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With Oil’s Surge, Renewed Buying in EnergyJanuary 6

Oil’s rapid rebound has re-ignited interest in the energy sector, which was one of the few areas of the stock market shunned by investors during the broad-market recovery in December.

With oil putting together a 44% rally since hitting a 2008 closing low of $33.87 a barrel on December 19, energy stocks have followed along, but the gains have not been as lofty. The Oil Service Holdrs ETF was up nearly 16% since that date headed into Tuesday’s trading, while oil giant Exxon Mobil rose 8.8% in that same time period.

Analysts say the rebound in energy shares has been a product of value-oriented types taking advantage of the sharp selloff in those shares at the end of the year (the S&P energy sector fell 4% in December, the worst performance of S&P’s 10 industry groups), and a judgment that those stocks may be a less volatile way to gain exposure to the roller-coaster that has been the oil market. That’s particularly true Tuesday, as energy stocks were holding their gains even as crude oil ended the day down 11 cents to $48.70 a barrel.

“Everything just goes up with oil,” says Brian Niemiec, analyst at Susquehanna International Group. “Some people want to be

Banks’ Credit Quality Expected to WorsenJanuary 6

Kerry E. Grace reports:

Although government support has buoyed U.S. banks, the industry will likely experience overall credit quality deterioration at least through this year, according to a report published Tuesday by Standard & Poor’s Ratings Services.

S&P credit analyst Barbara Duberstein said the number of bank failures will likely rise in 2009 “from an already high number in 2008,” as in other credit cycle downturns.

The ratings agency said its outlook on the U.S. banking industry through this year is negative, reflecting deteriorating economic conditions and mounting asset-quality problems. It said it expects negative rating actions will continue to “sharply exceed” positive ones this year, but that ratings would reflect the further divergence it expects in the performance of individual banks.

S&P said the industry will continue to be subject to concerns about systemic shocks from liquidity and confidence risks through at least early this year. But its outlook assumes that those concerns won’t revert to the peak September-October “crisis levels” that followed the bankruptcy of Lehman Brothers Holdings Inc.

The U.S. government’s involvement in the banking industry has become a theme in the credit analysis of banks, S&P said. The government’s reaction has become “critical to the s

You Say Recession, I Say DepressionJanuary 6

Rob Curran reports:

With so many money worries out there, economists say the distinction between a recession and a depression is not worth one thin dime. Neither has a scientific definition.

Merriam-Webster’s collegiate dictionary gives the definition of a recession as a “period of reduced economic activity.” A depression is a “period of low general economic activity marked especially by rising levels of unemployment.”

The old saw that “it’s a recession when your neighbor loses their job, and it’s a depression when you lose your job” is probably as good as any.

Sean Simko, head of fixed income management at SEI Investments, views a depression as a prolonged recession during which the economy loses the ability to regenerate. The most important force in Mr. Simko’s eyes is job creation. And the government’s drastic efforts should eventually turn around the labor market, he says.

One Wall Street economist, who couldn’t be quoted because he’s in the process of changing firms, e-mails: “This is another one of those funny debates about where to place an arbitrary divider on a continuous scale — Richard Dawkins calls it the ‘tyranny of the discontinuous mind.’ For example, when does someone stop being a ‘child’ and start being an ‘adult’? A better question is, will the policy ex

Four at Four: Santa Rides OffJanuary 5

So long, Santa Claus. The vaunted Santa Claus rally, which failed so miserably at the end of 2007 and into 2008, was better this year, despite Monday’s fall-off in equities. The Dow industrials put together a 5.7% gain for the last five trading days in December and the first two in January, and now investors will await the next round of earnings releases, economic data, and various other surprises to see if the market can hold onto a rally harvested during a traditionally low-volume period. “It looked like at the beginning we were going to sell off pretty substantially,” says Paul Brigandi, vice president of trading at Direxion Funds. He notes that the market was able to shrug off the poor figures from the automotive manufacturers and a downgrade of telecom companies to finish the session more or less mixed. The S&P 500 dropped 0.47%, but on balance, with more than 1.3 billion shares changing hands on the Big Board, that cannot be considered terrible. One warning sign for the market is the expectation for a relatively bright market in the next few weeks; Mr. Brigandi alluded to this, saying that “a lot of people think we could see a little bit of a rally here if the news isn’t worse than what’s discounted.” That much is indeed true — but at the same time, something to watch for.

Live-Blogging the House Hearing on MadoffJanuary 5

The House Committee on Financial Services titled “Assessing the Madoff Ponzi and the Need for Regulatory Reform” is beginning, with the SEC’s inspector general, David Kotz, scheduled to appear before the committee. Expect much in the way of bloviation — MarketBeat plans on sitting on the first hour of this, and then perhaps popping in on occasion after 3 p.m.

2:13 p.m. ET: Apparently there’s quite a bit of banter here about how this really isn’t a real meeting, but an informal meeting. Paul Kanjorski, (D, Penn.) starts by saying that the meeting is to figure out how Bernard Madoff managed to do all that he did. “We need to understand how Mr. Madoff organized his many business operations and how he perpetrated his alleged fraudulent acts,” he says. He adds that this should have been detected earlier, of course, and this “slipped through the cracks.” Cracks the size of the Grand Canyon, perhaps. (Or as Kara Scannell wrote in today’s WSJ, “The situation is even more awkward because SEC examiners seemed to be looking in the right places, yet still were unable to unmask the alleged scheme.” Mr. Kanjorski makes references to auditors the size of mice and an investment fund the size of an elephant. Basically, he’s summarizing what we al