Blog Posts by Matt Nesto

There's a funny scene in the movie Monty Python and the Holy Grail, where the the medieval-era trash collectors are calling on citizens to "bring out your dead." There's one small problem though; people who are still alive typically don't want to be declared dead.

And so it is with stocks right now, with the month of May hammering 90% of the S&P 500 and extracting near double-digit revenge on 4 of the 10 sectors. In the past three weeks alone, 15 stocks have slipped into "insta-bear" mode by shedding 20% or more.

But as the lobby of the morgue fills up, so to speak, investors like Sam Stovall, Chief Equity Strategist at S&P Capital IQ, are beginning to search for old loved ones whose time may not be up yet.

"If you believe a counter-trend rally is around the corner, then you may want to be looking at some of the most beaten up sectors," Stovall says in the attached video, pointing to Financials (XLF), Energy (XLE), Tech (XLK) and Materials (XLB).

It would be easy to overthink the reasons behind today's rebound in stocks. But market watchers like Sam Stovall, chief equity strategist at S&P Capital IQ, cite another one: precedent. In a note to clients today, Stovall writes, "history, sentiment, and technicals indicate that a recovery, or at least a counter-trend rally, is around the corner."

That's not to say that he thinks we are out of the woods yet or that the declines that have so far decimated May are over. Stovall says the flight to cash and high quality sovereign debt is still indisputable, while pointing to the 10-year yields of US Treasuries and German bonds at 1.73% and 1.43%, respectively.

"Usually we have to wait until a bear market (-20%) before we get such a washout," he says in the attached video. "So I tend to think we are ready for some sort of bounce." His research shows that May's decline alone puts it in the 96th percentile for monthly S&P 500 losses that date back to World War II.

On Greece in particular,

What's not to love about cheaper oil, gasoline, imported BMW's or that summer trip to Rome?

While the answer for most people is something along the lines of "more, more, more," the reaction at the Fed the dollar's sudden surge to a 4-month high is likely to be one of much greater concern.

"At the end of the day, a stronger dollar does have consequences," says Peter Kenny, managing director at Knight Capital in the attached video, referring to the pros and cons as "the perfect Catch-22."

As he, and surely the FOMC sees it, the dollar's 3-week surge hurts exports, manufacturing and jobs, and that, he says, is where the Fed will be forced to step in and take action, "to avoid slipping back into recession."

Of course, you'll never hear the Fed or the Treasury or any comparable government entity saying specifically that they support a weaker dollar, but you had better get ready to hear all sorts of things that suggest the price of that strong dollar is hurting U.S. growth.

There was a time not long ago that credit rating downgrades—threatened or actual—by the ratings agencies were largely dismissed as being late to the game and simple confirmations of what was already known. But even though the problems facing Spain's banking system are widely known, market watchers, like Peter Kenny of Knight Capital, say rating cuts combined with decelerating GDP makes for a caustic combination.

"It's going to matter for several reasons," Kenny says of the looming European bank downgrades in the attached video. "It's a story that is accelerating, despite what we hear from the political pundits. It really is the market speaking to the potential for a re-calibrated, reformulated EU somewhere down the road."

In fact, he says Greece will continue to play a leading role, especially in the eyes of its nearby neighbors.

"Greece was the template to keep the EU in its current form, and Greece will be be used as a template for other member nations who don't measure up to the austerity measures or have the popular support for them," Kenny says. What was once the case for unity has now become the case for disunity.

While he isn't making a call yet on the fate of Greece, he says the markets appear to be pricing in a ''less unified" future that, he thinks, will see market forces doing the work of politicians.

It is the Superbowl of IPOs. After months of rampant speculation, the time to play the big game has finally arrived. While there is no debating the clout and dominance that Facebook (FB) enjoys in the fast-growing social media industry, there is anything but consensus when it comes to determining what the company's soon-to-be-listed shares will really be worth when they start trading on Friday.

The WSJ is reporting that Facebook just raised the price range of its stock offering to $34 to $38 a share (from $28 to $35), putting the company's valuation at $93 billion to $104 billion. But what will happen in the so-called aftermarket when the stock opens for trading is anybody's guess.

As the big day approaches, we brought together two analysts—with widely different outlooks over the next year—and hit them with some of the key challenges that Facebook will have to address. But no matter how well, or poorly, the company executes, most market watchers agree that putting a price tag on the business (which is headed up by 28-year-old billionaire Mark Zuckerberg) will be no ordinary event, simply because of the mass appeal and attention the deal is garnering amongst people who may have never thought of owning a stock before.

"I think the demand is going to be through the roof, and I expect the stock to trade up, regardless of what it is worth and regardless of where it prices," says analyst Michael Pachter, of Wedbush Securities, in the attached video. "This is the kind of stock where Grandma buys a share for little Johnny."

For Brian Wieser, analyst with Pivotal Research Group in Portland, OR, the opportunity to own Facebook may not be available on day one.

Let's just get one thing straight right up front: there really is no such thing as a risk-free investment. Just eight months ago, gold was at $1,900 and enjoying a huge rally on the perception that the dollar was doomed. But lately, its status as currency of last resort looks to be, once again, losing out to the more traditional paper variety. To be clear, I'm not picking on gold or talking up the dollar, but rather pointing out what pros like Rich Ilczyszyn of iiTrader.com call ''perceived safety," and how volatile and changing global markets can quickly turn any haven into a loser.

"Europe is taking a lot of heat right now, so everybody plows into the dollar's perceived safety, short term," Ilczyszyn says in the attached video, adding that he thinks gold could see another $100 drop, on top of the 12% drop it has undergone since late February. From his purview at the Chicago Mercantile Exchange, the renewed exportation of fear and uncertainty from Europe makes for a simple equation: "euro risk = strength in the dollar," which in itself opens numerous avenues to play that, plus metals, energy, rates, stocks, or currencies. But broadly speaking, Ilczyszyn's first move is to protect.

"We have really slashed some of these positions because we don't know what's going to happen...with the euro zone and risk."

Consumers are getting some welcome relief in a direct and tangible way. Oil prices are down about $10 a barrel, and the price of a full tank of gasoline is a few bucks cheaper than it was a month ago. Expectations are that prices will stay low—at least through the summer.

Great news, right?

Maybe not. That's because the broader economic worries that are causing the prices to drop are potentially far more destructive and entrenched than a few bucks of brief relief.

The point is, while stocks have slid about 2.5% so far in May, the list of casualties is full of consumer and retail names at the very time that we are supposed to be feeling a little more flush.

"There are still a ton of cons out there," says John Canally, Investment Strategist with LPL Financial, in the attached video. "But over the next couple months, I think the cons will outweigh the pros, and the consumer discretionary sector will continue to struggle."

In fact, of the 81 stocks that make up the Discretionary Sector (XLY), half are having a worse May than the market. Of these laggards, half of them have done anywhere from 5% to 40%, including names like Fossil (FOSL), Priceline (PCLN), NetFlix (NFLX) and McDonald's (MCD).

And just like that, the storied annals of Wall Street can now add "London Whale" to a growing list of infamous traders who have blown themselves up and left their employers with a hefty bill. In the case of JP Morgan (JPM) and its $2 billion blunder, the infraction appears well contained and not threatening. But no matter, for the third time in less than a year --following UBS (UBS) and Kweku in September, the collapse of MF Global in October-- we are once again talking about carelessness and loss of control in some of the nation's biggest, and most influential banks.

"How does this happen? Two billion dollars!" marvels Rich Ilczyszyn, co-founder of iiTrader.com, and former employee of MF Global. "This industry is supposed to be highly regulated. How does the CEO of the company not know what the hedge is doing in the company? We saw this with MF Global," he says in the attached video.

Of course there are many differences between JP Morgan's debacle and some of the other trader implosions, mainly that the biggest U.S. bank's solvency never came into question, and some of the alleged hedging positions were actually making money. Even so, it has not only gripped Wall Street, caught the attention of Main Street, and wounded the financial superstar CEO Jamie Dimon, but it will surely make the road to revision of the Dodd-Frank bill and Volcker rule more bumpy and probably less fruitful for the banking industry.

"It's a very small percentage of their book," Ilczyszyn says, before lamenting that the last thing the market needs right now is more risk, or a reactionary backlash from regulators.