Wall Street's Good, The Bad and The Ugly

In the wake of Lehman Brothers and the collapse in broad-market equity prices, Wall Street has found itself attempting to carve out a bottom over the last several months. Finding safe haven in a historically volatile market has become the name of the game as bulls and bears wage their own version of tug-of-war.

The Good

On Friday, January 23rd, the NASDAQ managed to squeeze out a 12 point gain on the shoulders of Google's (GOOG) latest quarterly report. The world's largest web search engine said earnings climbed 18% compared to last year thanks to its dominant position in the online ad market. Recent buoyant results out of Google and Apple (AAPL) have helped counter tech's gloom and doom malaise triggered by Microsoft's earnings.

M&A activity resurfaced as well last week with Pfizer (PFE) agreeing to purchase Wyeth for $70 billion. Spillover from the credit crunch has essentially rendered the M&A space frozen as lenders rein in loaning capacity. The health care landscape is cited as a potential arena for consolidation due to relatively healthy balance sheets and the need for earnings drivers at bellwether companies. Pfizer (PFE), Brystol-Myers Squibb (BMY), Novartis (NVS), and Eli Lilly (LLY) are due up on the earnings slate this week.

The Bad

Bubbling under the radar, oil prices have crept higher over the past several weeks. Saudi production cuts appear to be forming support for crude prices in the $40/bbl range. While firming crude has stabilized the energy patch, lower prices at the pump have been a singular bright spot for global economies.

Data due up this week, like U.S. GDP and more downbeat earnings, could serve to curb the recent rise in oil. Wednesday's Department of Energy report will reveal if production cuts are reducing stockpiles to match the pace of demand destruction.

The Ugly

Jobs cuts slammed into Wall Street on Monday. Caterpillar (CAT) will cut 18% of its staff ? amounting to 20,000 jobs -, Home Depot (HD) will slash 7,000 jobs, and Sprint will eliminate 8,000 jobs by the end of March.

In addition to mounting unemployment, systemic risk in the financials continues to loom over the banking sector. With market caps crashing into the ground like a meteor headed for earth, Exxon Mobil (XOM) now makes up a larger percentage of the S&P than all major U.S. banks combined.

Uncertainty over trembling balance sheets and write-down losses has clearly shaken investor confidence in the maligned financial sector. Share prices at banking giants Citigroup (C) and Bank of America (BAC) have been beaten down so badly that the investing public is questioning if balance sheet liabilities have put these firm's assets under water.

American Express (AXP) releases Q4 earnings on Monday and is expected to report profits of $0.20/share. Many market analysts believe a credit card meltdown is the next shoe to drop. If so, the financial sector could keep any hopes of an extended rebound on the sideline.