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Stocks Plunge Into the Weekend.......


8/3/2007


Stocks plunged into the close Friday as troubling debt-related comments from Bear Stearns (BSC:NYSE) sent the New York market spiraling downward.

The Dow Jones Industrial Average tanked 281.42 points, or 2.09%, to 13,181.91. The S&P 500 tumbled 39.14 points, or 2.66%, to 1433.06, and the Nasdaq ended down 64.73 points, or 2.51%, at 2511.25.

"On a Friday during the summer months, you're going to see this type of large decline as the negative tone keeps feeding upon itself," said Art Hogan, chief market analyst with Jefferies. "The buyers packed up their bags once we picked a direction this morning, and there was no changing it."

Bear Stearns fell hard after finance chief Sam Molinaro said during a conference call that the credit market was "about as bad as I've seen it in 22 years." Following that observation, the stock indices went into a tailspin.

For Bear Stearns itself, it was a two-pronged skid. Earlier it was because Standard & Poor's cut its rating outlook for the broker to negative from stable.

Though the shares recovered, they sank again once the call got underway. Bear Stearns, which has lost 19% over the last month amid liquidity problems at some of its mortgage-related funds, finished down another 5.9% to $108.79.

Also weighing on the mood was the news that lender American Home Mortgage (AHM:) is slashing roughly 90% of its work force, and published reports now say the company will shut down after failing to find a buyer for its operations.

Earlier this week, American Home said its backers had cut off its credit and that one of the options that it would consider was liquidation. The stock plummeted 52.1% to 69 cents. American Home Mortgage lost 93.4% of its value this week.

A host of housing and mortgage-related stocks have seen punishing selloffs in recent sessions as investors fled at the first whiff of trouble.

Countrywide (CFC:) , Accredited Home Lenders (LEND:) and Beazer Homes (BZH:) are among those who have endured precipitous drops, regardless of whether the problem was more imagined than real.

Countrywide and Beazer dropped 6.6% and 13.3%, respectively, during the session.

As expected, the financial sector was creamed. The KBW Bank Index tumbled 4.1%, the Nasdaq Financial 100 Index spiraled 3.8% lower, and the NYSE Financial Sector Index dropped 3.1%.

"This problem is going to linger, and every headline is going to cause even more nervousness in the market," said Peter Cardillo, chief market economist with Avalon Partners. "Hopefully, these fears will begin to wane. If the credit crunch story should begin to expand further past these related names, then we can say these fears aren't overblown."

For the market overall, the fear that an unraveling housing sector is threatening to take down the entire economy has meant incredible volatility for the major indices of late.

During the prior two sessions, the Dow rallied around 250 points, but almost the entirety of those gains were collected during the final hour of trading each day. Intraday swings have become the norm, and stock averages have repeatedly turned on a dime from positive to negative and back again.

Last time out, the Dow rose 100.96 points, or 0.76%, to 13,463.33. The S&P 500 was up 6.39 points, or 0.44%, to 1472.20, and the Nasdaq gained 22.11 points, or 0.87%, to 2575.98.

Friday's steep decline resulted in another poor weekly performance for the major averages. Over the five sessions, the Dow slipped 0.6%, the S&P 500 slid 1.6%, and the Nasdaq gave back 1.9%.

On the New York Stock Exchange 4.54 billion shares changed hands, as decliners topped advancers by a 5-to-1 margin. Volume on the Nasdaq reached 2.53 billion shares, with losers outpacing advancers 4 to 1.

Meanwhile, the employment report, one of the most important pieces of data the government releases every month, showed that 92,000 workers were added to nonfarm payrolls in July. Economists had expected 135,000 positions to have been created.

The unemployment rate edged higher to 4.6% from 4.5% in June. Average hourly earnings, a key inflation metric, rose 0.3%, matching estimates.

Job growth for the prior month was revised downward. The government now says 6,000 fewer employees were put to work in June than had been first thought.

While jobs growth slowed, the small rise in wage growth could provide inflation comfort to the Federal Reserve. The central bank will meet for fifth time this year on Tuesday, but no change in the target fed funds rate is expected.

Ian Shepherdson, chief economist with High Frequency Economics, said that the trend in slowing payroll growth means that the Fed will have to cut interest rates further down the road.

"The household survey is volatile but the six-month average change in employment has slowed to just 26,000," he said. "If this persists, unemployment will rise further and the Fed, eventually, will have to ease."

Paul Mendelsohn, chief investment strategist with Windham Financial, pointed out that the jobs number isn't showing a major disintegration in employment.

"I don't think this number has any effect on what the Fed will do in terms of their decision making," he said. "The market has many other issues to deal with, as the other shoe looks to be dropping in the credit market."

There was more trouble for investors on the economic docket. The Institute for Supply Management's services index fell to a reading of 55.8 in July from 60.7 the previous month. The data were well below consensus and hit the lowest point since March.

Elsewhere, consumer products giant Procter & Gamble (PG:) posted quarterly earnings that were a little better than expected. The company also set plans to buy back as much as $30 billion of its stock, and it affirmed its fiscal 2008 forecast. Still, shares lost 42 cents, or 0.7%, to end at $62.88.

Treasury prices were on the rise. The 10-year note was up 18/32 in price, yielding 4.69%, and the 30-year bond added 23/32, yielding 4.86%.

Lower oil prices offered bulls little solace. After setting a record intraday high of $78.77 a barrel earlier this week, the September benchmark crude contract has pulled back and finished down $1.38 at $75.48 a barrel.

Tech Leads Stock Surge.......


8/8/2007


Stocks surged Wednesday as tech buyers cheered a strong earnings report from Cisco (CSCO:) and investors shook off some jitters about the credit markets.

The tech-heavy Nasdaq Composite jumped 51.38 points, or 2.01%, to 2612.98, bolstered by Cisco's earnings beat and strong outlook.

The other major averages rebounded from a late bout of volatility and ended solidly higher. The Dow Jones Industrial Average, which briefly plunged into negative negative territory in the last hour of trading, rose 153.56 points, or 1.14%, to 13,657.86. The S&P 500 added 20.78 points, or 1.41%, to 1497.49.

For the market, it represented the third straight day of gains after a massive selloff last week.

After the prior session's closing bell, Cisco posted profit and revenue figures that beat the Thomson First Call mean estimates. The networking-gear maker also raised its revenue guidance for the first quarter.

Bear Stearns upgraded Cisco to outperform from peer perform after the report, and the stock surged $1.99, or 6.7%, to close at $31.68.

"Cisco's news really gave us positive momentum," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "Even with the late day jitters from rumors, which gave us a lot of volatility, there is still money on the sidelines and there are some opportunities. No one wants to be left behind."

Roughly 5.35 billion shares traded on the New York Stock Exchange, with advancers topping decliners by a 12-to-5 margin. About 3.54 billion shares changed hands on the Nasdaq, as winners outpaced losers 2 to 1.

The embattled financial sector, the biggest part of the S&P 500, also was in recovery mode Wednesday, despite a late-session hiccup in shares of Goldman Sachs (GS:) .

The Nasdaq Financial 100 Index added 2.6%, the NYSE Financial Sector Index was up 2.2%, and the KBW Bank Index was higher by 1.8%.

The financial stocks'' gains came as investors worried about the credit markets were somewhat soothed by the Federal Reserves statement Tuesday, which acknowledged recent credit market tightness but maintained that inflation remains the biggest threat to the economy.

The Dow fluctuated after the statement, but ultimately the index ended Tuesday's session higher by 35.32 points, or 0.26%, to 13,504.30. The S&P 500 rose 9.04 points, or 0.62%, to 1476.71, while the Nasdaq Composite climbed 14.27 points, or 0.56%, to 2561.60.

"Post-Fed, the market seems to be a lot calmer," said Peter Cardillo, chief market economist with Avalon Partners. "Yesterday's announcement was what the market really needed to hear. Things are being monitored, but they're not bad."

Besides Cisco, Sprint Nextel (S:) beat estimates and offered guidance that was ahead of expectations. Sprint started higher but pulled back, ending lower by 45 cents, or 2.2%, to $19.77.

Ralph Lauren (RL:) traded sharply lower after missing fiscal first-quarter earnings targets. The apparel company also cut its full-year guidance for 2008. The stock was losing $10.98, or 11.8%, at $81.80.

Elsewhere, homebuilder Toll Brothers (TOL:) said its fiscal third-quarter revenue fell 21%, and the company said home sales could continue to slide until the credit mess is cleaned up.

Still, Toll Brothers finished higher by $1.38, or 6%, at $24.33, because the revenue decline wasn't as bad as analysts expected. The gain helped lift the Philadelphia Housing Sector Index, which rose 4.3%.

Railroad stocks were boosted by word that Warren Buffet's investment vehicle Berkshire Hathaway (BRK.A:) purchased another 1.62 million shares of Burlington Northern Santa Fe (BNI:) .

BNSF and rival CSX (CSX:) closed up 1.7% and 2.6%, respectively.

Broadcom (BRCM:) shares soared 9.8% on news that handset maker Nokia (NOK:) will be using the company's cell-phone chips.

Away from stocks, oil prices fell despite the Energy Department's latest inventory report showed a bigger-than-expected drop in supply. The front-month September crude contract, which has fallen 4% so far this week, shed another 27 cents to $72.15.

The Energy Department said that gasoline stocks unexpectedly fell by 1.7 million barrels last week. Crude stocks, meanwhile, fell by a greater-than-expected 4.1 million barrels, and distillates rose 1 million barrels.

Investors were also absorbing more economic data. Shortly after the opening bell, the Commerce Department said wholesale inventories rose 0.6% in June. Economists expect a 0.4% rise, compared with 0.5% in May.

Treasury prices tumbled and finished lower. The 10-year note fell 22/32 in price, yielding 4.86%, and the 30-year bond lost 1 12/32, yielding 5.02%.

Overseas markets were rallying after the Reserve Bank of Australia raised rates by a quarter-point to 6.5%, adding that recent credit market problems do not seem to have overflowed into the broader global outlook.

London's FTSE was 1.4% higher, and Frankfurt's DAX was up 1.2%. Overnight in Asia, Tokyo's Nikkei gained 0.6%, and Hong Kong's Hang Seng jumped 2.9%.

Credit Worries Clobber Stocks.......


8/9/2007


Stocks were slammed Thursday as news of a fund freeze in Europe renewed fears about the tightening liquidity markets and a spread of the subprime meltdown.

The Dow Jones Industrial Average plunged 387.18 points, or 2.83%, to 13,270.68, ending at session lows as a triple-digit slide steepened near the close. It was the biggest one-day point loss for the Dow since Feb. 27, when a selloff in China contributed to a 416-point decline.

The S&P 500 slid 44.40 points, or 2.96%, to 1453.09, and the Nasdaq Composite sank 56.49 points, or 2.16%, to 2556.49.

The steep declines came after French bank BNP Paribas said it has suspended three of its funds that have exposure to U.S. credit markets because of the inability to accurately value the mortgage-backed securities. The bank is just the latest financial firm to warn about exposure to liquidity problems in the U.S. credit market amid widespread defaults of subprime mortgage borrowers.

"With fresh evidence of the exposure of credit risk, the market can't get any traction and drops," said Art Hogan, chief market analyst with Jefferies. "The response may be overdone, but no one wants to get in the way when the ball starts rolling. This is consistent with what we've seen over the last couple weeks. This is the other shoe we've been waiting to drop."

Despite the slide, the major averages are still higher for the week. For the year, the Dow is still up 6.5%, the Nasdaq has gained 5.8%, and the S&P 500 has added 2.5%.

Trading curbs were put into effect on the New York Stock Exchange for the fourth time in 2007. A record 5.48 billion shares changed hands on the NYSE, as decliners toppled advancers by a 13-to-4 margin.

Volume on the Nasdaq reached 3.51 billion shares, with losers outpacing advancers 2 to 1.

The latest credit concerns hammered the battered financial sector even further. The NYSE Financial Sector Index lost 3.5%, and the Nasdaq Financial 100 Index fell 2.9%.

Among individual names, JPMorgan Chase (JPM:) , Lehman Brothers (LEH:) , Citigroup (C:) and Bear Stearns all slid by 5% or more.

BNP's action also punished European bourses. Paris'' CAC 40 lost 2.2%, Germany's Xetra Dax was down 2%, and London's FTSE 100 fell 1.9%.

In an unprecedented move, the European Central Bank provided a loan overnight of 95 billion euros, or about $130 billion, to banks to help inject funds into the market. Back in the U.S., the Federal Reserve put $12 billion in reserves into the banking system.

Treasuries, viewed as a safe harbor in turbulent times, rallied, reversing the previous session's decline. The 10-year note rose 21/32 in price, yielding 4.78%, and the 30-year bond added 5/32, yielding 5.03%.

"This is more of the same continued uncertainty," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "The extent of this credit issue and exposure for the rest of the market is unknown at this time, and the market hates that."

Adding to the concerns was news that Home Depot (HD:) is in talks with the private-equity buyers of its supply unit to amend the terms of the deal, including a potential price cut. The retailer also cut the price of its Dutch tender offer, citing the financial market conditions. The Dow component fell $2.01, or 5.3%, to close at $35.79.

Before the latest setback, fears of a credit crisis had cooled this week, allowing the Dow to rally nearly 500 points over the past three days.

Last time out, the Dow was higher most of the session, briefly turned negative, then rallied to close up 153.56 points, or 1.14%, to 13,657.86.

The Nasdaq was the big winner Wednesday, jumping 51.38 points, or 2.01%, to 2612.98 following Cisco's (CSCO:) earnings beat and strong outlook. The S&P 500 finished higher by 20.78 points, or 1.41%, at 1497.49.

Retail reports flooded in to start the new session. The world's biggest retailer, Wal-Mart (WMT:) , surprised analysts after it said comparable-store sales climbed 1.9% in July. Analysts had expected a 1.5% rise. The company also said it expects same-store sales to climb 1% to 2% in August. Wal-Mart slid $1.97, or 4.1%, to end at $46.45.

Rival Target's (TGT:) same-store sales rose 6.1% last month, coming in just ahead of estimates. The retailer also said it expects August comp sales to be up 4% to 6%. Shares of Target shed $2.69, or 4.1%, to $62.52.

Among other retail winners, J.C. Penney (JCP:) , Saks (SKS:) and Macy's (M:) all reported comp-store sales that beat estimates.

On the losing side were specialty apparel chains, with American Eagle Outfitters (AEO:) , Limited (LTD:) and Gap (GPS:) all reporting weaker-than-expected July results.

Among earnings, Dow component AIG (AIG:) after the prior close posted a 34% jump in second-quarter profit, easily topping estimates. Still, AIG gave back $2.18, or 3.3%, to $64.30.

News Corp. (NWS:) also reported late Wednesday, matching the Thomson First Call average estimate, as strong cable network results outweighed weakness in the company's movie and television businesses. News Corp. lost 39 cents, or 1.7%, to $22.41.

Elsewhere, Urban Outfitters (URBN:) reported a second-quarter profit that was in line with expectations, and HealthSouth (HLS:) swung to a second-quarter profit and beat forecasts. Shares of Urban Outfitters were off 4.6% and closed at $23, while HealthSouth was higher by 5.9% at $17.52.

Away from stocks, oil prices continued their recent tailspin. The front-month September crude contract, which has fallen 4.4% so far this week, shed another 56 cents to $71.59 a barrel.

The Labor Department released the lone economic report for the day before the opening bell, which showed that initial jobless claims rose by 9,000 to 316,000. The data came in above expectations.

Wall Street Limits Damage.......


8/10/2007


Stocks rebounded from deep losses Friday to close near break-even and bring all three major stock indices into positive territory for a week that saw panic about the credit market roil the global financial system.

After being down more than 200 points on Friday morning, the Dow Jones Industrial Average closed down just 31.14 points, or 0.2%, to 13,238.54. The S&P 500 eked out a gain of 0.55 points to close at 1,453.64. The Nasdaq Composite shed 11.6 points, or 0.4%, to 2,544.89.

Stocks battled back in a volatile session with heavy trading volume after plunging on Thursday, but not until the Federal Reserve moved in by injecting $38 billion in liquidity into the system to keep rates from rising above its target level.

"The Fed accomplished what it wanted to accomplish today, but we're not out of the woods yet," says Paul Mendelsohn, chief investment strategist with Windham Financial Services. "There are still major jitters in this market and there are serious problems in the credit market that still need to be worked out, so who knows what will happen on Monday."

With more signs of liquidity problems emerging from a variety of financial institutions, investors are essentially running scared and blind in an extended period of trading volatility, since no one knows the real extent of the problems. But while the credit-market worries sent Wall Street reeling Thursday and Friday, a rally in the first three days of the week provided enough gains to keep the averages in the black.

The Dow finished the week up 0.4%, while the S&P 500 added 1.4% and the Nasdaq rose 1.3%. The turmoil had the Dow closing with swings of more than 100 points in three out of five sessions.

In all, the Fed injected $62 billion in liquidity into the system Thursday and Friday. The central bank also issued a statement saying it would provide reserves as necessary to keep federal funds rate as close as possible to its target rate of 5.25%.

"In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets," the Fed said. "As always, the discount window is available as a source of funding."

Bill Hampel, chief economist with the Credit Union National Association, said the Fed was acting prudently.

"Not all the debt out there is bad debt, but this mortgage scare has people treating everything like it's junk," said Hampel. "The banks have stopped doing anything while they do the sort of due diligence on these complex securities (mortgage-backed securities and other derivatives) that they should have been doing all along."

Hampel believes the Fed will likely issue a rate-cut soon, since the outlook on the U.S. economy is shifting. Last week, the central bank opted to hold rates steady, citing the risk of inflation as its chief concern.

"The risk of a recession has gone up, because there is a real possibility that these credit problems will have a spillover effect on consumer spending and the broader economy," Hampel said.

Fears were stoked in Friday's session as Countrywide (CFC:NYSE) said in a Securities and Exchange Commission filing that "unprecedented disruptions" in mortgage securities markets will take their toll on the company over the short-term. The country's largest independent mortgage lender said that if liquidity continues to tighten it would hurt its financial condition.

Also, Washington Mutual (WM:NYSE) contributed to concerns, noting in its own SEC filing that the problems in the subprime market has spread into other types of nonconforming mortgages. The bank said liquidity in the secondary market has "diminished significantly."

"This is more evidence that the credit problems are not isolated to subprime," said Arthur Hogan, chief market analyst with Jefferies. "This again reminds us that we don't know the extent to which the subprime mortgage and credit derivatives issues are going to spill over into other parts of the financial system."

Concerns about a spillover became an issue in the prior session, when a wave of fear swept over investors after French bank BNP Paribas said it has suspended three of its funds that have exposure to U.S. credit markets. That spurred concerns that liquidity problems in the U.S., caused by increasing problems in the mortgage markets, were spreading globally.

The Dow plunged 387 points-- its biggest one-day point loss since the 416-point drop Feb. 27. The S&P 500 shed 44 points and the Nasdaq dropped 56.

Foreign stocks also tumbled, and after providing $131 billion in loans during the previous session, the European Central Bank offered another $84 billion to the bank system overnight. Both the Japanese and Australian central banks said they would follow the same lead and add funds to the banking system.

Back in the U.S., Treasuries, viewed as a safe harbor in turbulent times, rallied. On Friday, the 10-year note finished up 9/32 in price, yielding 4.73%, and the 30-year bond surged 24/32, yielding 2.97%.

In economic news, the government said Friday that U.S. import prices rose for a fifth-straight month, raising the possibility that cheap imports may not continue to keep a lid on inflation in the future. Import prices jumped 1.5% in July, according to the Labor Department, beating expectations on Wall Street for a 1% increase. In June, import prices climbed 0.9%, revised down from the previously reported measure of 1%.

Among stocks, EchoStar (DISH:Nasdaq) posted a 33% rise in second-quarter earnings, meeting expectations on Wall Street. Shares rose 1.2%.

Nvidia (NVDA:Nasdaq) after the prior close said that its second-quarter profit doubled from a year ago, beating expectations. However, the chipmaker said there were supply constraints due to strong demand for its products, prompting a downgrade from Merrill Lynch. Shares of Nvidia fell 4.6%.

Stock Futures in the Green.......


8/13/2007



Stock traders in New York were bidding up futures Monday as they aimed to open the week on an upbeat note following the market's recent credit scare-inspired volatility.

Futures on the S&P 500 were gaining 10.40 points to 1461.40 and were 3.78 points ahead of fair value. Nasdaq 100 futures were up 10.25 points at 1939.25 and were 4.57 points above fair value.

To be sure, investors remain on edge about the state of liquidity in global markets, but central banks abroad were making more moves to ease the worries. The European Central Bank has injected another $65 billion into its markets and the Bank of Japan has given up an additional $5 billion.

Now the focus will shift to the Federal Reserve in Washington to see whether it will again intervene in an effort to reassure investors after it pumped in funds last week.

Also overseas, news reports out of China say the central bank there doesn't have plans to sell its dollar reserves despite pressure from the U.S. to revalue the yuan.

Global equity measures were gaining ground. Tokyo's Nikkei was up 0.2%, and Hong Kong's Hang Seng advanced 0.5%. London's FTSE was better by 1.7%, and Frankfurt's DAX added 0.8%.

Meanwhile, back in the U.S., Goldman Sachs (GS:) is reportedly planning to hold a conference call later to discuss the recent performance of its quantitative funds and detail their losses.

Elsewhere, department store giant Sears (SHLD:) was out with profit estimates, saying its second-quarter earnings should be roughly in line with analysts'' expectations. The company also said it would repurchase up to $1.5 billion more of its common stock.

Homebuilder Hovnanian (HOV:) said it delivered 3,179 homes in the third quarter, a decline of 31% from the year-ago period. More than 2,500 contracts were signed, but that was down 24% from last year.

Treasury securities were climbing. The 10-year note was higher by 4/32 in price, lowering the yield to 4.79%, and the 30-year bond was up 8/32, yielding 5.02%.

Bank Injections Lift Stocks.......


8/13/2007


Stocks in New York pared their gains but were still higher Monday as new injections of funds by central banks allowed the market to begin the week on an upbeat note.

The Dow Jones Industrial Average was adding 48 points, or 0.4%, to 13,287. The S&P 500 was up 7.5 points, or 0.5%, at 1461, and the Nasdaq Composite halved its gains, though it was still better by 14 points, or 0.5%, to 2559.

To be sure, investors remain on edge about the state of liquidity in worldwide markets, but policymakers abroad were making more moves to ease the worries. The European Central Bank has put another $65 billion into its system, and the Bank of Japan has contributed an additional $5 billion.

Global equity measures gained ground after the actions. Tokyo's Nikkei was up 0.2%, and Hong Kong's Hang Seng advanced 0.5%. London's FTSE surged 2.8%, and Frankfurt's DAX climbed 1.6%.

Meanwhile, the U.S. Federal Reserve said it was adding $2 billion in liquidity by way of a one-day repurchase of Treasuries and other securities.

"The Fed is buying securities from the banks in cash, taking them off the banks'' hands," said Paul Mendelsohn, chief investment officer with Windham Financial. "It looks like $400 billion has been put into banks worldwide. That's a lot of money. It's hard to imagine what this market would be like without these injections. It would be an ugly picture."

At the same time, Goldman Sachs (GS:) said it has seen a "disappointing performance" at its quantitative funds of late. For instance, Global Equity, an equity long/short quant fund, has "suffered significantly" during the surge in volatility. Shares of Goldman were gaining $2.34, or 1.3%, to $182.84.

Elsewhere, Accredited Home Lenders (LEND:) sank 31% after the investment fund Lone Star pulled its $400 million offer for the company. Accredited said it would sue Lone Star for trying to back out of the deal.

Still, Peter Cardillo, chief market economist with Avalon Partners, said the new liquidity from the world's monetary authorities is helping to diminish fears of the credit problem and reassure market participants.

"Investors are starting to realize that what the central banks are doing is a long-term positive," he said. "Now, the market can focus on other things, such as earnings and economic data. It's all about stabilization now."

As for the economy, the Commerce Department said retail sales rose 0.3% last month, compared with a revised 0.7% decline in June. Excluding autos, retail sales were up 0.4%. Both figures were slightly above forecasts.

The government separately said that business inventories for June rose 0.4%, meeting expectations.

Treasuries were little changed. The 10-year note was lower by 1/32 in price, raising the yield to 4.81%, and the 30-year bond was up 4/32, yielding 5.03%.

On the corporate side, department store giant Sears (SHLD:) was out with profit estimates, saying its second-quarter earnings should be roughly in line with analysts'' expectations. The company also said it would repurchase up to $1.5 billion more of its common stock. Sears was rising by $5.69, or 4.3%, to $138.79.

Homebuilder Hovnanian (HOV:) said it delivered 3,179 homes in the third quarter, a decline of 31% from the year-ago period. More than 2,500 contracts were signed, but that was down 24% from last year. Hovnanian was lower by 13 cents, or 0.9%, to $14.57.

Oil prices were higher following a 5.3% drop last week. The front-month September crude contract was climbing $1.40 to $72.87 a barrel.

Among ratings changes, Deutsche Bank upgraded JPMorgan Chase (JPM:) to buy from hold. The firm also raised its rating for U.S. Bancorp (USB:) to hold from sell. JPMorgan was higher by 0.8% at $44.62, and U.S. Bancorp was adding 0.6% to $30.14.

BEA Systems (BEAS:) gained more than 3% after its stock was upgraded by Bear Stearns, UBS and Banc of America. The stock was recently up 41 cents, or 3.6%, to $11.82.

Stocks Take Another Drubbing.......


8/14/2007


Stocks in the U.S. slid Tuesday, closing near their worst levels of the session, as disappointing comments from two retail giants and ominous news from a Midwestern fund manager put investors back on edge.

The Dow Jones Industrial Average tumbled 207.61 points, or 1.57%, to 13,028.92. The index was pulled down by a 5.1% decline in Wal-Mart (WMT:NYSE) , which cut its outlook for the full year amid soft consumer spending, and a 4.9% loss in Home Depot (HD:NYSE) .

Wal-Mart said that excluding items, it had second-quarter earnings of 76 cents a share, matching the Thomson First Call estimate, but the world's biggest retailer guided lower for the third quarter and full year.

Consumers, it said, have been hurt by "economic pressure," raising concerns that the housing market and credit strife are being felt by shoppers. Wal-Mart fell $2.35 to $43.82.

Meanwhile, Home Depot also warned of ongoing troubles in the housing market, though it backed its full-year outlook. For the second quarter, Home Depot had a profit of $1.59 billion, or 81 cents a share, down 15% from a year ago. On an adjusted basis, the home improvement retailer beat estimates by a nickel.

The stock dropped $1.72 to $33.52.

As for the other major averages, the S&P 500 fell 26.38 points, or 1.82%, to 1426.54. The Nasdaq Composite shed 43.12 points, or 1.7%, to 2499.12.

Wal-Mart and Home Depot reported on the same day that investors were treated to mixed inflation data. The Labor Department's producer price index for July rose 0.6% last month, doubling expectations. However, the so-called core number, which excludes food and energy, rose 0.1%, and was half of what was anticipated.

Still, the core PPI has now risen 2.3% over the last 12 months, the biggest gain in two years, something the Federal Reserve will have to keep a close eye on.

"The headline and the year-over-year core numbers was hotter than expected, and that indicates the Fed still has a lot to do on the inflation side," said Paul Mendelsohn, chief investment strategist with Windham Financial.

"The core reading was good, but this doesn't solve the problem for the Fed," he continued. "It still makes it tough for the Fed to ease."

On Wednesday, the consumer price index, which is arguably the more important of the two, is due.

"Without a redirection of focus back to fundamentals, the selling will continue and we may drop below the 13,000 level on the Dow," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "With the stabilization in the credit market yesterday the Fed thought their work was done, but it seems the market needs some additional hand-holding. They should have kept up the additional liquidity in the market."

Stocks took a further hit after Illinois-based Sentinel Management Group asked regulators for permission to stop redemption's to money-market fund investors. The Commodity Futures Trading Commission said it was aware of the situation and would continue to monitor it.

Elsewhere in the financial space, Thornburg Mortgage (TMA:) , which saw shares plunge 46% after it said it won't accept new rate lock requests for four days. Earlier, five brokerage firms downgraded the stock, saying the company may be forced to sell assets to meet margin calls.

Banks and other lenders continued to suffer as worries over the recent credit crisis failed to abate. The NYSE Financial Sector Index finished down 2.4%, the Nasdaq Financial 100 Index was off 2.1%, and the KBW Bank Index lost 2.1%.

On the New York Stock Exchange 4.58 billion shares changed hands, as decliners topping advancers by a 5-to-1 margin. Volume on the Nasdaq reached 2.70 billion shares, with losers outpacing winners nearly 3 to 1.

Treasuries turned higher, lowering yields. The 10-year note climbed 7/32 in price, yielding 4.73%, and the 30-year bond was up 5/32 to yield 4.99%. The dollar was holding steady against the world's major currencies.

Also on the economic front, the Commerce Department said that the U.S. trade deficit narrowed to $58.1 billion in June from a revised $59.2 billion the previous month.

Overseas, European bourses declined in the wake of cautious remarks by UBS (UBS:) . London's FTSE lost 1.2%, and Frankfurt's DAX was down 0.7%. Overnight in Asia, Tokyo's Nikkei gained 0.3%, and Hong Kong's Hang Seng added 0.5%.

Switzerland's UBS dropped 4.8% after warning that earnings for the second half of 2007 would fall from year-ago levels because of the recent market conditions. The bank, however, did post a 79% jump in second-quarter earnings, topping estimates. UBS shed $2.60 to $51.49.

Another loser was Mattel (MAT:NYSE) , whose stock lost 2.4% following an announcement that it would recall millions of toys that were made in China, marking its second product recall in recent weeks. Mattel gave back 57 cents to $23.

One of the best performers was VMware (VMW:NYSE) , an EMC (EMC:NYSE) -owned software company that jumped more than 70% in its market debut.

Away from equities, the September front-month oil contract was 76 cents higher to finish at $72.38 a barrel. Gasoline tacked on 3.5 cents at $1.97 a gallon.

Wall Street Plunges Anew.......


8/15/2007


Stocks had another back and forth session Wednesday before ultimately closing with steep losses, and the Dow Jones Industrial Average dropped under 13,000 for the first time in four months.

After recovering from an early swoon to rise by as many as 90 points, the Dow gave back all of those gains and more, surrendering 167.45 points, or 1.29%, to 12,861.47. The index last closed below the 13,000 mark on April 24.

Elsewhere, the S&P 500 lost 19.84 points, or 1.39%, at 1406.70, and now is in negative territory for the year. The Nasdaq Composite slid 40.29 points, or 1.61%, to 2458.83.

"The technical conditions are not relevant anymore, as we can't get past the fact that there is a crisis per day," said Larry Wachtel, senior market analyst with Wachovia Securities. "Traders are simply trying to get through the day without an incident in financial stocks. The normal benchmarks, such as yearly gains, have to be thrown out the window."

The action wasn't exactly a surprise for daily market watchers considering the recent volatility, and at the forefront again were continuing jitters about credit.

"Each and every attempt [to go higher] is met with bad news that undermines confidence," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Now that the major global central banks have dumped liquidity into the market openly, they will be committed to keeping the spigot open."

Some of the ugliest action took place in Countrywide (CFC:) , where fears about its health sent the stock down 13% to close at $21.29. Merrill Lynch downgraded the shares all the way to sell from buy, citing the lack of liquidity in the mortgage market.

"The news about Countrywide's commercial paper issue was another debacle for the credit market," said Art Hogan, chief market analyst with Jefferies. "This just serves as a reminder that, with the country's largest mortgage originator in trouble, equities traders are pondering just how far this will reach."

Similarly, KKR Financial Holdings (KFN:) tanked 31.1% to $10.52 after the Kohlberg Kravis Roberts affiliate said trouble in the residential mortgage and commercial paper markets is forcing it to hold talks with investors in some of its asset-backed facilities regarding possible options for resolving potential funding issues.

Thornburg Mortgage (TMA:NYSE) was dropped to sell at Citigroup and A.G. Edwards, but it still had a 38.8% advance a day after sinking more than 40%.

Among subsector indices, the NYSE Financial Sector Index slumped 1.6%, the Nasdaq Financial 100 Index shed 0.9%, and the KBW Bank Index was off 0.8%.

"Given the continued weakness and pressure on funds that specialized in the subprime mortgages, the broader bank and brokerage stocks are getting pulled down right along with the specialized funds as investors panic out," Pado said.

Earlier, the Federal Reserve delayed a planned one-day repurchase agreement due to technical issues, only to later add $7 billion in reserves. One-day repos provide short-lived cash injections into the monetary system and are reversed the following day.

Central banks around the world have plowed in billions of dollars in liquidity in recent days, though the pace has slowed of late.

On the New York Stock Exchange 4.35 billion shares changed hands, as decliners crushed advancers by a 5-to-1 margin. Volume on the Nasdaq reached 2.30 billion shares, with losers outpacing winners nearly 7 to 3.

On Tuesday, the domestic averages fell hard following disappointing earnings reports from Wal-Mart (WMT:) and Home Depot (HD:) and more lending-market setbacks.

By the end of the day, the Dow had tumbled 207.61 points, or 1.57%, to 13,028.92. The S&P 500 fell 26.38 points, or 1.82%, to 1426.54, and the Nasdaq gave up 43.12 points, or 1.7%, to close at 2499.12.

Global equity measures struggled in the wake of a decline in U.S. stocks last time out. Tokyo's Nikkei fell 2.2%, and Hong Kong's Hang Seng plummeted 2.9%. London's FTSE was worse by 0.6%, while Frankfurt's DAX managed to gain 0.2%.

Meanwhile, the economic docket was fairly crowded. The Labor Department's consumer price index climbed 0.1% for July and the core index, which excludes food and energy prices, rose 0.2%. Both figures were in line with estimates.

The closely monitored core inflation figure is now up 2.2% over the past 12 months, unchanged from June.

The data came a day after the producer price index, which rose a greater-than-expected 0.6% in July. The core PPI was up 0.1% and was below estimates. The PPI report measures inflation at the wholesale level.

The CPI is considered the more important of the two when it comes to influencing Fed's decisions on interest rates, but both are factored into the central Bank's planning.

Also on the economic front, the Fed said that industrial production rose 0.3% in July as capacity utilization inched up to 81.9% from 81.8%. The data matched forecasts.

Separately, the New York Fed said its Empire State survey rose to a reading of 25.1 in August from 26.5 in July. Economists had expected a decline to 19.

Oil prices were higher for a third straight session. The front-month September crude contract jumped 95 cents to close at $73.33 a barrel, bolstered by a storm in the Gulf of Mexico and another system swirling in the Atlantic Ocean.

Treasury prices were mixed. The 10-year note rose 7/32 in price, yielding 4.70%, while the 30-year bond lost 8/32, raising the yield to 5.01%.

Among earnings, Deere (DE:) had much better than expected profits, and Sara Lee (SLE:) got past analysts'' quarterly estimates. Heinz (HNZ:) issued an optimistic forecast.

U.S. Market Set to Plummet........


8/16/2007


Stocks in the U.S. were set for another sharp slide Thursday, matching the declines in overseas markets as financial fears encircled the globe.

Futures on the S&P 500 were falling 17.70 points to 1396.70 and were 13.12 points below fair value. Nasdaq 100 futures were losing 23.75 points to 1854.75 and were 17.51 points beneath fair value.

Credit and housing worries took their toll on the markets again during the previous session. A 13% drop in shares of Countrywide (CFC:) Wednesday had investors continuing to fret about the extent and impact of the credit market crisis on corporate earnings and the economy.

Last time out, the Dow Jones Industrial Average plunged 167.45 points, or 1.29%, to 12,861.47, the first time the index has closed below 13,000 since April 24. The S&P 500 lost 19.84 points, or 1.39%, to 1406.70, and is now negative for the year. The Nasdaq Composite slid 40.29 points, or 1.61%, to 2458.83.

Selling at home begat selling overseas, as global indices struggled in the wake of declines in U.S. stocks. Tokyo's Nikkei 225 fell 2%, and Hong Kong's Hang Seng plummeted 3.3%. London's FTSE was worse by 3%, and Frankfurt's DAX dropped 2.7%.

Treasury prices were rallying as investors scrambled for a safe haven. The 10-year note was higher by 18/32 in price, cutting the yield to 4.65%, and the 30-year bond was up 31/32, yielding 4.96%.

More bad news for the housing sector is due out at 8:30 a.m. EDT, when the Commerce Department will post housing starts data for July. The report is expected to show drop-offs in both starts and building permits.

Meanwhile, St. Louis Federal Reserve President William Poole told Bloomberg that subprime mortgage woes are still not a threat to the U.S. economy. Only a "calamity," he said, would prompt the Fed to cut interest rates.

Several big names are due to report earnings later. Hewlett-Packard (HPQ:) , Fannie Mae (FNM:) , and Autodesk (ADSK:) will all release their quarterly numbers.

Retailers J.C. Penney (JCP:) , Kohl's (KSS:) , and Nordstrom (JWN:) are also set to report results.

Stocks Fly After Fed Cut.......


8/17/2007


A surprise cut in the Federal Reserves lending rate to banks sent stocks higher Friday as traders hoped the move would help bring some calm to the turbulent financial markets.

The Dow Jones Industrial Average rose 233.30 points, or 1.82%, to 13,079.08, and the S&P 500 added 34.67 points, or 2.46%, to 1445.94. The Nasdaq Composite gained 53.96 points, or 2.2%, to 2505.03. Earlier, the Dow was up more than 300.

The Fed, reacting to a crisis in liquidity conditions that has roiled markets around the world, reduced the discount rate, or the interest rate it charges banks that want to borrow, 50 basis points to 5.75%.

Discount-window borrowing is intended to provide liquidity to individual institutions in the event of short-term funding needs. It differs from the better-known fed funds rate, which is used when banks lend to each other.

A statement from the Fed said that "financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward."

The central bank reiterated that it believes the economy is continuing to expand at a moderate pace, but "downside risks to growth have increased appreciably."

"The Fed's move to cut the discount will certainly help alleviate the liquidity problem," said Peter Cardillo, chief market economist with Avalon Partners. "They left the fed funds rate unchanged, but they said they are monitoring the situation. They were concerned about growth faltering, they acted, and the markets like it."

Separately, the Fed injected another $6 billion of liquidity into the system by way of a three-day repurchase agreement.

Despite the rally, the major averages were still lower for the week. The Dow lost 1.2% over the five sessions, the S&P 500 dipped 0.5%, and the Nasdaq ended down 1.5%.

Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, questioned whether the gains will stick at the start of next week.

"If markets fail to respond positively today and hold those gains through next week, the economy will be in a crisis of confidence that is truly threatening to our prosperity," he said. "If not, we are in much bigger trouble than economists have conceded so far."

Breadth was decidedly positive for the only time this week. On the New York Stock Exchange 5.07 billion shares changed hands, as advancers topped decliners by a 7-to-1 margin. Volume on the Nasdaq reached 2.61 billion shares, with losers outpacing winners nearly 8 to 3.

Overseas, Asia's indices were hit hard, but Europe bounced after the Fed cut. Tokyo's Nikkei 225 plummeted 5.4%, and Hong Kong's Hang Seng fell 1.4% overnight. London's FTSE rebounded from early losses to jump 3.5%, and Germany's Xetra Dax added 1.5%.

The recent surge in the value of the Japanese yen was partly to blame for the heavy declines in Asia. The yen is at its highest against the dollar in over a year.

Robert Pavlik, chief investment officer with Oaktree Asset Management, said the Fed's move may not be the end of the selling pressure.

"This has stemmed the downward pressure for now, but this is the discount window and not the fed funds rate," said Pavlik. "Mortgage loans are not tied to the discount window. This doesn't help the individual consumer because it doesn't completely straighten out the subprime mess. It's not necessarily going to bring back the market liquidity that helped finance all the leveraged buyout and private-equity deals."

Ian Shepherdson, chief economist with High Frequency Economics, said that traders can only speculate, but "the decision to move the primary discount rate rather than the fed funds rate may indicate that the Fed anticipates some institutional failure ... probably not a bank, but rather an institution that has substantial bank liabilities that may not be able to clear."

U.S. Treasury bonds, which had been a safe haven for investors as the major averages slid dramatically this week, were losing ground late. The 10-year note was lower by 2/32 in price, raising the yield to 4.67%, and the 30-year bond was down 22/32, yielding 5.00%.

Energy and commodity prices rebounded after falling hard last time. Oil prices dropped $2.33 during the previous session, but finished up 98 cents to close at $71.98 a barrel. Gold futures gained $8.80 to $666.80 an ounce, and silver was higher by 30 cents to $11.80 an ounce.

Among equity names, Countrywide (CFC:) was again making headlines. The stock tumbled earlier this week on worries about its health and its need to tap an $11.5 billion credit line.

However, Banc of America Securities upgraded Countrywide to neutral from sell, saying it believes that the decision to access credit should help the company weather the subprime storm. Shares rallied $2.48, or 13.1%, to $21.43.

Hewlett-Packard (HPQ:) was also in focus after the tech giant posted fiscal third-quarter earnings following the previous close that beat Wall Street's estimates.

H-P also raised fiscal fourth-quarter earnings and sales guidance, and the stock ended up $1.10, or 2.4%, to $47.15.

Fickle Market Ends Mixed.......


8/21/2007


Stocks in the U.S. endured another seesaw trading session Tuesday as questions and concerns about the credit markets and the role of the Federal Reserve continued to swirl.

The Dow Jones Industrial Average lost 30.49 points, or 0.2%, to 13,090.86, and the S&P 500 added 1.57 points, or 0.1%, to 1447.12. The Nasdaq was better by 12.71 points, or 0.5%, at 2521.30.

New York's major averages rose to their short-lived session highs at midday after Senate Banking Committee Chairman Christopher Dodd (D., Conn.) said Fed Chairman Ben Bernanke will take advantage of all the means he has to stabilize the markets.

He made his comments following a meeting with Bernanke and Treasury Secretary Henry Paulson. Some traders took that to mean a reduction in the fed funds target rate from the 5.25% level, where it has been for more than a year, could be on the horizon. Futures contracts indicate traders are uniformly expecting a cut in the near future.

Those hopes were stoked last week when the Fed unexpectedly lowered the discount rate, the rate it charges on loans to banks, by 50 basis points. The fed funds rate is the interest banks charge each other on overnight loans. Dodd said he didn't ask Bernanke to cut the fed funds target.

However, the move up was quickly halted by Richmond Fed President Jeffrey Lacker. Speaking in Charlotte, N.C., Lacker, who has a reputation for hawkish views, said the recent volatility wasn't necessarily a reason for a rate cut and that there is still room to be worried about inflation.

"Even without a change in the interest rate target, the Fed has tools at its disposal that can help the market make necessary adjustments in times like these," he said, in prepared remarks.

Lacker currently isn't a member of the Federal Open Market Committee, the policymaking body that votes on the fed funds rate, but because he is a Fed official, his words still carry considerable weight.

Earlier, in a televised interview, Paulson tried to sound a calming tone, saying that while there are liquidity concerns and stresses in the capital markets, the domestic and global economies remain strong.

"These things take a while to play out," he said, and eventually "liquidity will return to normal."

Meanwhile, signs of the credit crisis flared up again. Following the prior close, Capital One Financial (COF:) said it will shut down its wholesale mortgage business, eliminating 1,900 jobs in the process.

Shares of Capital One rose 2.6% in the wake of the announcement as investors hoped the move would mitigate the chance the company will be hurt by the troubles in the mortgage world.

Elsewhere, Accredited Home Lenders (LEND:Nasdaq) signed an agreement to swap about $1 billion of loans under a 90-day purchase agreement. The transaction will reduce the company's exposure to margin calls on the loans, Accredited said. Its shares rose 1.7%.

The homebuilders weren't as fortunate. Banc of America downgraded Toll Brothers (TOL:NYSE) to sell from neutral and cut Hovnanian (HOV:NYSE) and Standard Pacific (SPF:NYSE) to neutral from buy, saying it believes cancellations have been increasing.

All three stocks traded lower.

Separately, RealtyTrac said the number of foreclosure filings in July soared 93% from the same month a year ago to 179,599, illustrating the difficulties facing the housing arena.

Treasury bonds were on the rise. The 30-year gained 9/32 in price, lowering the yield to 4.95%, and the 10-year note added 9/32 in price, yielding 4.59%. Yields on three-month bills rebounded to 3.62% after plunging during the last session.

As for the foreign-exchange market, the dollar was little changed against the yen and the euro.

Overseas, the People's Bank of China raised interest rates for the fourth time this year as the central bank aimed to control inflation. In Europe, the Bank of England said at least one lender used its lending facility, similar to the Fed's discount window, for the first time in over a month.

Hong Kong's Hang Seng Index rose 0.6%, and Japan's Nikkei 225 climbed 1.1% overnight. London's FTSE was up 0.1%, and Germany's Xetra Dax tacked on 0.2%.

Away from the financial sector, earnings were out from several retailers. Target (TGT:) was in line with expectations and reaffirmed its outlook, and BJ's Wholesale Club (BJ:) exceeded estimates.

Saks (SKS:) beat by a penny, and Staples (SPLS:) was in line. American Eagle (AEO:NYSE) topped the consensus but issued downside guidance, while Dick's Sporting Goods (DKS:NYSE) surpassed analysts'' targets and guided higher.

Crude oil was lower as Hurricane Dean made landfall in Mexico, sparing major oil operations in the Gulf of Mexico. The September benchmark crude contract shed $1.65 to $69.47 a barrel. Natural gas was soft again, losing 22 cents to $5.82 per million British thermal units.

Stocks Take Small Step Back.......


Thursday...8/23/2007


Stocks in the U.S. finished slightly lower Thursday as buyers took a breather after the prior session's rally and failed to embrace news of a handout for embattled lender Countrywide Financial (CFC:) .

After rising 40 points at the start of trading, the Dow Jones Industrial Average pulled back and ended down 0.25 point at 13,235.88. The S&P 500 eased 1.57 points, or 0.11%, at 1462.50. The Nasdaq Composite was moderately weaker, losing 11.10 points, or 0.43%, to 2541.70.

Peter Cardillo, chief market economist with Avalon Partners, said the market "is now beginning to digest and stabilize. In spite of the recent situation in the credit market, the economy remains sound. That may be making investors a bit hesitant, especially if the Federal Reserve doesn't lower interest rates at its next meeting in September."

Before the opening bell, Bank of America (BAC:) said it has invested $2 billion in Countrywide in order to help the largest mortgage lender in the U.S. weather the current difficulties in the credit market.

However, Countryside's CEO Angelo Mozilo said in a televised interview that the credit environment is "not getting better" and that it is unclear when the housing cycle will bottom. He added that a steeper downturn could lead to a recession, and that the Fed should cut rates in order to inject liquidity into the market.

After soaring 20% in the premarket session, the stock finished with a small gain of 20 cents, or 0.9%, at $22.02. The shares have lost 22% this month.

"The market held up pretty well, as the credit system looks like it has started to work again," said Paul Mendelsohn, chief investment officer with Windham Financial. "Some believe we've put in a bottom and some believe the worst is yet to come. The volatility has weakened, though, which is a good thing for investors that are looking to position themselves ahead of the next Fed meeting."

Meanwhile, a report on loans made through the Fed's discount window came out after the close, showing that an average of about $1.2 billion a day was borrowed by banks. Last Friday, the Fed reacted to a crisis in liquidity by reducing the discount rate, the interest rate it charges banks that want to borrow, 50 basis points to 5.75%.

Bank of America, Citigroup (C:) , JPMorgan Chase (JPM:) and Wachovia (WB:) have said they each borrowed $500 million from the Fed at that 5.75% interest rate.

"The move by the four major banks to go to the discount window and borrow $500 million apiece helped instill a sense of confidence," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "The amount isn't important. The banks were making an effort to validate the move by the Fed, and that proved to be a positive for the financials."

Breadth weakened from the prior day. On the New York Stock Exchange 3.10 billion shares changed hands, as advancers matched decliners. Volume on the Nasdaq reached 1.65 billion shares, with losers outpacing winners nearly 3 to 2.

Merger chatter in the sector put buyers in control Wednesday. The Dow gained 145.27 points, or 1.11%, to finish at 13,236.13. The S&P 500 was up 16.95 points, or 1.17%, at 1464.07, and the Nasdaq rose 31.50 points, or 1.25%, to 2552.80.

Global indices followed suit. Overnight, Japan's Nikkei climbed 2.6%, and Hong Kong's Hang Seng was better by 2.8%. China's Shanghai Composite tacked on 1%, sending it above 5000 for the first time.

Markets in the U.K., France and Germany were only slightly higher after coming off their best levels.

Elsewhere, Impac Mortgage (IMH:) said it is cutting back its mortgage origination business, eliminating 350 jobs. Shares lost 4 cents, or 2.4%, to close at $1.61. The move comes one day after Lehman Brothers (LEH:) said it is shuttering its subprime lender BNC Mortgage, resulting in the termination of 1,200 positions in 23 locations.

HSBC Holdings (HBC:) and Accredited Home Lenders (LEND:) have also said they would cut jobs.

Moody's Investors Service placed the ratings of three homebuilders, Centex (CTX:) , Lennar (LEN:) and Pulte Homes (PHM:) , under review for possible downgrades, and the stocks were mixed.

Lennar was higher by 2.2% and Pulte Homes gained 0.6%. Centex finished with a 0.5% decline.

On the ratings front, JMP Securities upgraded Toll Brothers (TOL:) to market perform from underperform. Shares tacked on 0.7% to $22.30.

Away from stocks, the front-month October crude contract added 57 cents and closed at $69.83 a barrel. Gasoline prices gained 3.5 cents to $1.92 a gallon.

On the economic front, the Labor Department said initial jobless claims fell by 2,000 last week to 322,000 claims, the first decline in a month. The less-volatile four-week moving average rose by 4,750 to 317,750.

Treasury bonds gained. The 10-year note rose 9/32 in price, reducing the yield to 4.62%. The 30-year bond was up 18/32 in price, yielding 4.92%.



The Dow 6 Month chart.......

Strong Data Spark Rally.......


Friday 8/24/2007


Stocks ended the week with solid gains Friday as traders cheered surprisingly positive data on the housing sector and the broader economy.

The Dow Jones Industrial Average rose 142.99 points, or 1.08%, to 13,378.87, helped by a strong upswing in the last hour of trading. The S&P 500 added 16.87 points, or 1.15%, to 1479.37. After opening lower, the Nasdaq Composite jumped 34.99 points, or 1.38%, to 2576.69.

The market shrugged off early sluggishness after the Commerce Department said new-home sales unexpectedly rose 2.8% to 870,000 annualized units. Economists had expected that sales would decline 1% to 825,000 units. June's initial read of 834,000 units was revised upward to 846,000.

"These numbers tend to be volatile and are subject to revisions," pointed out Steven Sheldon, principal of SMS Capital Management. "It's hard to understand why home sales are surging right now. It will take months to unfold, so you can't take credence in one set of numbers. This is already dated information, but the Federal Reserve will be paying attention."

Also on the economic front, the government said durable goods orders jumped 5.9% in July, nearly six times the consensus target and triple the revised 1.9% advance in June. Excluding transportation, orders rose 3.7%, the largest climb in two years.

Both reports arrived a day after Countrywide Financial's (CFC:) CEO Angelo Mozilo rattled the market, saying in a televised interview on CNBC that the credit environment is "not getting better" and that it's not clear when the housing cycle will bottom.

Mozilo added that a downturn in housing could possibly lead to a recession, and that the Fed should cut rates in order to get new liquidity into the market.

Those comments contributed to the major averages'' inability to hold early gains last time out, when the Dow eased 0.25 points at 13,235.88. The S&P 500 slipped 1.57 points at 1462.50, and the Nasdaq shed 11.10 points to 2541.70.

Shortly after the last close, a report on loans made through the Fed's discount window was released, showing that an average of about $1.2 billion a day was borrowed by banks during the past week. Last week, the Fed cut the discount rate, the interest rate it charges to lend to banks, by 50 basis points to 5.75%.

Financial subsector indices started lower but finished with slight gains. The Nasdaq Financial 100 advanced 1%, the NYSE Financial Sector Index was up 0.7%, and the KBW Bank Index tacked on 0.5%.

The major averages finished higher for the week as the recent turmoil in the credit markets abated somewhat. The Dow rose 2.3% over the five sessions, the S&P 500 added 2.4%, and the Nasdaq ended up 2.8%.

Breadth was decidedly positive, while volume was weaker compared to previous sessions. On the New York Stock Exchange 2.60 billion shares changed hands, as advancers topped decliners by a 2-to-1 margin. Volume on the Nasdaq reached 1.66 billion shares, with winners outpacing losers nearly 3 to 1.

Turning to stocks, Home Depot (HD:) may accept $1.2 billion less than the original $10.3 billion from three private-equity companies in a deal for its wholesale distribution business, according to a report in The Wall Street Journal. Home Depot added 66 cents, or 1.9%, to $34.68.

Marvell Technology (MRVL:) dropped 11.8% after it swung to a second-quarter loss. Marvell lost $2.10 to $15.75.

Brocade Communications (BRCD:) rose 4.3% after topping third-quarter estimates following the previous close. Brocade was higher by 30 cents at $7.26.

Apparel retailer Gap (GPS:) posted a better-than-expected 19% rise in second-quarter profits and raised its guidance for the year. Gap ended up $1.11, or 6.4%, to $18.51.

Meanwhile, fellow clothing seller AnnTaylor (ANN:) said second-quarter profits dropped 27% from a year ago but still topped expectations. The stock climbed $2.79, or 9.4%, to $32.43.

Gains in Gap and AnnTaylor boosted the S&P Retail Index, which finished with a gain of 1.9%.

Elsewhere, the front-month October crude contract rose $1.26 to end at $71.09 a barrel. Gasoline prices gained 6 cents at $1.99 a gallon.

Treasury bonds were gaining ground. The 10-year note was higher by 5/32 in price, yielding 4.63%. The 30-year bond added 26/32 in price, cutting the yield to 4.89%.

Global indices were mostly lower. Overnight, Hong Kong's Hang Seng Index fell 0.2% and Japan's Nikkei 225 shed 0.4%. In Europe, London's FTSE was up 0.4%, while Germany's Xetra Dax lost 0.1%.

         

Wall Street Drifts Downward.......


Monday 8/27/2007


Stocks in the U.S. opened the week with modest losses Monday as another report detailing the softness in the housing sector kept buyers from remaining interested.

The Dow Jones Industrial Average made a brief push into the green after midday, but it ultimately closed down 56.74 points, or 0.42%, at 13,322.13. The S&P 500 was off 12.58 points, or 0.85%, to 1466.79, and the Nasdaq Composite lost 15.44 points, or 0.6%, at 2561.25.

Shortly after the opening bell, the National Association of Realtors said existing-home sales dipped 0.2% to 5.75 million annualized units in July. The data came in higher than expectations but marked the lowest level of sales since November 2002.

Inventories of unsold homes, meanwhile, rose 5.1%, representing a 9.6-month supply.

"This [report] does not change the underlying trend, which is horrible," said Ian Shepherdson, chief economist with High Frequency Economics. "In particular, inventory continues to soar. In this environment, prices would be falling even if all was well in the mortgage market, so in today's troubled circumstances we have to expect steep declines for the foreseeable future."

Housing stocks Toll Brothers (TOL:) , Lennar (LEN:) , Centex (CTX:) and Pulte Homes (PHM:) all finished lower by 4.5% or more.

The report comes after separate data from Commerce Department on Friday showing that new-home sales unexpectedly rose 2.8% to 870,000 annualized units. Economists had expected that sales would decline 1% to 825,000 homes.

Those numbers helped boosted the major averages, which finished out another volatile week with gains.

The Dow rose 142.99 points, or 1.08%, to 13,378.87, aided by a strong upswing in the last hour of trading. The S&P 500 added 16.87 points, or 1.15%, to 1479.37, and the Nasdaq jumped 34.99 points, or 1.38%, to 2576.69.

Volume was sluggish to begin the new week. On the New York Stock Exchange, 2.39 billion shares changed hands Monday, as decliners topped advancers by a 2-to-1 margin. Volume on the Nasdaq reached 1.32 billion shares, with losers outpacing winners nearly 2 to 1.

Volume may continue to be light as the pre-holiday week progresses, though traders will have a torrent of economic data to digest. Minutes from the Federal Reserves policy meeting on Aug. 7 are due Tuesday, and reports on second-quarter gross domestic product and personal income and spending, among others, are expected later in the week.

"The economic calendar is full this week and there's certainly a lot of data to focus on," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "It's hard to tell, though, if there will be enough participants around this week to make anything exciting happen. This whole summer has been pretty surprising, in that there has been more activity than anyone expected."

Paul Nolte, director of investments with Hinsdale Associates, said that the unexpected increases in new home sales and durable goods orders to round out last week were "an indication that just maybe the economy remains on sounder footing than many believe and the fallout from subprime lending is relatively contained.

"What did disappear last week was the thought that the Federal Reserve was going to have to cut rates at their September meeting, although a rate cut still seems likely by year-end," Nolte added.

Though the turmoil in the credit markets has settled somewhat, former Treasury Secretary Lawrence Summers said over the weekend that the risks of a recession are at their highest since the terror attacks on Sept. 11, 2001.

Additionally, Summers said, efforts by Congress to restrict lenders Fannie Mae (FNM:) and Freddie Mac (FRE:) were badly timed, and that "we should be encouraging them to provide capital in the subprime space."

Among equities, Home Depot (HD:) will accept $1.8 billion less than the original $10.3 billion planned from three private-equity companies in a deal for its wholesale distribution business.

According to The Wall Street Journal, the home-repair retailer guaranteed $1 billion of the debt the buyers will take on to complete the transaction. Home Depot climbed 57 cents, or 1.6%, to $35.25.

Other M&A activity was making headlines, as well. Computer maker Gateway (GTW:) will be acquired by Taiwan's Acer in a $710 million deal. The bid values shares of Gateway at a 57% premium to its last closing price. Shares of Gateway soared 50.4% to close at $1.82.

Elsewhere, U.S. Steel (X:) will purchase Canada's Stelco for $1.04 billion. U.S. Steel dipped 38 cents, or 0.4%, to $93.01.

Away from stocks, the front-month October crude contract rose 88 cents to close at $71.97 a barrel. Gasoline prices advanced 6 cents to $2.03 a gallon.

Treasury bonds crept higher. The 10-year note added 5/32 in price, yielding 4.59%. The 30-year bond ended up 11/32 in price, reducing the yield to 4.86%.

In Asia, Hong Kong's Hang Seng surged 2.9% overnight, and Japan's Nikkei 225 tacked on 0.3%. Many overseas indices in Europe were closed for a holiday.

Stocks Find No Solace in Fed.......


Tuesday 8/28/2007


Stocks in the U.S. fell hard Tuesday after the minutes from the last Federal Reserve meeting failed to give investors any firm indication that the central bank is considering lowering interest rates.

The Dow Jones Industrial Average plunged 280.28 points, or 2.1%, to 13,041.85. The S&P 500 lost 34.43 points, or 2.35%, to 1432.36, and the Nasdaq Composite was weaker by 60.61 points, or 2.37%, at 2500.64.

The major averages were underwater early in the session amid more bad news on the financial and housing sectors, but they went deeper into the red after the 2 p.m. EDT release of the minutes of the Aug. 7 Fed meeting.

During that gathering, the Federal Open Market Committee kept its fed funds target rate at 5.25% for the ninth straight time. The Fed said it remained focused on inflation but it altered its statement to note the recent credit crisis.

In the statement accompanying the rate decision, the central bank noted that "credit conditions have become tighter for some households and businesses, and the housing correction is ongoing."

The minutes indicated that members of the FOMC judged that risks were on the rise, saying that "conditions in markets for subprime mortgages and related instruments, including segments of the asset-backed commercial paper market, deteriorated sharply toward the end of the period."

The Fed also said that the worsening mortgage situation could lead to a housing slump deeper and more prolonged than it had seemed earlier this year.

"Participants noted that investors had become much more uncertain about the likely future cash flows from subprime and certain other nontraditional mortgages, and thus about the valuation of securities backed by such mortgages," the minutes said.

But the panel also reiterated its inflation concerns. "Readings on core inflation had improved modestly in recent months but did not yet convincingly demonstrate a sustained moderation of inflation pressures, and ... the high level of resource utilization had the potential to sustain inflation pressures," the Fed said.

"Against this backdrop, members judged that the risk that inflation would fail to moderate as expected continued to outweigh other policy concerns," the minutes added.

The meeting came before credit worries significantly worsened, leading the Fed to cut its discount rate -- the interest it charges on loans to banks -- by 50 basis points. Many market participants are hoping in a reduction for the fed funds target, possibly as soon as Sept. 18, when the FOMC next meets.

"This Fed is very different from the Alan Greenspan-era in that they're dealing with a liquidity crisis through the discount window," said Paul Nolte, director of investments with Hinsdale Associates. "It is this Fed's view that the economy is still OK and that the liquidity problem is restricted to the financial sector. These minutes have taken hopes of a rate cut at the September meeting away.

"The economy is still weakening and will warrant a cut eventually," added Nolte. "The Fed doesn't have tools to deal with this type of problem today, so it's hard to say the way they're dealing with this is the right way, and we won't know until six months to a year from now."

Elsewhere on the economic front, the Conference Board said its consumer confidence index slid to a reading of 105 in August, as expected, from a revised 111.9 in July.

Ian Shepherdson, chief economist with High Frequency Economics, said that the drop in consumer confidence was clearly foreshadowed by steep declines in the University of Michigan consumer sentiment index, and it may not be the end of the process.

"Both the headline and current conditions indexes plunged, almost exactly reversing their July gains," he said. "What the easing in gas prices did, the chaos in the markets undid. We expect a further modest decline in confidence over the next month or so as people see the loss of value in their mutual fund, 401(k) and brokerage statements."

Following by a day a report on existing-home sales, which fell 0.2% as inventories soared 5.1%, more bad news was pressuring the housing sector. The S&P/Case-Schiller Index of home prices showed a 3.2% drop during the second quarter, the biggest decrease since the index began 20 years ago.

Housing stocks D.R. Horton (DHI:) , Lennar (LEN:) , Centex (CTX:) and Pulte Homes (PHM:) all finished down 3% or more.

The Dow has now dropped 338 points over the last two sessions, while the S&P 500 has given back 47 points and the Nasdaq has declined 76 points.

Breadth weakened considerably from the previous session. On the New York Stock Exchange 2.74 billion shares changed hands, as decliners topped advancers by a 7-to-1 margin. Volume on the Nasdaq reached 1.56 billion shares, with losers outpacing winners nearly 4 to 1.

More bad news was weighing on the financial sector. The Financial Times said that Barclays (BCS:) may have several hundred million dollars of exposure to troubled debt through links to German lender Saschen LB.

Barclays denied the report, but its shares lost $2.33, or 4.8%, at $46.61.

Elsewhere, Citigroup (C:) , Lehman Brothers (LEH:) and Bear Stearns (BSC:) were all downgraded to neutral from buy by Merrill Lynch. All were lower by 3.5% or more.

Jitters over the economic reports and the Fed outweighed M&A news. Medco Health (MHS:) said it will acquire PolyMedica (PLMD:) for $1.5 billion, a 17% premium to the stock's last closing price. Medco shed 1.2% to $85.11, while PolyMedica jumped 14.1% to close at $51.69.

Wendy's (WEN:) traded higher after word that Triarc (TRY:) , which owns the Arby's restaurant name, and Nelson Peltz's Trian Fund may purchase the restaurant chain. Wendy's gained 70 cents, or 2.2%, to $32.69.

Home Depot (HD:) confirmed that it will take less than it had planned for its supply unit, saying it will sell 87.5% of the division to private equity investors for $8.5 billion. Home Depot will retain a 12.5% stake. Previously, the sale was priced above $10 billion. Shares added 3 cents, or 0.1%, to close at $35.05.

Away from stocks, the front-month October crude contract ended lower by 19 cents to $71.74 a barrel. Gasoline prices were lower by 2 cents at $2.02 a gallon.

Treasury bonds went higher. The 10-year note rose 11/32 in price, yielding 4.53%. The 30-year bond was up 1/32 in price to yield 4.85%.

Asia's markets finished lower overnight. Hong Kong's Hang Seng eased nearly 1%, and Japan's Nikkei 225 dipped 0.1%. In Europe, London's FTSE 100 was off 1.9%, and Germany's Xetra Dax was down 0.7%.