wait and see approach of a more traditional trader, they do know and understand these trends.

Before thinking about day trading for a living you must know more than just the stock market and your own capabilities. A day trader must function under certain regulations which include minimum equity requirements for a day trader account, as the day trade buying power of that account and what defines a trader as a day trader. You do not want to begin your new career with SEC trouble looming over your head. Check out the regulations and the requirements. Do your homework and possibly buy and download the applicable software to your home or office computer. Day trading for a living can be lucrative, or it can be the financial death of you, know what you are getting into before you get into it.

Article Written By J. Foley

Stocks Finish Higher, Led by Techs

The market posted its fourth straight weekly gain despite more gloomy news on the labor market and a decline in service-sector sentiment

U.S. stocks closed higher Friday, sending the market upward for a fourth straight week. The advance was led by tech issues after Research in Motion (RIMM) posted robust fourth-quarter results.

On Friday, the 30-stock Dow Jones industrial average finished higher by 39.51 points, or 0.50%, at 8,017.59. The broad S&P 500 index moved up 8.12 points, or 0.97%, to 842.50. The tech-heavy Nasdaq composite index added 19.24 points, or 1.20%, to 1,621.87. On the New York Stock Exchange, 21 stocks were higher in price for every 10 that declined. Nasdaq breadth was 16-11 positive.

Treasuries plunged. The dollar index eased. Gold and crude oil futures fell.

The stock market's higher close followed earlier bouts of profit taking, as investors digested news of another hefty drop in nonfarm payrolls in March while preparing for next week's start of the first-quarter corporate earnings season. The gains extended rallies from earlier this week that drove all three major market indexes up more than 20% off their bear-market lows in early March.

Federal Reserve Chairman Ben Bernanke discussed the Fed's balance sheet, which has expanded in bid to help the economy work out of recession.

In a speech Friday, Federal Reserve Chairman Ben Bernanke said the Fed has used its balance sheet "prudently," in conjunction with a multiplicity of new programs. He also cited the drop to record lows in mortgage rates as a sign that the Fed's actions are having their intended effect.

Bernanke also indicated the Fed has taken care to design its programs so that they will be unwound as markets and the economy revive. The speech detailed the various Fed programs as it essentially retooled its balance sheet to meet the needs of the credit markets.

In economic news Friday, the U.S. ISM nonmanufacturing index slipped to 40.8 in March from February's 41.6. The index is up from its all-time low of 37.4 in November 2008, but is well off its 49.6 print a year ago. However, the business activity index improved to 44.1 versus 40.2 (it was 52.2 in March 2008). New orders fell to 38.8 from 40.7. The employment index slid to 32.3 from 37.3. New export orders dipped to 39.0 from 40.0. Prices paid fell to 39.1 from 48.1. The composite manufacturing and nonmanufacturing edged down to 40.3 from 40.9.

"The data disappointed expectations for modest improvement and that should give Treasuries a little boost at the expense of stocks," says Action Economics.

U.S. nonfarm payrolls lost 663,000 jobs in March, and a bit stronger than the 650,000 expected. The unemployment rate rose to 8.5% from 8.1% the month before, though about as expected. While February's 651,000 decline was not revised, January was revised down to -741,000 (previously 655,000), with job losses averaging 685,000 in the first quarter. Average hourly earnings rose 0.2%. Average weekly hours dipped to 33.2 from 33.3. Total goods-producing sector lost 305,000 jobs, with a 161,000 decline in manufacturing, and an 126,000 drop in construction. Business services lost 133,000 jobs. Only health care added jobs, about 8,000.

"The headline data were about in line with forecasts. While the data indicates the job weakness continues, the report failed to realize the worst fears of a greater than 700,000 drop in jobs," says Standard & Poor's senior economist Beth Ann Bovino.

The persistent rally of stock market

The stock market
enjoyed an unusually strong week with the BSE Sensitive Index finishing 12.06% or 1,081.81 points higher, and the Nifty ending
10.74% up. The CNX Midcap Index underperformed the main indices with a relatively modest gain of 5.77%.

Tata Steel was the biggest winner among the index stocks with a 26.9% gain. The other index stocks to go up included ICICI Bank, HDFC Bank, Sterlite Industries and State Bank with gains falling between 19.3% and 18.0%. None of the index stocks declined last week.

Unitech was the biggest winner among the more heavily traded non-index stocks with a 33.2% gain. The other non-index stocks to go up included PNB, Aban Offshore, Lanco Infratech, Axis Bank, Sesa Goa, JSW Steel and Yes Bank with gains falling between 32.4% and 23.6%.

Akruti City was the biggest loser among the more heavily traded non-index stocks with a 51.6% loss. The other non-index stocks to go down included Edserv Softsystems, MindTree, Crompton Greaves, Tulip Telecom, Everonn Systems , Firstsource Solutions and Gujarat NRE Coke with losses falling between 22.1% and 2.9%.

Intermediate Trend

The market remains in the intermediate uptrend which started on March 6 when the Sensitive Index made a bottom at 8,047. The levels below which the uptrend would end are now a considerable distance down at 8,867 for the Sensitive Index, 2,739 for the Nifty and 3,190 for the CNX Midcap Index.

These would be revised upwards to the level where the next minor decline bottoms out. Most global markets are in fairly strong intermediate uptrends, and are typically somewhere between their one-month and three-month highs.

Long-Term Trend

The market's long-term trend is down. The index has been in a 3,300-point range between 7,700 and 11,000 since the end of October, without any clear sequence of rising or falling tops and bottoms. It would therefore be best to take 11,000 as the level to cross for the Sensitive Index for a bull market confirmation. The corresponding level for the Nifty is 3,250, and that for the CNX Midcap Index is 4,000. (Figures have been rounded upwards).

Almost 25% of the market's heavily traded stocks are now at two-month highs or better, and over 15% are above their 200-day moving averages. These could be the first signs that the bear phase may have already ended. In any event, quite a few stocks may have already left the worst behind them.

Trading & Investing Strategies

The market is currently in an intermediate uptrend, and long-term investing should be put on hold until the next intermediate downtrend develops and has run for a week or two. It will be a good idea to hold on to past and recent investments, and not get out of them as this rally progresses. This portfolio building exercise suggested over the last few months is simply to buy stocks at low levels, and not in anticipation of an early end to the bear market - even though this now looks like a distinct possibility.

Global Perspective

The major trends of all global markets remain down, but the intermediate trends of almost all the markets are up. The Dow would enter a bull market (major uptrend) if it were to climb above 9,500. The Shanghai Index has crossed its 200-day moving average, and a global bull phase will become a real possibility if other indices follow suit.

The BSE Sensitive Index had lost 37.5% in the twelve months that ended on Thursday, keeping it at the 21st place among 35 wellknown global indices considered for the study. Chile continues to head the list, but with a 11.6% loss. New Zealand, South Korea, Israel and Spain follow. The Dow Jones Industrial Average has lost 35.6% and the NASDAQ Composite has lost 30.4% over the same period. (These rankings do not take exchange rate effects into consideration).

(The author is an independent technicals analyst)

Sifting for Gold Among High-Profit Stocks

It's time to draw up a shopping list in preparation for the market's recovery. Here are 56 solid stocks that offer compelling value, relative to bonds, based on earnings yield. Topping the list: WellPoint.

THE DAY WILL COME when you will want to own stocks again. Really, truly, it will. After last week's strong showing, maybe you are already feeling a little left out. Bear-market rallies will eventually give way to a full-blown bull market. And when that time comes, you don't want to miss it. For that to happen, it is vital to prepare a blueprint to help guide your investment choices.

Jeremy Grantham, market seer and chief investment strategist of Boston money-management firm GMO, stressed the importance of being ready for the inflection point in a recent piece titled "Reinvesting When Terrified." He concluded that "you absolutely must have a battle plan for reinvestment and stick to it," all the more so when prospects appear their darkest. GMO now forecasts healthy long-term returns of 10% to 13% for equities.

There is no question that in an environment in which assets are still being repriced and balance sheets restructured, caution is wise. No one is suggesting investors should double down on the market -- but it is probably time to start averaging down.

DRAWING UP A PLAN OF ACTION and setting certain investment parameters before heading into what is arguably still a war zone should offer investors some protection against losses while positioning portfolios to capture potentially powerful returns. If you are skeptical of the ability of stocks to outperform ever again, as a case in point Grantham recalls the 105% return in the Standard & Poor's 500 for a six-month period beginning in June 1933, long before unemployment peaked and bank failures ran their course.

In a five-month period during the 1974 bear market, he points to the 148% advance in equities in the U.K. Moreover, during the Great Depression, there were six advances of 20% or more before full recovery took hold.

To help you with your blueprint, we created a screen based on the earnings yield of a stock -- the earnings per share for the most recent 12-month period, divided by the current stock price. This percentage, which is the inverse of the price/earnings ratio, provides a way to compare stocks with bonds or money-market instruments. The higher the yield relative to fixed-income securities, the better the value of the stock. Ray Dalio of Bridgewater Associates has said the key piece of advice he would offer to investors would be to consider the earnings yield of a stock before making an investment.

Understanding that the earnings outlook for a company isn't etched in stone, most of the stocks in our screen, with just a few exceptions, are expected to produce decent -- if not exceptional -- long-term earnings growth, a factor that will only enhance the rate of return compared with bonds. Last week's huge Treasury-market rally made these stocks look more attractive.

WE HAVE SCREENED FOR COMPANIES whose earnings yield is at least twice that of the 10-year Treasury's recent 2.8% level (it was trading at 2.61% on Friday). We chose that multiple to take into consideration the extra risk associated with stocks. Right now, the stock market as a whole, as measured by the S&P 500 and its earnings yield of 9%, appears to be undervalued in relation to bonds as measured by that 2.8% Treasury-yield yardstick.
Table: Better Than Bonds

We wanted to isolate those companies on the best financial footing, so we weeded out those with debt-to-total-capitalizations higher than 40% and debt-to-equity ratios greater than 60%. To underscore our emphasis on stability, only companies with market values higher than $15 billion made the final cut.

You might wonder why we didn't just screen for dividend yields -- which investors typically use when making a decision on buying a stock. Our thinking is that with companies increasingly slashing or suspending dividend payouts to conserve cash flow and bolster liquidity in these troubled times, this is fast becoming an unreliable indicator of a stock's potential investment return.

Not surprisingly in the current environment, only two financial companies made it to our final screen. They are property-casualty company Traveler s (ticker: TRV), with an earnings yield of 15% and mean long-term earnings-per-share growth estimated at 8.5%, and Warren Buffett's financial conglomerate Berkshire Hathaway (BRKA), with interests in insurance as well as manufacturing, media, consumer-discretionary and retail sectors and an earnings yield of 7.5%.

Travelers' conservative management of its investment portfolio, stable personal-lines business, manageable debt load, and strong balance sheet has helped it weather the current downturn well, and should give it an edge in a recovery.

Berkshire Hathaway is, well, Berkshire Hathaway (see Barron's, "Don't Count Out Berkshire Hathaway," March 2). Despite pressure on its investment portfolio from an ill-timed foray into the oil patch through a ConocoPhillips (COP) stake -- Conoco also makes it onto our long-term list -- and Buffett's staunch support of some beleaguered banks, plus some derivative bets that so far appear to have backfired, Berkshire ended 2008 with $24 billion in cash. And it continues to be well-positioned to take advantage of others' travails. One area Buffett now finds attractive is high-yielding investment-grade corporate bonds.

Only one utility makes our list: Duke Energy (DUK), a pure-play electric utility sporting a 9.9% earnings yield and estimated mean long-term earnings growth of about 4%. Duke has ample liquidity to support growth and see it through this economic crisis. Investors will likely be drawn to its solid balance sheet and geographic diversity, as well as its 7% dividend yield -- which in this case appears to be sustainable.

Most heavily represented on our list are companies in the health-care and information-technology sectors. Indeed, Nos. 1 and 2 on the list of 56 companies are managed-health-care companies WellPoint (WLP), with an earnings yield of 17.2%, and UnitedHealth (UNH), boasting an earnings yield of 16.8%.

After a difficult couple of years, WellPoint is on track to improve its shareholder returns. New management is in place, claims inventories are down, and reserves have been strengthened. The company is expected to generate free cash flow of $3 billion in 2009, and to repurchase up to $2 billion of its shares this year.

Topping the list of info-tech stocks is Hewlett-Packard (HP), whose earnings yield is 12.9%. Hit hard by the global downturn and frozen IT budgets, the computer-printer giant posted lower-than-expected revenue in its fiscal first quarter, and reduced its earnings outlook. But synergies from its acquisition of EDS as well as share gains should provide meaningful earnings support. When spending does tick up, Hewlett-Packard is well-positioned to benefit (see the Dec. 29, 2008 Barron's "How HP Prints Profits"). Meantime, it ended the first quarter with $11.3 billion in cash; operating cash flow was $1.1 billion. Also, the company has $7.9 billion remaining in a share-repurchase program, after buying back $1.2 billion of its shares in the prior quarter. Needham & Co. has called Hewlett-Packard "a must-own name in large-cap tech."

There are few media companies that make the grade, but one that does is News Corp . (NWS, Class B), owner of Dow Jones, which publishes Barron's. News Corp. shares have been battered by the deep advertising recession affecting the entire newspaper industry. Also, when Peter Chernin, Rupert Murdoch's longtime second-in-command, announced recently he would leave the company, concerns were raised about succession plans.

Still, the company's balance sheet is in fine shape, with a manageable debt load and cash available to cover its obligations through 2015. News Corp. is expected to generate $2.2 billion in free cash flow this year. At 8.1%, its earnings yield is about 2.9 times the yield of the 10-year Treasury. The stock could benefit if management chose to buy back shares, a signal that the worst for the media industry and economy might be over. At least one analyst has a price target of $14 on the shares, which would indicate a roughly 100% move from current levels.

Our screen, while not foolproof, is compelling for the values it has turned up among companies representing a wide range of sectors. The size and standing of the companies as well as their sound balance sheets and potential for growth should result in meaningful returns for those investors with an action plan in their pockets.

E-mail comments to mail@barrons.com

Making Sense of the Stock Market's Wild Ride

Fortunes are won and lost from day to day in a volatile market that shows no signs of settling down soon

By Ben Steverman

Once again, the wild stock market has made fools of those who would try to predict its direction.

Amid buckets of bad news and a gloomy mood on Wall Street, stocks took a violent swing to the upside. In just three days, the broad Standard & Poor's 500-stock index advanced 10.7%, which is more than what stocks rose in four of the last five years.

That followed a scary descent for the S&P 500 to the lowest levels in more than 12 years. From Jan. 6 to a low on Mar. 6, the S&P 500 dropped 29%.

All this volatility makes stock market investors look like they can't make up their minds. If stocks prices change so much from Monday to Thursday, investors apparently don't know what U.S. companies are really worth.There are two common ways of explaining the market's recent rally, and both underscore investors' extreme uncertainty and skittishness.
Citigroup Memo

The first explanation is based on theories about how markets work. For one thing, stocks rarely fall day after day without a break. Stocks "were more oversold than [they've] been in my 13 years on Wall Street," says Dave Rovelli, managing director of equity trading at Canaccord Adams. "We were due for a rally."

Stocks seemed to react to a Mar. 9 letter from Citigroup (C) Chief Executive Vikram Pandit, touting his troubled bank's performance in the first couple months of 2009. But to Rovelli, that was just a trigger to a rally that would have started eventually anyway. The S&P 500 had declined in 13 of 16 trading sessions from Feb. 13 to Mar. 9.

Richard Sparks of Schaeffer's Investment Research agrees. "The market was ripe for a rally," he says.
Shift in Market Psychology?

The rebound was driven not by long-term investors but by traders with a very short attention spans. "It's driven by big money, momentum players," Sparks says. "It's such a tough market to trade," that these market participants focus on "very short-term time periods." Traders jump on market trends, but those moves don't last long and can turn on a dime.

The volatility is most striking in the financial sector. From Mar. 10 to 12, one measure of the financial sector, Financial Select Sector SPDR (XLF) rocketed 30% higher. The same index had lost half its value from the beginning of the year to Mar. 9. Professional traders are no doubt making—and also losing—a lot of money on these rapid moves. Successful traders must be "nimble enough and right enough," Sparks says.

Some wonder, though, if the past week marked a significant shift in market psychology. Dan Genter, president of RNC Capital Management, says the recent rally doesn't just reflect the moves by short-term traders but also by long-term investors who are beginning to put money into the market.
Pricing In Worst-Case Scenarios

Stocks—particularly bank stocks—were trading at absurd prices. "All these companies are not going out of business," he says. By falling to 1996 levels, stocks priced in a worst-case scenario for both the economy and for earnings prospects. At those levels, "unless you think the world is coming to an end, it's difficult not to be bullish long-term," says Uri Landesman of ING Investment Management (ING).

Few in the market believe the world has solved its economic and financial problems—quite the opposite. But, Genter says, "it's not just in freefall anymore." He hopes that, by dropping to an extreme low this month, stocks now have a new low below which they're unlikely to fall again.

Landesman says the market needs to see a strong rally from these levels. Or, he worries, stocks will lose their momentum and fall back again. Rovelli also warns of more volatility ahead, particularly in the next couple weeks as bullish and bearish traders battle over the direction of the market.
Long-Term Volatility?

The wild ride could last much longer than that. Scott Jacobson, an expert on volatility and chief investment strategist at Capstone Sales Advisors, says high volatility in the stock market tends to last for two to four years during and after a recession. "I'm sure we have two years of volatility at least," he says.

The problem with a volatile stock market is that it doesn't just reflect investor uncertainty. Wild swings also cause uncertainty and confusion among the investing public, who see their retirement nest eggs grow or shrink erratically from day to day.

Market observers often say the stock market is supposed to move higher six months before the economy does. But, from this standpoint, it's impossible to know whether the market's newfound optimism is a harbinger of things to come, or simply a temporary rest stop on the market's trip ever lower.

Steverman is a reporter for BusinessWeek's Investing channel.

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How to select a Forex Broker

The decision of which brokerage firm is best for you is as important in the Forex market as it is in the Stock Market. The way of evaluating the various firms differs slightly between the two markets, however. Forex trades do not involve commissions, but they do have what are known as spreads, which is the difference between the price a currency can be purchased and the price for which it can be sold at a given point in time.

This spread (which is expressed in "pips") is how the brokerage makes its money, so it serves the same purpose for them as a commission. You can be pretty certain that the spreads vary between brokerage firms just as widely as commissions do in the Stock Market, so investigate this carefully before making your selection.

Most brokerages dealing with the Forex market are involved with large financial institutions where the funds are available to provide sufficient leverage for their clients. It is still important to make sure your firm is reliable. They should be registered as a FCM (Futures Commission Merchant), and regulated by the CFTC (Commodity Futures Trading Commission).

Most firms offer widely varied packages of tools that assist you in making trading decisions and understanding the market better. They provide information and research that is available to you in many different formats. It is wise to take a little time to study these tools, and to find the ones that are most helpful to you. They are going to end up being very important and you need to be comfortable with them.

Look for a firm with a wide variety of account and leverage options. The ability to use the Forex market's advantages in leverage is one of the things that makes it the most attractive to you as an investor, and you want to have the maximum flexibility here. Although there are a few unethical firms operating, a few references and inquires should be able to identify them. This selection process is worth a little effort and an investment of time. It is an investment that is going to the most likely to pay off.

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Despite grim news, market has best week of the year

COMBINED NEWS REPORTS
February 8, 2009

More jobs were lost in January than in any month since December 1974. The unemployment rate is the highest since September 1992. President Barack Obama said the economic downturn "could not be more serious." Wall Street's reaction? Let's party.

Despite the grim economic news, the Dow and the S&P 500 index had their best week in more than a month. The Nasdaq composite index had its biggest weekly gain since November.

The Labor Department said the nation lost 598,000 jobs last month and the unemployment rate climbed to 7.6 percent. If part-time employees, discouraged workers and others are factored in, the unemployment rate would have been 13.9 percent in January, highest on record.

"People are thinking ahead to what are these numbers going to look like in June," said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. "Main Street is in free fall, which is where Wall Street was in September and October. Wall Street since mid-October has been flat, and that's what Main Street might look like by spring or early summer."

The Dow Jones industrial average closed Friday at 8,280.59, a gain of 3.5 percent for the week. The Nasdaq composite index finished at 1,591.71, up 7.8 percent. The S&P 500 index ended at 868.60, a rise of 5.2 percent.

Much of the last week's big rally was attributed to hope that a bank-rescue plan, scheduled to be unveiled Monday by Treasury Secretary Timothy Geithner, will lift the economy from recession.

"All focus right now is now is really on Washington," said Dan Cook, senior market analyst at IG Markets

Advantage of Forex over Stock and Commodity Markets

When one begins to discuss the advantages of investment in the Foreign Currency Exchange Market (Forex) over the Stock or Commodity Market, it is quite easy to sound like a cheerleader and with the same kind of bias. The Forex market offers so many advantages that it is not hard to understand its popularity.

The Forex Market operates 24 hours a day. It is a truly world wide market, and when the sun goes down in one trading center, it is coming up in another. The Forex market, although it has its trends and cycles, is not locked in the Bear vs. the Bull market mentality of the Stock Exchange.

Since all Forex trades involve the exchange of one currency for another, one currency's hard times opens the door for a profit in another currency. The market is not adversely affected by rising interest rates. When a nation raises rates, generally the currency is strengthened, while rising interest rates tends to depress the stock market.

The combined number of different stock issues on the NYSE and NASDAQ exchanges totals 8000. That is a lot of stocks and it is time consuming to keep up with even a portion of them.

There are four major currencies, and only about 34 second tier currencies, to consider in the Forex. Brokerage firms do not stand between you and profit in the Forex. Not only are the brokerage and commission fees almost non-existent, but analysts in the Forex tend to actually analyze in the currency market and not dictate or control the rise and fall of the market.

When the two markets are compared, the Forex certainly looks like the better investment choice.

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How to Formulate a Profitable Trading Plan In The Forex Market

Investments & Trading

There is no magic formula that ensures profit on any type of investment. The forex market is no exception to this, but there are some steps you can take when devising your own personal investing plan that will not only make profit a more likely result, but will insulate you somewhat from disaster.

* Select Your Term: There are three basic time frames within the forex market dealing with the length of time a position in a certain currency is held. They are long term, medium term, and short term. Each has its advantages and disadvantages. The short term position holder, sometimes known as a scalper, will be making rapid fire trades often exchanging currencies back and forth within a single day. The long term trader will hold on to his currency for months or even years. The medium term trader usually holds his positions for a few days or a week. The advantage of the medium term is that it requires the least amount of capital to realize profit. Leverage is only needed to boost that profit, whereas in both long and short term trading, it is needed to both protect the investment, and insure any chance of profit. Although medium term is recommended for the beginning investor, and involves less risk, you need to identify which is right for your personal plan, and stick to it. A plan that tries to use all three at once will most likely lead to confusion.


* Learn to Use Technical Analysis: The forex market lends itself very well to statistical analysis. Trend following is an example of a type of analysis that can guide the investor in making profitable decisions. Technical analysis of the market includes monitoring price movement as well as a large number of indicators. There are programs available where this large amount of data can be crunched in any way that fits your own individual plan and your own needs. You are going to need to find the right way to access and organize the data required for the execution of your own individual investing strategy.


* Learn to Perfectly Time Your Trade: One of the features of the forex market is the ability of the investor to insulate himself from drastic market swings. This is partly because of the 24 hour nature of the market. With the exception of weekends, there is a forex market operating somewhere day and night. A good trading plan should include both "stop loss" and "take profit" orders. These are simply instructions to change your currency position when either your profit or your loss reaches a certain point. The stop loss order is more easily understood. This is simply bailing out before things get too bad. The take profit approach usually meets with more resistance, and it is true such an order might prevent you from making even more profit should a volatile change keep propelling the value upward. Volatile is volatile, however, and what goes up fast may come down faster. As you can not monitor your account twenty four hours a day, you want to know that if your profit point is reached while you are soundly sleeping, at least your expected level of profit will be realized.

One of the biggest advantages of the internet age regarding forex trading is the ability to freely use demo accounts - which are basically virtual forex games. These programs give you a chance to invest virtual money and see how well you do. Once your personal trading plan is formulated, execute it using a demo account. By doing this you will get a chance to see how it works, iron out any bugs, and fine tune your entries and exits, before you risk a single penny.
To learn an amazing breakthrough system that can skyrocket your trading profits, "Go Here Now"

5 stock experts foresee 2009 rebound

By Adam Shell, USA TODAY
NEW YORK — With the stock market on track for its worst year since 1931, Wall Street strategists are predicting a rebound in 2009.

A review of year-end '09 targets for the Standard & Poor's 500 index by five top market strategists found that nearly all expect double-digit percentage gains, despite another year of sharp swings. The most bullish projections call for a 24% gain from current levels.

Wall Street's gurus, however, were also bullish heading into 2008. While most predicted a stormy first half, none forecast the financial hurricane that engulfed investors. The S&P 500 is down 39.3% in 2008, the worst since a 47.1% drop in 1931, S&P says.

But predicting a rebound may be based on more than hope. Stocks have snapped back sharply after past historic declines. After stocks bottomed out after an 89.2% drop in July 1932, for example, the Dow Jones industrials rallied 93.9% the next two months, Dow Jones Indexes says.

Similarly, the S&P 500 rebounded 25.2% in 1938 after falling 38.6% in 1937, S&P says. After the 2000-02 bear market bottomed, the S&P 500 rebounded 26.4% in 2003.

One caveat: The S&P 500 fell 15.2% in 1932 after its record 1931 decline.

The strategists are betting on:

•An economic recovery. At some point after mid-2009, a rebound should occur, says Thomas Lee, U.S. equity strategist at JPMorgan Chase. But Lee says investors shouldn't rush back into stocks immediately.

He expects a rally early in the year on initial optimism about the bailout plans. Then he expects a pullback because of headwinds such as weak earnings. He says tailwinds such as lower gasoline prices, fiscal stimulus and a stabilization of the housing market will help stocks by year's end.

•Government stimulus plans. "The size of the global policy response to stabilize both the financial system and the growth outlook is virtually unprecedented," writes Abhijit Chakrabortti, strategist at Morgan Stanley.

•A repeat of history. "When this bear market ends, be prepared for a fast and furious partial recovery," S&P's chief investment strategist Sam Stovall writes in his 2009 outlook. Historically, the S&P 500 has recouped, on average, 33% of its bear market losses 40 days after a bottom.

Stick to your plan in a volatile market

Posted: Dec. 27, 2008 7:33 p.m.

Fourth quarter 401(k) statements will be arriving soon like a lump of coal in everyone's stocking.

Falling home prices have kept investors nervous since the fourth quarter of 2007. But when Lehman Brothers filed for bankruptcy protection in September, things went from bad to worse.

What made this stock market drop so painful is that, this time, there's been almost no safe place to put your money. Everything dropped simultaneously. Diversification, meant to lower portfolio volatility, was rendered completely ineffective by panic selling in all asset classes.

In terms of magnitude, it's the third-worst drop in stock market history (-51.9%), if we use Nov. 20 as the bottom. The other two drops that were bigger: Sept. 7, 1929, to June 1, 1932 (-86.2%), and March 6, 1937, to March 31, 1938 (-54.5%). This has driven many 401(k) portfolios down 30% to 40% for the year.

So what's a 401(k) investor to do?

Don't let emotions dictate your investment decisions. Fear is a powerful motivator, but bailing out of the market now is not the answer. Today, stocks and corporate bonds are 30% cheaper, on average, than they were six months ago. Foreign stocks and bonds are even more depressed. While prices may still go lower, it's hard to see how selling long-term assets at some of the most depressed prices in the past 120 years will turn out to be a good idea.

Don't try to time this market. Sure, there's a chance that the market will drop more in 2009, but there's no way of knowing if that will happen or how far it might drop. What we do know is that historically, after a bear market bottom is reached, the bounce back is usually swift and significant. In fact, after 20 bear market bottoms that date back to 1903, the market rebounded an average of 46% over the next twelve months.

Develop a plan. 2008 will be, from this point on, the year financial planners use to illustrate the importance of having a proper saving and investing strategy for retirement. Those who started too late, saved too little or invested too aggressively as they neared retirement now face the reality of having to work longer or accept a lower standard of living.

Stick to your plan. Keep investing during lousy market periods, even if it feels unnatural. While your current asset-allocation strategy was probably no help avoiding a collapse in the value of your 401(k) account, that's not a good reason to abandon it now. It's impossible to know which fund category will bounce back first, so a diversified strategy is still your best approach to recover from this bear market.

Rebalance your portfolio back to your original target allocation between stock and bond funds. Say you had adopted an investment strategy that allocated 80% of your savings to a diversified portfolio of stock funds, and 20% to bond and stable value funds. Because of the beating stock funds have taken this year, your portfolio is probably now closer to 60% stock funds and 40% bond and stable value funds.

Because I believe we're close to the bottom, consider selling some of your bond and stable value funds now and purchasing more shares of stock funds to reallocate your holdings back toward your original target allocation of 80/20. Rebalancing gradually over the next six months will lessen the importance of the timing.

How you respond to this sharp drop in the markets could have a profound effect on how financially secure you are in retirement. History suggests that we are now looking at one of the most opportune times to invest that we've seen in a long time.

Michael J. Francis is president and senior investment consultant of Francis Investment Counsel LLC, a registered investment adviser based in Pewaukee. He can be reached at michael.francis@francisinvco.com.
The information in this article is for informational purposes only. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Francis Investment Counsel does not offer personal tax or legal advice.

Rebuild retirement savings with 401(k) and smart use of stocks

The bear market and the economic slump have caused most 401(k) retirement savings to have a major meltdown this year.

Not only has the financial mess caused retirement investments to plummet in value, it also has caused a growing number of employers to suspend their 401(k) company match.

But as gloomy as it all seems, you shouldn't spend the winter hiding under your blankets. After you put away your holiday decorations, it's a good time to regroup and learn from this year's pitfalls and mistakes.

Here are some tips for rebuilding your retirement savings in 2009:

Make sure you can sleep at night
FIND MORE STORIES IN: CDs | Enron | Vanguard | Hewitt Associates | Employee Benefit Research Institute | Pamela Hess | Center for Retirement Research | Jack VanDerhei | Christopher Jones | Financial Engines

As difficult as the year was, you may have learned some important things about yourself. You may be far less willing to take risks than you think.

"We've been through one of the most rapid and extreme bear markets in history," says Stephen Utkus, principal at Vanguard's Center for Retirement Research. "And if that wasn't a test of your risk tolerance, I don't know what would be."

If you're still comfortable with your asset allocation, then your risk and return are in a good balance. But if you've lost much sleep this year, you know it's time to reduce your risk and adjust your investment priorities.

Don't panic

After the worst financial crisis since the 1930s, you need to start 2009 by making a candid assessment of your retirement plan, Utkus says. If that means investing less in stocks, fine. Just be aware that you may have to increase your savings over the long term to compensate for the lower returns you'll get from bank CDs and money market funds.

If you shifted money in a panic, however, you might want to reconsider. So far this year, 401(k) trading activity has risen to 6%.

"It's only 6%, but it's very high, relative to other years," says Pamela Hess, director of retirement research for Hewitt Associates. "And there has been a lot of emotional selling."

Not surprisingly, most have moved their money into stable value funds and money market mutual funds. That may seem safe. But if you're planning to get back into stocks, don't think you'll be able to time the market. Most people simply sell low and buy higher.

"They really risk missing the upside," Hess says. "Then they are locking in an inferior return."

Start the year by making sure you have a smart financial strategy — and don't rely on the past when you plan for your future.

"Everyone says, 'The market is going down, therefore I shouldn't invest in equities,' " Utkus says. "You should think about how to be best positioned going forward, as opposed to spending too much time looking out the rearview mirror."

And most planners say that if you have a long-term investment horizon — 20 years or so — you should have most of your assets in stocks.

Diversify

Some plan participants were too aggressive in their investments by investing only in one kind of stock — small-company stocks, for example. When the market collapsed, their retirement savings did, too.

It's even more risky to be too concentrated in company stock, says Christopher Jones, chief investment officer for Financial Engines, which provides advice to 401(k) plan participants.

Even though the Enron debacle should have provided a cautionary tale about investing in company stock, that's still a major problem, Jones says. Many plan participants continue to invest 100% of their 401(k) money in company stock.

"They look at the stock market and say that they've done better in their company stock," he says. "The fallacy, of course, is that it doesn't guarantee anything about the future."

Make sure that you have a well-diversified portfolio that includes broad-based stock funds, such as those that track the S&P 500-stock index.

"Don't confuse bad investment results in the past with a good financial incentive going forward," says Jack VanDerhei, research director of the Employee Benefit Research Institute.

Be mindful of your age

When you're 30, you can put all your money in stocks because you'll have plenty of time to make up for losses. When you're 55, it's much harder to make up those losses. Many employees who are close to retirement are now suffering because they had overly invested in stocks.

But if they'd invested in a target-date fund, they would be in better shape. These funds invest in a mix of stocks, bonds and money funds based on when you plan to retire, and they're managed by professionals who make disciplined investment plans.

Nearly half of 401(k) plan participants who are ages 56 to 65 had portfolios that had at least 20% more in stocks than target funds designed for that age group did, says VanDerhei.

Many companies now use target-date funds as the default option for 401(k) automatic enrollment — but that generally involves younger employees, who are newly enrolled. Older plan participants should consider moving their 401(k) money into target-date funds, especially if they don't believe they have the financial acumen to accomplish their asset allocation on their own, VanDerhei says.

Keep saving

Even if the stock market calamity has made you feel frightened and demoralized, you should try to stay in the game, Hess says.

Then you can take advantage of the pretax savings that you have in a 401(k) plan. And if your company offers a matching contribution, you also can take advantage of that.

"You should make sure that you are saving enough to get every last penny of your company matching contribution," Jones says.

Unfortunately, more than 20% of the workers who participate in their plan don't contribute enough to get the full company match, according to Hewitt Associates.

Keep the big picture in mind

A growing number of employers are suspending their company match. That creates worries and resentment among workers, And some are considering dropping their 401(k) plan entirely.

But keep in mind that most companies, unless they go into bankruptcy, will eventually reinstate their matching contribution. And the responsibility for retirement savings was yours, anyway, says Sheryl Garrett, a financial planner in Kansas City, Mo.

"Companies have to cut where they think it inflicts the least amount of pain on their employees and their business," she says. "Cutting into your retirement nest egg temporarily is their way of trying to stay viable and continue giving you a paycheck."

Don't cash out

Younger employers tend to cash out their 401(k) plan when they switch jobs. Big mistake.

For most, if they have $10,000 or less in their plan, it looks like free money, and retirement seems far away, Hess says.

But if a 25-year-old has just $5,000 in a retirement account that earns a 7% average rate of return, it will be worth $74,872 when the worker reaches 65 — even without adding any more money, according to Hewitt.

Take charge

Most people are passive investors, Hess says. It would be great if they took a more active role in their savings.

By Christine Dugas, USA TODAY

In the past, many workers had a pension plan, so 401(k) plans were a supplemental benefit.

"Now, they are our main savings vehicle, and so it's important to have a plan and stick with it," Hess says.

If you need help, you should check out the tools and advice that your employer offers, or talk to a financial planner. But start out the year with a good retirement plan.

"Keep in mind that for most Americans, a 401(k) plan is the bedrock of their retirement saving," Jones says.

"You are responsible for making the investments and for bearing the consequences of the investment risk."

You Can Make Money in Any Market

By John Rosevear
December 23, 2008

Do you know what gets me about the recent stock market blowup?

Somebody out there made a bundle off it.

I know, it's hard to believe. Most folks' retirement account balances are way down. Every single stock mutual fund (all 11,579 of them) is down this year, and highfliers from Akamai (Nasdaq: AKAM) to Apple (Nasdaq: AAPL) -- and that's just the beginning of the alphabet -- are way off their recent highs.

But somewhere out there are investors who made money this year. Lots of money, in some cases.

Many are professionals, of course -- hedge fund managers and others with access to sophisticated tools and strategies -- but others are just ordinary individual investors like you and me. Like you and me ... except that they've learned to use tools and strategies we haven't.

Like going short.

The long and short of it
Most mutual funds aren't allowed to short stocks -- to borrow and sell them, in other words, betting that they'll be able to buy the stock back at a lower price and make money on the difference. Many individual investors avoid the practice as well. The risks are high, the upside is limited, and shorting can't be done at all without a margin account, which excludes most retirement accounts.

But sometimes shorting a stock -- or a sector, or an index -- is a prudent investment. Markets go down as well as up, as we've seen recently. Sectors fall out of favor. Companies sometimes appear headed for disaster long before the wider market catches on, as was the case with Lehman Brothers for a while. Bubbles appear, become evident to some, and then pop.

Shorting banks, oil, or other commodities earlier this year would have been an excellent move, and the weaknesses in all three of those areas were visible to some folks at the time. But how many profited? A lot fewer, because shorting is dicey, and, as I mentioned previously, it's a strategy unavailable to most who do their investing via IRA accounts.

But that's changing. New tools allow investors to take short positions without the need for a margin account. These offer great opportunities for the informed -- along with some new risks.

Enter the short ETF
Most investors are familiar with ETFs. Exchange-traded funds track a wide variety of indexes and are traded throughout the day, like stocks. In recent years, companies like ProShares have created families of short ETFs -- investments that go up when the indices they track go down. (And -- this is important -- vice versa.)

The selection has grown rapidly. ProShares alone offers an extensive selection covering all the major U.S. and international indices, sectors from financials to industrials to health care, commodities including gold and crude oil, major currencies, and more.

Be careful of that lever
Many of these are leveraged, or what ProShares calls "UltraShort," so for every 1% move down in the underlying index, the fund is supposed to go up about 2%. They don't track precisely in practice, but close enough to work out well if you're right, and to cost you a bundle if you're wrong (although unlike a true short position you can't lose more than your original investment). Still, tread very carefully with these products.

The lack of precision has been an issue for some short ETFs. While a fund like UltraShort Oil & Gas (NYSE: DUG) is designed to inversely track an index that includes obvious sector heavyweights like Chevron (NYSE: CVX), Schlumberger (NYSE: SLB), and ExxonMobil (NYSE: XOM), the fund's actual holdings are complex derivatives, not short positions in those stocks. The "black box" aspect can be a turnoff for some.

Nonetheless, these ETFs remain useful tools -- not the one fund to carry you to retirement, but a way to take a well-thought-out position on the market, in a sector, or on a currency or commodity. But for once, I'll advise you to think in the short term on these investments. Long is the way to bet long term, as this bear market won't last forever.

Putting it all to work
I've used short ETFs in a small way in the past few months. Most significantly, in the midst of the market crash in early October, I threw a portion of my portfolio's cash position into UltraShort S&P 500 ProShares (NYSE: SDS), which acted as a sort of brake on my portfolio as the declines continued. In that case, the double leverage was exactly what I wanted -- to have a big effect with a relatively small investment.

More recently, I've explored using both long and short ETFs to take longish-term positions on currency movements and sector strengths. The Fool's new $1 million real-money portfolio, Motley Fool Pro, is employing similar strategies using ETFs and short positions together with a core stock portfolio, and I've learned a lot by following its investments.

If you're interested in learning more about Motley Fool Pro and long and short strategies using ETFs, the service will be reopening soon, but for 10 days only. To learn more, and to get your private invitation to join, simply enter your email address in the box below.
"The most exciting development in my lifetime!" 15 years ago, Motley Fool founder David Gardner uncovered a secret that changed how he'd invest forever. It can make you money in up, down, and rollercoaster markets. To learn more, enter your email address now.

Fool contributor John Rosevear owns shares of Apple. Akamai Technologies is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. The Motley Fool has a disclosure policy.

Forex Training is a Must For Anyone Serious About Turning a Profit in The Market

Investments & Trading

No matter how well you did in school or what kind of IQ you have, we all need specialized training in certain areas. The forex market is no exception to this. Forex training should be a prerequisite for anyone considering getting serious about trading world currencies for profit.

Is formal training truly necessary? After all, there are plenty of books and online articles on the subject. Wouldn’t it be enough to read them on your own and getting into the market without going through the hassle of official training?

Well, look at it this way. You could read manuals on how to fly a plane, but you probably wouldn’t want to try it for real without getting some hands-on training first in a simulator. By the same token, you shouldn’t jump into buying and selling currencies without getting some training first. You might be able to manage successfully without it, but you’ll be so much better prepared with it.

Forex is a complicated, highly nuanced financial area, and the people who are experts in it are aware that the average person knows almost nothing about it. To help share the wealth of information, the experts have devised a number of training systems on the Internet and elsewhere.

Many forex training systems offer simulators or practice accounts. In these, no real money is involved. It’s pure simulation, giving new traders an up-close-and-personal look at the market without any financial risk. In these demos, you get all the charts, figures and other data you’d get if you were doing it for real. It’s excellent practice for the real thing.

Forex training is seldom free, however. Depending on the type and depth of training, it can be anywhere from $50 to several hundred dollars. How much training you need depends on how serious you are about joining the marketplace. If you truly want to make money buying and selling currencies, it might be wise to get as much training as possible. On the other hand, if you intend to do it as a hobbyist, and if you limit your investments up front to adjust for the learning curve, you might do well enough with just the basic training.

Either way, you owe it to yourself to follow the training lessons carefully. Learn as much as you can from the resources available to you. It will help you turn a profit when you get into trading and help you minimize your financial losses.

Article Writt4en By J. Foley

Wall Street dips on Morgan woes

Stocks churn - and briefly pull into positive territory - but an afternoon rally doesn't hold, and all three major indexes end the day lower.

By Catherine Clifford, CNNMoney.com staff writer
Last Updated: December 17, 2008: 6:06 PM ET

NEW YORK (CNNMoney.com) -- Stocks ended lower Wednesday as investors tried to shrug off a bigger-than-expected loss from investment bank Morgan Stanley, but an afternoon rally failed to hold traction.

Wall Street took a hit Wednesday in the wake of the severe losses from the nation's second-largest investment bank, but sentiment was still buoyed by the Federal Reserve's rate-cutting announcement Tuesday. At this point in the recession, investors are not easily flustered by yet another loss booked by a financial giant.

The Dow Jones industrial average (INDU) lost 99.8 points, or 1.1%. The broader Standard & Poor's 500 (SPX) index ended down 9 points, or nearly 1%, and the Nasdaq composite (COMP) shed almost 11 points, or 0.7%.

Stocks started the session sharply lower and battled back to positive territory briefly, but in the final hour of the session, stocks gave back all of their earlier gains.

One analyst said that Wednesday's volatility was in line with the market's recent turmoil. "One thing you have to keep in mind is the volatility that we have seen over the past couple months," said Ed Clissold, senior global analyst at Ned Davis Research.

Wall Street's sharp drop at the open was anticipated, given the big gains on Tuesday, when the Dow jumped 360 points, or 4.2%. Even if investors had not been dealing with the news of the massive Morgan losses, stocks would have snapped lower in reaction to the sharp gains on Tuesday, a market observer said.

Harry Clark, chief executive and founder of the Clark Capital Management Group, said the market "is taking bad news in stride these days." While massive financial-sector losses weigh on investor sentiment, Clark said that the market is looking for a recovery.

Clissold echoed the sentiment that the market has been braced for negative news. "When a large financial company reports bad earnings, investors for the most part treat that as what would be expected," Clissold said.

Investors were also still digesting the decision from the Federal Reserve Tuesday to cut the key lending rate to record low levels as it pledged to consider further ways to spur economic activity.

Meanwhile, market breadth was positive. Advancers beat out decliners 3-to-2 on the New York Stock Exchange on volume of 1.34 billion shares. And advancers just beat decliners on the Nasdaq, with a volume of 2.16 billion shares.

Company news: Before markets opened on Wednesday morning, Morgan Stanley (MS, Fortune 500) posted a staggering $2.3 billion loss for the fourth quarter, which was far greater than the $298 million loss that analysts were expecting, according to Thomson Reuters.

The loss was even worse than what analysts were bracing for and was yet another indication that every part of the financial sector has been battered by stock-market volatility and credit-market weakness.

The announcement from Morgan Stanley comes the day after rival Goldman Sachs (GS, Fortune 500) posted a $2.1 billion loss - the company's first since it went public in 1999.

Fed rate cut: Wall Street's pullback Wednesday came on the heels of a rally on Tuesday precipitated by the Federal Reserve cutting its key lending rate to the lowest level on record.

The U.S. central bank lowered its key interest rate to a range of between 0% and 0.25%. The rate cut was the 10th time the central bank has slashed rates in the past 15 months.

The central bank has attempted to juice the economy, which officially fell into recession at the end of 2007, with an aggressive rate-cutting campaign.

However, now that the key lending rate is near zero, the central bank may have to find other ways to spur the slumping economy. In fact, in the Fed's rate-cut statement released on Tuesday, the agency indicated that it would consider purchasing its own long-term Treasurys.

"The Fed has really stepped up," Clark said.

He added that investors have taken comfort in the central bank's moves, as evidenced by Tuesday's rally on Wall Street and improvements in the credit markets.

Another analyst echoed the sentiment. "The Fed has clearly signaled it is going to do whatever is necessary to get the debt markets functioning properly again, which is going to be key for the equity markets," Clissold said. In the long run, Clissold said that a return to health in the credit markets is essential to a broader recovery.

Government debt, currencies: Long-term Treasury prices soared Wednesday, continuing Tuesday's rally that happened in the wake of the Fed's announcement that it would consider buying its own long-term debt.

The goal of the government in stepping in and buying its own debt would be to help the troubled housing market find some footing. Thirty-year mortgages typically move in lockstep with the yield on the benchmark 10-year Treasury note.

Lending rates continued to decline. The overnight Libor rate declined to 0.13% from 0.16% on Tuesday, while the 3-month Libor rate dropped to 1.58% from 1.85%, according to Bloomberg.com. Libor, or the London Interbank Offered Rate, is a daily average of what 16 different banks charge other banks to lend money in London.

The improvements in Libor rates are one indicator of credit-market pressures easing. "They have been coming down for the last two months and they are finally down where they should be," Clark said.

Auto bailout: U.S. automakers are still awaiting news from the Bush administration as to the status of their plea for a $14 billion bridge loan.

General Motors (GM, Fortune 500) and Chrysler LLC have warned that they are within weeks of running out of cash. After the Senate failed to approve a bailout package for the automakers, the Bush administration said it would consider tapping the $700 billion bailout fund Congress approved for the banks and Wall Street.

Meanwhile, the auto finance firm GMAC doubled the amount of capital it has raised, moving it closer to qualifying for much-needed federal funds. If GMAC can obtain enough funds to qualify as a bank, then it could obtain funds as a part of the $700 billion bailout bill.

Oil: Oil settled for the day down $3.54 to $40.06 a barrel, a 4 1/2-year low, after OPEC announced it will cut oil production by 2.2 million barrels a day as of Jan. 1 to boost oil prices. Crude oil prices have slid from record highs as the global economic recession has chipped away at demand for energy.

Oil prices have fallen nearly $100 a barrel since the record highs reached over the summer, and the cartel hopes that the production limit will stabilize oil prices.

The new production cut comes on top of a 2 million-barrels-a-day cut that was previously announced, bringing production levels down by 4.2 million barrels per day from September levels.

Other markets: In currency markets, the dollar fell to a 13-year low versus the yen and also weakened against the euro. The greenback rose slightly against the British pound.

COMEX gold for February was up $25.80 to $868.50 an ounce.

Gas prices rose Wednesday after breaking an 86-day streak of declines over the weekend, according to a daily survey of gas station credit-card swipes. The price of regular unleaded rose $0.6 cents to a national average of $1.667 a gallon from $1.661 on Tuesday, according to motorist group AAA. To top of page
First Published: December 17, 2008: 10:35 AM ET

Advantages of Using Online Forex Trading

Investments & Trading

If you want to invest in Forex then you need to know the advantages of using online Forex trading.
Earlier people had difficulty in investing Forex trading because during these days only large financial institutions were allowed to invest in Forex. There was no space for the small traders.
But due to invention of computers the doors for small investors opened and they were given a chance to invest in forex market. This type of trading is called online trading.

There are many sites that offer the facility for online trade. You can also take the benefit of stock trading. These websites are operated by forex trading companies. These companies have experts that would proper guidelines for forex trading. If you are a beginner then these experts would provide you necessary guidelines about the investment. It would assist you about the ways that are used for forex trading.

There are some sites that provide the facility for trading starter kits. But this facility would be provided only if you open an account with this site. They would provide you an opportunity to learn the different types of trading courses that would help you to earn huge profits in short duration of time. Some sites would provide simulators that help to simulate the procedure of trading in forex. They would treat you as new born babies and they would try to teach you the basic steps of forex trading.

Forex trading is open for 24hours a day. The professional forex brokers would take care of your account. They would help you to keep keen watch on the market. They would provide you assurance about the investment that you have made, also give you assurance that you have invested at the right place at the right time. Thus you can say that they would provide you necessary security.

You would not have any difficulty in operating the forex market. You would not face any problem in accessing the data and to analysis the online forex sites. They would keep on updating the data and the price of the stocks. If you want to contact your brokers then the sites have forums or online chat that can be used for contacting the authorized person. It is considered to be the fastest and the easiest method to contact the forex broker that can provide their guidelines whenever you are in need.

These sites would help you to analyze the current data. You can examine this data from your house. You don’t need to visit your broker to collect the information about the data.
If you want to collect the information about the forex then you can explore yourself. There are many websites that would provide you the necessary details about the forex market. Thus you would not have any difficulty in collecting the necessary information about forex trading. These sites would help you to select the best trader. You can select these traders by making comparison between different traders.

Article Written By J. Foley