Economy Makes for Mixed Market

Major indexes came off earlier lows Friday February 20th after the Dow reached a six-year low in the previous session. Big banks remained in the spotlight amid nationalization fears. U.S. stocks were mixed in early trading Friday amid market volatility as February options contracts expire. Major indexes came up from earlier lows following Thursday’s skid in the Dow Jones industrial average through its Nov. 20 bear market low to a six-year low. The Dow is off 47% in the 16-month slide.

Today the 30-stock Dow Jones industrial average was lower by 44.21 points, or 0.59%, at 7,421.74. The broad S&P 500 index fell 5.66 points, or 0.73%, to 773.28. The tech-heavy Nasdaq composite index was up 1.81 points, or 0.13%, to 1,444.63.

On the NYSE, 21 stocks were lower in price for every six that advanced. Nasdaq breadth was 14-8 negative. Trading was relatively active.

The financial sector remained in the spotlight Friday amid concerns that big banks may be nationalized. Bank of America (BAC) Chairman and Chief Executive Kenneth Lewis told Bank of America executives at a senior leadership meeting on Thursday that Washington policy officials have assured him that the possibility of nationalizing the largest U.S. bank by assets is not on the table, the newspaper said, citing a person at the meeting.

Separately, Lewis was subpoenaed last week by New York Attorney General Andrew Cuomo, who is investigating whether the bank violated state law by withholding information from investors, the Wall Street Journal said. Investigators took testimony all day Thursday from former Merrill Chief Executive John Thain, the newspaper said. Thain was asked about $4 billion in bonuses paid to Merrill employees, and in particular why Bank of America’s merger agreement with Merrill contained a nonpublic attachment outlining the maximum Merrill could pay, the newspaper said.

The troubled newspaper industry remained in the headlines. The New York Times Co. (NYT) said its board voted to suspend the quarterly dividend on the company’s Class A and Class B common stock. In November, 2008, the company reduced the payout level of its fourth quarter to $0.06 per share from $0.23 per share in the 2008 third quarter. Let’s further look at the analysis of the US Economy here below:

Shares of Chiquita Brands International (CQB) tumbled Friday after the company posted a $0.74 fourth-quarter non-GAAP loss per share vs. $0.02 EPS on flat sales, higher costs including flood impacts, a weaker euro, and lower performance in salads. The company expects to deliver improved full-year results in 2009.

In recent economic stock news, U.S. CPI rose 0.3%, with the core rate up 0.2% in January. That follows a revised 0.8% decline in December headline index (was -0.7%), and a flat reading on the core. Gains were widespread following several months of declines and should help unwind deflation fears. Energy prices rose 1.7%, rebounding from a 9.3% December decline. Gas prices rose 6.0% after a 19.3% drop in December. Food prices edged up 0.1%. In the housing sector, the owners’ equivalent rent measure rose 0.3%. Apparel prices rose 0.3%. Medical care costs are up 0.4%, and tobacco prices are up 0.8%. The data are close to expectations and should have little effect on the markets.

The euro headed lower vs. the U.S. dollar Friday as worries about trouble in Eastern Europe encouraged investors to flee to safer assets. Traders were nervous about damage to the European banking industry from struggling economies on the euro zone’s periphery and in Eastern Europe, says S&P.

Alternative Energy Investments

Alternative energy investments is not a new investment theme. However, with oil in triple digits, many advisors now believe the time is right for this sector to be propelled to the forefront. Further, advances in alternative energy technology now favor continued research and support in developing alternatives. By their very nature, alternative energy stocks are best suited for long-term investing. Especially with the current price of oil flucuations we are seeing in today’s markets.  Investors must also be aware that many of these stocks have already had significant runs. Volatility should be expected, as stocks in this sector often rise and fall along with volatility in oil prices. However, few sectors are as well positioned for those willing to dollar-cost average into long-term positions with the goal of building positions for long-tern gains. There are several key drivers of the alternative energy trend. Consider that as recently as  2002, crude oil was trading below $20 per barrel and natural gas cost less than $2 per million British Thermal Units (BTUs). Now, oil is trading at over $100, while natural gas is trading at more than five times its lows.Naturally, rising prices for key energy commodities spells rising costs for consumers. For the first time in history, drivers have been consistently paying more than $3 for a gallon of gasoline. And electricty produced from natural gas is becoming increasingly expensive. Alternative energies offer a way to cut dependence on fossil fuels and reduce this extreme variability in energy costs.

Another pillar of growth for alternative energy investments is increasing government regulation. The U.S. already controls the emission of pollutants from power plants. Pollutants are regulated using a cap-and trade sytem. This system allows power plants polluting above the irregulated maximum emissions to buy credits from cleaner plants. Thus, dirtier plants have the choice of buying potentially expensive credits or taking the steps to reduce emissions of key pollutants. This sytem serves as an economic incentive – cleaner plants are able to recoup some of their pollution mitgation costs by selling their excess environmental credits. And this sytem will become increasingly important as attention turns to carbon dioxide and green house gases.

So there is no mistaken that alternative energy is the future. The question is how far off into the future and which alternative energy will be the winners and which will be the losers.  That of course is the million dollar question and difficult to forecast with any certaintly until the new stimulus package is unfolded or until we see which direction technology advances take shape and also which programs the government will back.  Until that time alternative energy stock picks not entirely a crap shoot as their are some prospective candidates: Suntech Power Holdings (NYSE: STP), Global Alternative Energy ETF (NYSE: GEX), Evergreen Solar (NASDAQ: ESLR) and the likes but only time will tell as to which ones will bust out. Stay tuned for more alternative energy stock picks and alternative energy blogs.