Just about everyone says the Fed will ease on September 18. A few, including a Wyoming newspaper, think the Fed may announce an ease at Jackson Hole tomorrow. See http://www.jhguide.com/article.php?art_id=2144. Highly respected Ed Hyman says that with inflation concern subsiding the Fed will ease to avoid a recession. Growth will trough at 1.5% and, with the Fed in ease mode, that will be good for the market. The out of consensus part of his call is his optimism about the market. There's a video interview on Bloomberg but here's the short story...
Aug. 29 (Bloomberg) -- The Federal Reserve will probably cut its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group.
``They will start to ease in a measured way, 25 basis points every meeting,'' Hyman said in an interview in New York. ``I think the economy will react favorably to it.''
Hyman said he sees a ``better economy next year,'' with stocks and Treasury yields rising. Slacker growth this year will ``put inflation aside'' as a concern, he said.
The deepest housing recession in 16 years is weakening the economy after the Fed raised its benchmark interest rate 17 consecutive times from June 2004 to June last year.
As global credit markets seized up, the Fed on Aug. 17 lowered its discount rate. Traders are betting on a reduction in the federal funds rate, currently at 5.25 percent, at the Fed's next policy meeting Sept. 18.
``I do not think we will have a recession,'' he said. ``I think it will go to 1.5 percent growth. That will be the low point.''
While it oversimplifies anyone's position to say the a Fed ease equates to a good market, the consensus view seems naïve. I think that previous tensions in the markets that were soothed by the "Greenspan put" were different from today's environment. They were more purely about liquidity. The issue today is different if only because the liquidity event is so much more widespread that nearly every financial institution is affected. If you gave away capital today it would be deployed differently from past years. Another difference then is that this time, risk has truly been re-priced. A Fed ease at this juncture would send a negative signal about the markets ability to gracefully conduct that re-pricing.
So far the real damage has been to those who have made big mistakes, from the poor chap who bought twice the house he could afford to the fund manager who threw a levered laugh at risk. Maybe the severity of the situation dictates a prompt Fed response but weigh the anxiety we all share against 1) the fact the S&P is still up about 3 percent this year and 2) the Fed's determination to kill the Greenspan's put. The last thing the Fed wants to do is spark a rally.
So we don't know if the Fed will be extraordinarily reluctant to cut the Fund rate and if they do it will be because of dislocations so severe that they will not warrant celebrations by the market. For example, a lot of asset-backed commercial paper rolls over tomorrow, about twice the amount the market has been able to digest in recent days. Bank conduits' ability to issue ABCP is a measure of banks' willingness to lend to each other. If that market failed, that could induce a move but don't jump for joy; that would be a frightening turn of events.
The market, which showed such glee at BAC's investment in CFC, has reconsidered. The failure of private capital to instill confidence will figure prominently in Bernanke's calculation too, we think. That doesn't make it good news.
So beware of an ease. Don't confuse a Bernanke ease with a Greenspan put. It won't work this time.
Thursday, August 30, 2007
Wednesday, August 29, 2007
UP 2% Today, Down 2% Yesterday...is it going anywhere?
In stark contrast to Tuesday's sharp sell-off, the major averages bounced back in noticeable fashion today as a sense that stocks were oversold helped investors recoup almost all of Tuesday's losses and close at session highs.
The Nasdaq wiped out its 2.4% pullback from a day earlier while 146 out of 147 S&P industry groups traded higher, underscoring the broad-based nature of today's bounce. Yesterday, only one S&P industry group closed higher.
Today's rally validated the assertion that the selling related to disappointment over the August 7 FOMC minutes was overdone, and frankly, misinterpreted by many market watchers.
All 10 economic sectors finished sharply higher, paced by a 3.1% surge in Energy. Already this year's best performing sector (+16%), everything from Drillers to Refiners rallied in sympathy with a 2.5% surge in oil prices. Crude for October delivery closed at $73.51/bbl following much larger than expected declines in weekly crude and gasoline supplies.
Telecom (+2.9%) and Consumer Discretionary (+2.8%) turned in the next best performances, with the latter sector staking claim to the Dow's third biggest winner -- Home Depot (HD 36.52 +1.47).
Technology (+2.7%) sporting a similarly strong performance was more noteworthy since it carries a larger weighting than the aforementioned sectors. Apple (AAPL 134.08 +7.26) led the charge, soaring 5.7% after confirmation of a special media event left investors optimistic about new product offerings.
The Financial sector's resilience in the face of another Fed infusion, reports that a London-based hedge fund (Cheyne Capital) may liquidate its commercial paper unit, and an analyst downgrade on Bear Stearns (BSC 107.10 -1.32) for the third time in as many days amid more earnings uncertainty, reflected the market's appetite for picking up bargains.
The financial sector (+1.8%) was hit the hardest a day earlier (-3.2%), but got some help today after Moody's said leveraged loan commitments of major US investment banks do not have negative rating implications as liquidity remains sufficient and marking down the commitments is "manageable."
A restoration of confidence in the S&P 500's most heavily weighted sector was a key to the sustainability of today's recovery efforts. The S&P 500 is now up 3.2% for the year. Today's 2.2% advance nearly erased Tuesday's 2.4% sell-off.
With all eyes on Bernanke this week ahead of his opening remarks at a Fed symposium on Friday, news that the Fed Chairman reportedly told Senator Schumer the Fed is ready to "act as needed" gave stocks an added boost of confidence late in the day.
On the NYSE, where trading curbs again went into effect 30 minutes before the close, advancers outpaced decliners by a 5-to-1 margin. Volume was once again below average, but that is typical in the week leading up to the Labor Day holiday. While that suggests there wasn't a tremendous amount of conviction behind the buying efforts, market bulls will no doubt be pleased with the quick payback from Tuesday's losses.
The Nasdaq wiped out its 2.4% pullback from a day earlier while 146 out of 147 S&P industry groups traded higher, underscoring the broad-based nature of today's bounce. Yesterday, only one S&P industry group closed higher.
Today's rally validated the assertion that the selling related to disappointment over the August 7 FOMC minutes was overdone, and frankly, misinterpreted by many market watchers.
All 10 economic sectors finished sharply higher, paced by a 3.1% surge in Energy. Already this year's best performing sector (+16%), everything from Drillers to Refiners rallied in sympathy with a 2.5% surge in oil prices. Crude for October delivery closed at $73.51/bbl following much larger than expected declines in weekly crude and gasoline supplies.
Telecom (+2.9%) and Consumer Discretionary (+2.8%) turned in the next best performances, with the latter sector staking claim to the Dow's third biggest winner -- Home Depot (HD 36.52 +1.47).
Technology (+2.7%) sporting a similarly strong performance was more noteworthy since it carries a larger weighting than the aforementioned sectors. Apple (AAPL 134.08 +7.26) led the charge, soaring 5.7% after confirmation of a special media event left investors optimistic about new product offerings.
The Financial sector's resilience in the face of another Fed infusion, reports that a London-based hedge fund (Cheyne Capital) may liquidate its commercial paper unit, and an analyst downgrade on Bear Stearns (BSC 107.10 -1.32) for the third time in as many days amid more earnings uncertainty, reflected the market's appetite for picking up bargains.
The financial sector (+1.8%) was hit the hardest a day earlier (-3.2%), but got some help today after Moody's said leveraged loan commitments of major US investment banks do not have negative rating implications as liquidity remains sufficient and marking down the commitments is "manageable."
A restoration of confidence in the S&P 500's most heavily weighted sector was a key to the sustainability of today's recovery efforts. The S&P 500 is now up 3.2% for the year. Today's 2.2% advance nearly erased Tuesday's 2.4% sell-off.
With all eyes on Bernanke this week ahead of his opening remarks at a Fed symposium on Friday, news that the Fed Chairman reportedly told Senator Schumer the Fed is ready to "act as needed" gave stocks an added boost of confidence late in the day.
On the NYSE, where trading curbs again went into effect 30 minutes before the close, advancers outpaced decliners by a 5-to-1 margin. Volume was once again below average, but that is typical in the week leading up to the Labor Day holiday. While that suggests there wasn't a tremendous amount of conviction behind the buying efforts, market bulls will no doubt be pleased with the quick payback from Tuesday's losses.
Saturday, August 11, 2007
How Bad Is It?
Major gauges cut losses but still end in the red for day 2 as investors weigh Fed's $38 billion infusion into the banking system. Worries remain about tightening credit, subprime mortgage market.
Stocks fell Friday, but recovered from bigger losses earlier in the session after the Federal Reserve pumped $38 billion into the banking system, soothing some worries about tightening credit and the subprime mortgage market fallout.
Treasury bond prices fell, raising the corresponding yields. Oil prices dipped, and gold prices rebounded.
The Dow Jones industrial average (down 31.14 to 13,239.54) lost 0.2 percent, after falling more than 200 points in the morning. On Thursday, the Dow slumped 387 points, suffering its second biggest one-day point and percentage decline of the year.
The broader S&P 500 (up 0.55 to 1,453.64) index ended little changed, recovering from earlier losses, while the tech-fueled Nasdaq Composite (down 11.60 to 2,544.89) index gave up 0.5 percent after falling more in the morning.
All three major gauges managed to end modestly higher for the week, with a three-day rally in the first half of the week trumping Thursday's battering and Friday's mixed trade.
For the week, the Dow gained about 0.4 percent, the S&P 500 rose 1.4 percent and the Nasdaq composite added 1.3 percent.
The volatile nature of trading is unlikely to ease up anytime soon, said Randy Diamond, an equity trader at Miller Tabak. However, "If this thing continues to play out as it has on a daily basis, people may become less jumpy," he said.
"Eventually, the market will have to pick a direction and go with it," Tabak said. "But it's too hard to tell now which way it will go."
Next week brings a bevy of key readings on the economy, including the July retail sales and June business inventory reports on Monday.
The Dow had slumped more than 200 points in the morning, reflecting a broad market selloff, before trying to rebound near midday after the second wave of the Federal Reserve's cash infusion. The afternoon was again choppy, as investors struggled to position themselves amid ongoing uncertainty.
Treasury bond prices fell, after having risen in the morning in a classic "flight-to-quality" move into the comparatively safer haven of bonds.
Stocks slumped Thursday as worries about a tightening of the global credit market resurfaced, sparking a broad decline in stocks in the U.S. and abroad.
The worries continued Friday after central banks in Europe, Japan, Australia and the U.S. all made billions available.
However, investors found some solace in news later in the session that the U.S. Federal Reserve had upped its initial influx of $19 billion to first $35 billion and then $38 billion, said Joseph Saluzzi, co-head of equity trading at Themis Trading.
"There may be a little less fear now," Saluzzi said. "It may not really make much of a difference, but it settles some feelings."
Yet, concerns about credit tightening and subprime aren't going away anytime soon, and the market is bound to remain vulnerable in the weeks ahead, let alone next week.
"This is still an emotional market and there are a lot of news events that could happen over the weekend that could weigh on stocks next week," Saluzzi said.
Earlier in the week, French bank BNP Paribas said it was halting withdrawals from three of its funds because of current market conditions, while Goldman Sachs (Charts, Fortune 500) said two of its hedge funds have sold some of their positions because of recent losses.
Similar news from other financial institutions this weekend or early next week could spark another leg down for the stock market, Saluzzi said.
Blackstone, Fortress: Time to bargain hunt?
Stocks have been whipsawed over the last few months on fears about tightening credit after a period of widespread liquidity.
At the same time, investors have been trying to sort out the implications of the fallout from the subprime mortgage market - loans made to consumers with less than ideal credit - amid the slumping housing market.
The European Central Bank (ECB) pumped extra cash into the system for a second day in a row, adding $83 billion in liquidity Friday. Central banks in Japan and Australia also added liquidity to their banking systems.
The Federal Reserve followed suit, initially adding $19 billion in temporary reserves. The move was the biggest single temporary open market operation in four years, the New York Federal Reserve said. In the late morning, the central bank said it was adding an additional $16 billion and in the afternoon, another $3 billion, bringing the total to $38 billion.
Futures markets show traders expect the Federal Reserve to cut interest rates on Sept. 18, the next policy meeting. However, there is also some speculation that the central bank could cut rates ahead of that meeting.
Select commodity and technology stocks bounced back, enabling the broader market to trim losses.
Gold and silver prices rose, boosting a variety of metal and mining stocks. The Amex Gold Bugs (up $6.64 to $346.02) index jumped 2 percent.
Among Dow 30 stocks, Exxon Mobil (up $0.91 to $84.51, Charts, Fortune 500) and IBM (up $1.91 to $112.64, Charts, Fortune 500) managed gains, while Alcoa (down $0.75 to $34.69, Charts, Fortune 500), General Electric (down $0.71 to $38.23, Charts, Fortune 500) and Microsoft (down $0.59 to $28.71, Charts, Fortune 500) all declined.
Countrywide Financial (down $0.80 to $27.86) slipped almost 3 percent after saying in a regulatory filing that unprecedented disruptions in the mortgage market pose a threat to its financial state.
Market breadth was negative, but improved from the morning. On the New York Stock Exchange, decliners beat advancers 5 to 3 on volume of 2.52 billion shares. On the Nasdaq, losers topped winners 9 to 7 on volume of 3.23 billion shares.
Treasury prices fell, lifting the benchmark 10-year note yield to 4.80 percent from 4.77 percent late Thursday. Bond prices and yields move in opposite directions.
In currency trading, the dollar slipped versus the euro and rose versus the yen.
U.S. light crude oil for September delivery fell 12 cents to $71.47 a barrel on the New York Mercantile Exchange.
Stocks fell Friday, but recovered from bigger losses earlier in the session after the Federal Reserve pumped $38 billion into the banking system, soothing some worries about tightening credit and the subprime mortgage market fallout.
Treasury bond prices fell, raising the corresponding yields. Oil prices dipped, and gold prices rebounded.
The Dow Jones industrial average (down 31.14 to 13,239.54) lost 0.2 percent, after falling more than 200 points in the morning. On Thursday, the Dow slumped 387 points, suffering its second biggest one-day point and percentage decline of the year.
The broader S&P 500 (up 0.55 to 1,453.64) index ended little changed, recovering from earlier losses, while the tech-fueled Nasdaq Composite (down 11.60 to 2,544.89) index gave up 0.5 percent after falling more in the morning.
All three major gauges managed to end modestly higher for the week, with a three-day rally in the first half of the week trumping Thursday's battering and Friday's mixed trade.
For the week, the Dow gained about 0.4 percent, the S&P 500 rose 1.4 percent and the Nasdaq composite added 1.3 percent.
The volatile nature of trading is unlikely to ease up anytime soon, said Randy Diamond, an equity trader at Miller Tabak. However, "If this thing continues to play out as it has on a daily basis, people may become less jumpy," he said.
"Eventually, the market will have to pick a direction and go with it," Tabak said. "But it's too hard to tell now which way it will go."
Next week brings a bevy of key readings on the economy, including the July retail sales and June business inventory reports on Monday.
The Dow had slumped more than 200 points in the morning, reflecting a broad market selloff, before trying to rebound near midday after the second wave of the Federal Reserve's cash infusion. The afternoon was again choppy, as investors struggled to position themselves amid ongoing uncertainty.
Treasury bond prices fell, after having risen in the morning in a classic "flight-to-quality" move into the comparatively safer haven of bonds.
Stocks slumped Thursday as worries about a tightening of the global credit market resurfaced, sparking a broad decline in stocks in the U.S. and abroad.
The worries continued Friday after central banks in Europe, Japan, Australia and the U.S. all made billions available.
However, investors found some solace in news later in the session that the U.S. Federal Reserve had upped its initial influx of $19 billion to first $35 billion and then $38 billion, said Joseph Saluzzi, co-head of equity trading at Themis Trading.
"There may be a little less fear now," Saluzzi said. "It may not really make much of a difference, but it settles some feelings."
Yet, concerns about credit tightening and subprime aren't going away anytime soon, and the market is bound to remain vulnerable in the weeks ahead, let alone next week.
"This is still an emotional market and there are a lot of news events that could happen over the weekend that could weigh on stocks next week," Saluzzi said.
Earlier in the week, French bank BNP Paribas said it was halting withdrawals from three of its funds because of current market conditions, while Goldman Sachs (Charts, Fortune 500) said two of its hedge funds have sold some of their positions because of recent losses.
Similar news from other financial institutions this weekend or early next week could spark another leg down for the stock market, Saluzzi said.
Blackstone, Fortress: Time to bargain hunt?
Stocks have been whipsawed over the last few months on fears about tightening credit after a period of widespread liquidity.
At the same time, investors have been trying to sort out the implications of the fallout from the subprime mortgage market - loans made to consumers with less than ideal credit - amid the slumping housing market.
The European Central Bank (ECB) pumped extra cash into the system for a second day in a row, adding $83 billion in liquidity Friday. Central banks in Japan and Australia also added liquidity to their banking systems.
The Federal Reserve followed suit, initially adding $19 billion in temporary reserves. The move was the biggest single temporary open market operation in four years, the New York Federal Reserve said. In the late morning, the central bank said it was adding an additional $16 billion and in the afternoon, another $3 billion, bringing the total to $38 billion.
Futures markets show traders expect the Federal Reserve to cut interest rates on Sept. 18, the next policy meeting. However, there is also some speculation that the central bank could cut rates ahead of that meeting.
Select commodity and technology stocks bounced back, enabling the broader market to trim losses.
Gold and silver prices rose, boosting a variety of metal and mining stocks. The Amex Gold Bugs (up $6.64 to $346.02) index jumped 2 percent.
Among Dow 30 stocks, Exxon Mobil (up $0.91 to $84.51, Charts, Fortune 500) and IBM (up $1.91 to $112.64, Charts, Fortune 500) managed gains, while Alcoa (down $0.75 to $34.69, Charts, Fortune 500), General Electric (down $0.71 to $38.23, Charts, Fortune 500) and Microsoft (down $0.59 to $28.71, Charts, Fortune 500) all declined.
Countrywide Financial (down $0.80 to $27.86) slipped almost 3 percent after saying in a regulatory filing that unprecedented disruptions in the mortgage market pose a threat to its financial state.
Market breadth was negative, but improved from the morning. On the New York Stock Exchange, decliners beat advancers 5 to 3 on volume of 2.52 billion shares. On the Nasdaq, losers topped winners 9 to 7 on volume of 3.23 billion shares.
Treasury prices fell, lifting the benchmark 10-year note yield to 4.80 percent from 4.77 percent late Thursday. Bond prices and yields move in opposite directions.
In currency trading, the dollar slipped versus the euro and rose versus the yen.
U.S. light crude oil for September delivery fell 12 cents to $71.47 a barrel on the New York Mercantile Exchange.
Thursday, August 9, 2007
Hedge Funds - Everyone Wants in Right?
oh, yea, they all make money right?
(Reuters) - Goldman Sachs Group shares fell nearly 6 percent on Thursday after another of its hedge funds posted losses and reportedly sold positions.
North American Equity Opportunities, which started the year with about $767 million in assets, was down more than 15 percent this year through July 27, a person familiar with the situation said.
Declines at that fund follow a 12 percent drop in the last two weeks at Global Alpha, Goldman's flagship $9 billion macro hedge fund. That fund is down 16 percent for the year and traders have said the fund is selling parts of its portfolio.
Goldman denied talk on Wednesday it was liquidating the fund and declined further comment. On Thursday, the bank declined to comment on the North American Equity Opportunities fund.
Equity Opportunities is a market neutral stock fund that takes long and short bets. The smaller fund, like Global Alpha, relies on computer-driven "quantitative" trading models.
Goldman shares fell $11.05, or 5.7 percent, to $182.25 on Thursday. Since June 13, Goldman has fallen 22 percent, compared with a 4.1 percent decline for the Standard & Poor's 500 index <.SPX> and a 15.4 percent decline for the Amex Securities Broker Dealer index. <.XBD>
Goldman joins other investment banks managing hedge funds that have struggled during the recent market turbulence.
Swiss bank UBS AG was forced to shut down Dillon Read Capital Management less than two years after its launch following losses on mortgage markets. Bear Stearns Cos shares, and its reputation, were slammed as two of its mortgage funds suffered losses, outflows and then filed for bankruptcy.
Earlier on Thursday, French bank BNP Paribas froze 1.6 billion euros ($2.21 billion) worth of funds, citing problems over U.S. subprime mortgages.
Analysts said hedge fund declines will not have a major impact on earnings at a firm as large and diversified as Goldman. Still, the declines raise worrying questions about Goldman's largest and most mysterious business: securities trading.
"The main threat is on the trading side. That has always been the black box at Goldman that keeps their multiple down," said Les Satlow, a portfolio manager who helps invest $450 million at Cabot Asset Management. "That's the kind of thing that makes investors anxious."
Global Alpha has long been a top performer, fueling growth in Goldman Sachs Asset Management and making the bank one of the world's largest hedge fund managers. Over the years, the fund fattened the wallets of Goldman insiders who invested.
Run by 40-year-olds Mark Carhart and Raymond Iwanowski, Global Alpha uses computer models to make bold bets on stocks, bonds, currencies and commodities worldwide. The fund has had wild swings -- it returned nearly 40 percent in 2005 -- but has delivered positive returns since its inception in 1995.
Weak performance at Alpha has put a dent in Goldman's results in recent quarters. In the first quarter, Goldman's incentive fees from asset management fell 78 percent from a year earlier, to $23 million, reflecting poor performance.
In the second quarter, incentive fees fell 87 percent.
Outside investors responded by pulling out. Goldman's net flows of money into alternative investments were nil in the second quarter, compared with $6 billion received a year ago.
(Reuters) - Goldman Sachs Group shares fell nearly 6 percent on Thursday after another of its hedge funds posted losses and reportedly sold positions.
North American Equity Opportunities, which started the year with about $767 million in assets, was down more than 15 percent this year through July 27, a person familiar with the situation said.
Declines at that fund follow a 12 percent drop in the last two weeks at Global Alpha, Goldman's flagship $9 billion macro hedge fund. That fund is down 16 percent for the year and traders have said the fund is selling parts of its portfolio.
Goldman denied talk on Wednesday it was liquidating the fund and declined further comment. On Thursday, the bank declined to comment on the North American Equity Opportunities fund.
Equity Opportunities is a market neutral stock fund that takes long and short bets. The smaller fund, like Global Alpha, relies on computer-driven "quantitative" trading models.
Goldman shares fell $11.05, or 5.7 percent, to $182.25 on Thursday. Since June 13, Goldman has fallen 22 percent, compared with a 4.1 percent decline for the Standard & Poor's 500 index <.SPX> and a 15.4 percent decline for the Amex Securities Broker Dealer index. <.XBD>
Goldman joins other investment banks managing hedge funds that have struggled during the recent market turbulence.
Swiss bank UBS AG
Earlier on Thursday, French bank BNP Paribas
Analysts said hedge fund declines will not have a major impact on earnings at a firm as large and diversified as Goldman. Still, the declines raise worrying questions about Goldman's largest and most mysterious business: securities trading.
"The main threat is on the trading side. That has always been the black box at Goldman that keeps their multiple down," said Les Satlow, a portfolio manager who helps invest $450 million at Cabot Asset Management. "That's the kind of thing that makes investors anxious."
Global Alpha has long been a top performer, fueling growth in Goldman Sachs Asset Management and making the bank one of the world's largest hedge fund managers. Over the years, the fund fattened the wallets of Goldman insiders who invested.
Run by 40-year-olds Mark Carhart and Raymond Iwanowski, Global Alpha uses computer models to make bold bets on stocks, bonds, currencies and commodities worldwide. The fund has had wild swings -- it returned nearly 40 percent in 2005 -- but has delivered positive returns since its inception in 1995.
Weak performance at Alpha has put a dent in Goldman's results in recent quarters. In the first quarter, Goldman's incentive fees from asset management fell 78 percent from a year earlier, to $23 million, reflecting poor performance.
In the second quarter, incentive fees fell 87 percent.
Outside investors responded by pulling out. Goldman's net flows of money into alternative investments were nil in the second quarter, compared with $6 billion received a year ago.
UGH...Enough Said
Stocks got crushed Thursday, plunging right out of the gate; and every attempt to buy on the day's dips was met with even stronger waves of selling pressure.
Renewed fears about credit risk, this time from across the pond, prompted investors to take a deeper look at the severity of the ongoing subprime problem and the difficulties that diminishing liquidity is having on banks and brokers to accurately value assets.
The latest shoe to drop came from BNP Paribas. The French bank halted withdrawals from three of its funds as a lack of liquidity left it unable to fairly value their holdings on account of the turmoil in the U.S. credit market. Also discouraging was the fact that the company's CEO reportedly said just last week that the bank's exposure to U.S. subprime was "absolutely negligible."
The news out of Europe prompted a 50-basis point jump in Libor (London Interbank Offered Rate) to its highest level in six years and prompted the ECB to inject nearly 95 bln euros ($130 bln) into money markets. The Fed also chimed in by adding $24 bln in banking reserves. Such attempts to temporarily ease the pain of a possible credit crunch, however, were viewed with a glass half empty and merely exacerbated the worst of liquidity fears.
Not surprising, given its substantial exposure to mortgage lending and widening credit spreads, the Financial sector (-3.8%) got hammered, slipped further into negative territory for the year. With the most influential sector also the day's weakest link, it was not surprising to see the S&P 500 outpace the Dow and Nasdaq to the downside.
The broader market posted its worst one-day decline (-3.1%) since March 2003. All 10 economic sectors closed sharply lower, plunging 2.9% on average. Of the 147 S&P industry groups, only 10 posted gains.
Retailers were another blemish and were looking weak before the market even opened, as the bulk of July same-store sales figures missed forecasts.
On the NYSE, where trading curbs went into effect an hour before the close, decliners outpaced advancers by a nearly 4-to-1 margin while above average volume showed added conviction on the part of sellers.
Renewed fears about credit risk, this time from across the pond, prompted investors to take a deeper look at the severity of the ongoing subprime problem and the difficulties that diminishing liquidity is having on banks and brokers to accurately value assets.
The latest shoe to drop came from BNP Paribas. The French bank halted withdrawals from three of its funds as a lack of liquidity left it unable to fairly value their holdings on account of the turmoil in the U.S. credit market. Also discouraging was the fact that the company's CEO reportedly said just last week that the bank's exposure to U.S. subprime was "absolutely negligible."
The news out of Europe prompted a 50-basis point jump in Libor (London Interbank Offered Rate) to its highest level in six years and prompted the ECB to inject nearly 95 bln euros ($130 bln) into money markets. The Fed also chimed in by adding $24 bln in banking reserves. Such attempts to temporarily ease the pain of a possible credit crunch, however, were viewed with a glass half empty and merely exacerbated the worst of liquidity fears.
Not surprising, given its substantial exposure to mortgage lending and widening credit spreads, the Financial sector (-3.8%) got hammered, slipped further into negative territory for the year. With the most influential sector also the day's weakest link, it was not surprising to see the S&P 500 outpace the Dow and Nasdaq to the downside.
The broader market posted its worst one-day decline (-3.1%) since March 2003. All 10 economic sectors closed sharply lower, plunging 2.9% on average. Of the 147 S&P industry groups, only 10 posted gains.
Retailers were another blemish and were looking weak before the market even opened, as the bulk of July same-store sales figures missed forecasts.
On the NYSE, where trading curbs went into effect an hour before the close, decliners outpaced advancers by a nearly 4-to-1 margin while above average volume showed added conviction on the part of sellers.
Thursday, August 2, 2007
Stocks Stage Late Session Rally, Despite Subprime Credit
Wall Street put together another late session rally Thursday, with the Dow industrials finishing 100 points higher, even amid persistent subprime and credit market fears. The Dow Jones industrial index gained about 100 points, finishing nearly 0.8% higher. The broader S&P 500 climbed over 0.4% higher after dipping into negative territory earlier in the session, while the tech-laden Nasdaq Composite index rose nearly 0.9%. Just a day earlier, markets staged a nearly identical rally in the final moments of the session after remaining in the red for most of the session. Stocks struggled for most of Thursday's session, as upbeat earnings barely offset worries that tighter credit standards were impacting the financial sector.
Subprime concerns resurfaced after mortgage lender Accredited Home Lenders Holding revealed in a Securities and Exchange Commission filing that it was not certain it would continue to operate because of adverse conditions of the subprime mortgage market. Shares of the company tumbled nearly 38 percent on the news.
American Home Mortgage Investment Corp. will close its doors Friday, Newsday reported late Thursday, just two days after the mortgage lender said it was considering liquidating its assets.
Stocks got off to a modestly higher start following improved earnings from Nokia, Starbucks and Dow component Walt Disney.
A weaker-than-expected reading on June factory orders and a surprisingly low weekly jobless claims reading briefly jolted stocks, but ultimately had little impact as Wall Street braced for the big economic reading of the week: Friday's employment report for July.
Right now, U.S. employers are expected to have added 135,000 jobs last month, up from June, according to Briefing.com.
"I think if the number comes in at or above expectations it will be a positive for the stock market in the near term and provide some stability," said Richard Cripps, chief market strategist for broker Stifel Nicolaus.
In other corporate news, financial data processor Fiserv said it will acquire the electronic payment processing company Checkfree for $4.4 billion in cash, soothing recent concerns that dealmaking will dry up on Wall Street in the wake of recent troubles in the credit market.
Market breadth was positive. Winners beat losers by nearly 2 to 1 on volume of 1.97 billion on the New York Stock Exchange. Advancers topped decliners 4 to 3 on volume of 2.49 billion on the Nasdaq.
Oil prices remained near record highs reached earlier this week as U.S. light crude for September delivery rose 40 cents to $76.93 a barrel on the New York Mercantile Exchange.
Treasury prices climbed, lowering the yield on the benchmark 10-year note at 4.77% from 4.79% late Wednesday. Bond prices and yields move in opposite directions.
The dollar fell versus the euro and gained against the yen.
Subprime concerns resurfaced after mortgage lender Accredited Home Lenders Holding revealed in a Securities and Exchange Commission filing that it was not certain it would continue to operate because of adverse conditions of the subprime mortgage market. Shares of the company tumbled nearly 38 percent on the news.
American Home Mortgage Investment Corp. will close its doors Friday, Newsday reported late Thursday, just two days after the mortgage lender said it was considering liquidating its assets.
Stocks got off to a modestly higher start following improved earnings from Nokia, Starbucks and Dow component Walt Disney.
A weaker-than-expected reading on June factory orders and a surprisingly low weekly jobless claims reading briefly jolted stocks, but ultimately had little impact as Wall Street braced for the big economic reading of the week: Friday's employment report for July.
Right now, U.S. employers are expected to have added 135,000 jobs last month, up from June, according to Briefing.com.
"I think if the number comes in at or above expectations it will be a positive for the stock market in the near term and provide some stability," said Richard Cripps, chief market strategist for broker Stifel Nicolaus.
In other corporate news, financial data processor Fiserv said it will acquire the electronic payment processing company Checkfree for $4.4 billion in cash, soothing recent concerns that dealmaking will dry up on Wall Street in the wake of recent troubles in the credit market.
Market breadth was positive. Winners beat losers by nearly 2 to 1 on volume of 1.97 billion on the New York Stock Exchange. Advancers topped decliners 4 to 3 on volume of 2.49 billion on the Nasdaq.
Oil prices remained near record highs reached earlier this week as U.S. light crude for September delivery rose 40 cents to $76.93 a barrel on the New York Mercantile Exchange.
Treasury prices climbed, lowering the yield on the benchmark 10-year note at 4.77% from 4.79% late Wednesday. Bond prices and yields move in opposite directions.
The dollar fell versus the euro and gained against the yen.
Wednesday, August 1, 2007
11th HOUR RALLY ON WALL STREET
Major Gauges Break Into The Black Minutes Before The Closing Bell After A Tumultuous Session.
Stocks rallied late in the session Wednesday as investors weighed credit concerns and oil prices in addition to some better-than-expected economic news and corporate earnings reports. The Dow Jones industrial average rose over 150 points, or 1.2% after struggling for most of the session.
The broader Standard & Poor's 500 index added 0.7% and the tech-heavy Nasdaq composite index gained 0.3%.
All three major gauges got off to a rocky start on the heels of a stock selloff in the previous session.
But stocks bounced into the black briefly after the Institute for Supply Management reported that nationwide manufacturing activity fell more than expected and the National Association of Realtors' pending home sales index jumped more than expected in June.
Oil prices weighed in following the government's weekly report on crude inventories, which showed a huge drawdown last week. U.S. light crude for September delivery sank $1.26 to $76.95 a barrel after reaching a peak of $78.77, according to Reuters.
In addition, credit concerns, a slumping real estate market and corporate earnings compounded investors nervousness throughout the session, according to Art Hogan, chief market strategist at Jefferies & Co. "We don't know the magnitude of all of those issues," Hogan said, and "that is giving markets the jitters."
Market breadth was negative and volume was heavy. Losers beat winners on the New York Stock Exchange by nine to seven on volume of 2.4 billion shares. Decliners topped advancers by three to two on volume of 3 billion shares on the Nasdaq.
Treasury prices fell, raising the yield on the benchmark 10-year note to 4.78 percent from 4.74 percent late Tuesday. Bond prices and yields move in opposite directions.
The dollar gained against the euro and was little changed versus the yen.
COMEX gold for December fell $3.40 to $675.90 an ounce.
Stocks rallied late in the session Wednesday as investors weighed credit concerns and oil prices in addition to some better-than-expected economic news and corporate earnings reports. The Dow Jones industrial average rose over 150 points, or 1.2% after struggling for most of the session.
The broader Standard & Poor's 500 index added 0.7% and the tech-heavy Nasdaq composite index gained 0.3%.
All three major gauges got off to a rocky start on the heels of a stock selloff in the previous session.
But stocks bounced into the black briefly after the Institute for Supply Management reported that nationwide manufacturing activity fell more than expected and the National Association of Realtors' pending home sales index jumped more than expected in June.
Oil prices weighed in following the government's weekly report on crude inventories, which showed a huge drawdown last week. U.S. light crude for September delivery sank $1.26 to $76.95 a barrel after reaching a peak of $78.77, according to Reuters.
In addition, credit concerns, a slumping real estate market and corporate earnings compounded investors nervousness throughout the session, according to Art Hogan, chief market strategist at Jefferies & Co. "We don't know the magnitude of all of those issues," Hogan said, and "that is giving markets the jitters."
Market breadth was negative and volume was heavy. Losers beat winners on the New York Stock Exchange by nine to seven on volume of 2.4 billion shares. Decliners topped advancers by three to two on volume of 3 billion shares on the Nasdaq.
Treasury prices fell, raising the yield on the benchmark 10-year note to 4.78 percent from 4.74 percent late Tuesday. Bond prices and yields move in opposite directions.
The dollar gained against the euro and was little changed versus the yen.
COMEX gold for December fell $3.40 to $675.90 an ounce.
Why oil is rising but gas gets cheaper
Higher refinery activity has pushed crude to record highs but helped gasoline prices drop 11 percent. Will the trend continue?
If you're like most American motorists, you've noticed two things lately: Oil prices are at record highs, yet gasoline prices have dropped.
Over the last two months, U.S. crude has gained nearly 25 percent, and is now just pennies away from its all-time high. Yet gasoline futures have lost 7 percent over the same time. Retail gasoline prices have fallen even further, declining 11 percent from the all-time high set in May.
Usually oil and gas prices move in tandem. Yet this time around, analysts say the disconnect is all about refining. If refineries keep churning out gas, and crude doesn't spike too much further, some say motorists could see gas prices under $2 a gallon by winter.
$80 oil lurks
"It's a seasonal play," said Peter Beutel, a former trader and now an oil analyst at the consultancy Cameron Hanover. "People buy gasoline ahead of the [summer] season and sell it during the season."
That play was more pronounced this year as lots of maintenance and a series of accidents kept refineries from producing normal amounts of gasoline during the spring.
The record low gas supplies prompted fears of a shortage during the summer driving season, and that helped prices to hit an all-time high of $3.227 back in May.
But over the last six weeks, gasoline stocks have been rising and refineries have been operating at increasingly higher rates.
With summer more than half over, its likely gasoline prices will continue to fall.
"It's really going to take something extraordinary to get prices to spike mid-season," said Stephen Schork, publisher of the industry newsletter the Schork Report, who said retail gasoline prices could fall to around $2.70 by the end of September. "You'd need something catastrophic to disrupt supply."
Nearly everyone agrees that if something catastrophic did happen - like a massive hurricane in the Gulf of Mexico knocking out refineries - gasoline's decline would come to a quick end.
But another variable spoiling the party could be crude prices.
Just as more refining activity has led to more gasoline supplies and cheaper gas prices, it has also caused higher demand for crude. That higher demand, combined with the break down of peace talks in Nigeria and longer-term projects for greater worldwide demand and decreased supply, has fueled oil's recent rally.
If crude breaks over its all-time high of $78.40 - it was within cents at the time of this writing - and remains above $78 for a few days "Then I think we're going to $95," said Beutel.
"If crude breaks out, gasoline will have to come along for the ride," he said.
If you're like most American motorists, you've noticed two things lately: Oil prices are at record highs, yet gasoline prices have dropped.
Over the last two months, U.S. crude has gained nearly 25 percent, and is now just pennies away from its all-time high. Yet gasoline futures have lost 7 percent over the same time. Retail gasoline prices have fallen even further, declining 11 percent from the all-time high set in May.
Usually oil and gas prices move in tandem. Yet this time around, analysts say the disconnect is all about refining. If refineries keep churning out gas, and crude doesn't spike too much further, some say motorists could see gas prices under $2 a gallon by winter.
$80 oil lurks
"It's a seasonal play," said Peter Beutel, a former trader and now an oil analyst at the consultancy Cameron Hanover. "People buy gasoline ahead of the [summer] season and sell it during the season."
That play was more pronounced this year as lots of maintenance and a series of accidents kept refineries from producing normal amounts of gasoline during the spring.
The record low gas supplies prompted fears of a shortage during the summer driving season, and that helped prices to hit an all-time high of $3.227 back in May.
But over the last six weeks, gasoline stocks have been rising and refineries have been operating at increasingly higher rates.
With summer more than half over, its likely gasoline prices will continue to fall.
"It's really going to take something extraordinary to get prices to spike mid-season," said Stephen Schork, publisher of the industry newsletter the Schork Report, who said retail gasoline prices could fall to around $2.70 by the end of September. "You'd need something catastrophic to disrupt supply."
Nearly everyone agrees that if something catastrophic did happen - like a massive hurricane in the Gulf of Mexico knocking out refineries - gasoline's decline would come to a quick end.
But another variable spoiling the party could be crude prices.
Just as more refining activity has led to more gasoline supplies and cheaper gas prices, it has also caused higher demand for crude. That higher demand, combined with the break down of peace talks in Nigeria and longer-term projects for greater worldwide demand and decreased supply, has fueled oil's recent rally.
If crude breaks over its all-time high of $78.40 - it was within cents at the time of this writing - and remains above $78 for a few days "Then I think we're going to $95," said Beutel.
"If crude breaks out, gasoline will have to come along for the ride," he said.
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