The Spit and the Spitzer

Who knew that the "Two Minutes Hate" would be just another round of Schadenfreude at the spontaneous combustion that was former New York City attorney general and (until Monday morning) New York governor Eliot Spitzer this week?

Schadenfreude, as I noted this week in a piece for Morning Coffee with TradingMarkets, is a fancy German word for "sucks to be you." Eliot Spitzer, whose crusade against such captains of finance as New York Stock Exchange chairman Richard Grasso and American International Group's CEO "Hank" Greenberg helped make him one of the most loathed men in New York as far as Wall Street was concerned, found himself apologizing and then resigning as news broke of his alleged, long-time involvement with a high-end prostitution ring.

What prevented this from being a run-of-the-mill politican's sex scandal is myriad. First of all, while you do have the now stereotypical situation of the moralist hypocrite, it is worth nothing that Spitzer was no mere legislator. As New York attorney general, Spitzer delighted in pursuing his prey--whether they were Wall Street tycoons or, ironically enough, New York prostitution rings--and showed little reluctance to turn his battles into personal ones. Less than a month after becoming New York governor, Spitzer allegedly told a member of the New York state assembly, "I'm a f------ steamroller." The remark did little to win friends or influence people in the legislature, with which the governor was often at odds and who were among the swiftest to call for Spitzer's resignation after the news broke.

Other factors involved in the case include the possible invocation of the Mann Act, a statute from the early decades of the 20th century that made it a federal crime to transport women across state lines for "immoral purposes." They also include the fact that investigators are somewhat less interested in Spitzer's allegedly activity with a 22-year old prostitute and more interested in the financial transactions that may have been part of an effort to hide his high-price philandering (Spitzer reportedly paid more than $80,000 over ten years for the services he solicited from the women of the "Empire Club.") This morning there was even a report that investigators were looking into the possibility that Spitzer may have illegally used campaign funds to pay for prostitutes.

How close are we to being able to call this market the "Spitzer Bottom"? I've long been fascinated by the way deep corrections in markets tend to reflect a negative mood among the population at large. In fact, when markets are truly in trouble and pessimism reigns, there is a tendency among many to lash out and scapegoat the successful, the lucky, the "good." In the same way that misery loves company, significant corrections such as the one we have experienced since October 2007 have tended to encourage people to want to bring the "high and mighty" down a peg or two. And there was more than the apocryphal to stories that traders on Wall Street were literally cheering during Spitzer's morbid apology and subsequent resignation announcements.

So now that the markets have claimed a pretty sizeable scalp, is the correction over? With the Dow down nearly 250 points on Friday as I write, it is hard to believe that the next move is up. But in the same way that it is hard to imagine things getting too much worse for Eliot Spitzer and his family, we are starting to get to the point where it is worth wondering just how much worse the markets are likely to become before this current round of "sucks to be you" runs its course.

Stocks in the News

Headlines this week included some strongly positive news from technology, as well as raised forecasts from a major earth-moving equipment maker, and more bad news out of the financial sector.

Shares of Ciena (CIEN@CIEN | Quote | Chart | News | PowerRating) had their biggest gain in months this week after reporting quarterly earnings that beat analyst expectations. The company's positive outlook also helped buoy shares in trading this week.

Fannie Mae (FNM@FNM | Quote | Chart | News | PowerRating) was the subject of dueling opinions this week as an analyst upgrade from Morgan Stanley appeared at odds with a heavily critical article in the financial publication, Barrons.

Wellpoint (WLP@WLP | Quote | Chart | News | PowerRating) helped lead the stocks of healthcare benefit companies lower this week after the company surprised investors with lowered guidance for 2008.

A boon in growth and development worldwide continues to be a boon for Caterpillar (CAT@CAT | Quote | Chart | News | PowerRating) one of the largest makers of earth-moving equipment such as bulldozers, which raised its 2008 forecast earlier in the week.

The target of an unsolicited bid by larger rival, Electronics Arts (ERTS@ERTS | Quote | Chart | News | PowerRating), Take Two Interactive (TTWO@TTWO | Quote | Chart | News | PowerRating) this week announced widening losses for the first quarter, losses that were significantly larger than in the same quarter a year ago.

Target (TGT@TGT | Quote | Chart | News | PowerRating) reported this week that it was planning to sell at least half of its credit card division to an unnamed company. The deal would net Target approximately $4 billion.

Bear Stearns (BSC@BSC | Quote | Chart | News | PowerRating) faced a liquidity crisis as the Federal Reserve rushed to provide money to JP Morgan (JPM@JPM | Quote | Chart | News | PowerRating), which would in turn lend the capital to Bear. Shares of Bear Stearns plunged more than 50% in trading on Friday.

What to Look for Next Week

Monday: Housing Market Index / Industrial Production
Tuesday: Housing Starts / PPI / FOMC Announcement
Wednesday: MBA Purchase Applications
Thursday: Jobless Claims / Leading Indicators / Quadruple Witching
Friday: Markets Closed for Good Friday

Best Performing Stocks (PR 8-10) of the Last Five Days

Here are some of the best performing, high Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 9 or 10.

Sara Lee (SLE@SLE | Quote | Chart | News | PowerRating). Long Term PowerRating 10.
iShares Russell 2000 Growth Index Fund (IWO@IWO | Quote | Chart | News | PowerRating). Long Term PowerRatings 9
Johnson & Johnson (JNJ@JNJ | Quote | Chart | News | PowerRating). Long Term PowerRatings 9
General Mills (GIS@GIS | Quote | Chart | News | PowerRating). Long Term PowerRatings 9
H.J. Heinz Company (HNZ@HNZ | Quote | Chart | News | PowerRating). Long Term PowerRatings 9

Worst Performing Stocks (PR 1-3) of the Last Five Days

Here are some of the worst performing, low Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 3, 2 or 1.

Alaska Air Group, Inc. (ALK@ALK | Quote | Chart | News | PowerRating). Long Term PowerRating 3
Bear Stearns Companies (BSC@BSC | Quote | Chart | News | PowerRating). Long Term PowerRating 3
Hansen Medical Inc. (HNSN@HNSN | Quote | Chart | News | PowerRating). Long Term PowerRating 3
Jackson Hewitt (JTX@JTX | Quote | Chart | News | PowerRating). Long Term PowerRating 2
UAL Corporation (UAUA@UAUA | Quote | Chart | News | PowerRating). Long Term PowerRating 1

David Penn is Senior Editor at PowerRatings.net.