We had a nice "up" day going; then the Beige Book hit and BP kept getting slammed down hard. It is my view that the worsening BP situation (the spill and the share price) is weighing on stocks and on investors' confidence.
Frankly, the threat of bankruptcy at BP could precipitate other credit concerns. Since anything that can possibly go wrong will do so in our stock market, the next shoe to drop could be concerns that BP might have some counterparty obligations with hedge funds or commercial banks. And a potential threat of a BP bankruptcy could precipitate additional credit concerns.
I have quickly looked at BP's balance sheet, and its derivative positions total $14 billion -- derivative assets of about $8 billion and derivative liabilities of $6 billion.
This seems quite manageable ... but in this market, who knows?
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