The US stock market

STOCKS FALL, JP MORGAN AND CHESAPEAKE GET DESTROYED: Here's What You Need To Know

Business Insider,

12 May, 2012

They really effed up this time.
First the scoreboard:
Dow: 12,820, -34.4, -0.2%
S&P 500: 1,353, -4.6, -0.3%
NASDAQ: 2,933, +0.1, +0.0%



And now the top stories:

• After yesterday's closing bell, JP Morgan hosted a surprise conference call to discuss new details in their 10-Q.  The bank, considered by many as the best risk manager in the world, announced a shock $2 billion trading loss from its chief investment office.  The position was supposedly a hedge gone wrong.  LISTEN To The Greatest Moments Of Jamie Dimon's Embarrassing Conference Call.

• If it was a hedge, then shouldn't the offsetting position be well in the money?  This was one of two questions asked by Art Cashin.  His other question, "Who was on the other side of the trade?"  Trading derivatives is a zero-sum game.

• The analyst community came to the defense of the bank.  Goldman Sachs argued that the risk/reward balance was favorable, and reiterated its buy rating.  Oppenheimer reiterated its "outperform" rating on the stock saying that the damage to the company is mainly psychological.  Doug Kass entered the market right away and bought shares on the dip.  "I weighed the impact of the hit to earnings and to perception and concluded that it is fairly unusual to be able to buy JPMorgan Chase's shares at only $4 over book value," said Kass. JP Morgan Presents The 14 Best Stocks In America >

• The bigger picture implications may be a bit more serious.  David Kotok asked, "Is it idiosyncratic or systemic?"  If it's the latter, then investors may have reason to be concerned about the other banks.  Senator Carl Levin immediately released a statement: "Today’s announcement is a stark reminder of the need for regulators to establish tough, effective standards to implement the Merkley-Levin language to protect taxpayers from having to cover such high-risk bets."

• Chesapeake Energy took it on the chin today.  In a delayed 10-Q filing, the company wrote warned it may have to delay certain asset sales in order to stay in compliance with its debt covenants.  "[T]he assets we select and schedule for monetization, our budgeted capital expenditures and our commodity price forecasts are carefully considered as we project our future ability to comply with the requirements of our corporate credit facility. As a result, we may delay one or more of our currently planned asset monetizations, or select other assets for monetization, in order to maintain our compliance."

• Commodities continued to get beat up today, with oil and precious metals heading lower.  The S&P GSCI Spot Index is on an 8-day losing streak.  15 Countries Sitting On Gigantic Oceans Of Oil >