-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: August 16, 2007 9:12:00 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Already a "Correction" -- and It'll Be Downhill from There
Stock Market Update -
Thu Aug 16 2007 16:20:01 EDT
Thu Aug 16, 2007 4:20PM EDT
http://www.reuters.com/article/stockTickerBriefing/
idUSSI2007081616410820070816
[BRIEFING.COM] After going more than four years without a market
correction of 10%, the Dow, S&P 500, and Nasdaq all endured large
enough losses intraday to make such a scenario become a reality.
However, a huge short covering rally in the S&P 500's most heavily
weighted sector -- Financials -- triggered a significant broad
market advance in the final hour of trading.
At their lows, the Dow, S&P 500, and Nasdaq were down 2.7%, 2.6%,
and 2.9%, respectively. The sharp losses followed an alarming
announcement from Countrywide Financial (CFC 20.18, -1.11) that it
had tapped the entirety of its $11.5 billion credit line to deal
with short-term funding issues.
Stocks, however, garnered momentum late in the day and staged one
of the biggest market turnarounds in recent memory. All three
major indices closed above their "corrective" lows. The S&P 500
eked out a small gain while the Dow and Nasdaq closed modestly lower.
Fears of a global liquidity crunch, which prompted carry-trade
unwinds that sent the yen surging the most against the dollar since
1998, were among several issues plaguing stocks right out of the gate.
In fact, when the yen hit its best levels of the day around 1:00
ET, that was when the Dow slipped to its lows of the session (-343
points or -2.7%). At that point, the Dow joined both the S&P 500
and Nasdaq down more than 10% from their July peaks, signaling a
market correction for an index containing even the bluest of blue
chips.
The extensive sell-off in everything from gold to copper suggested
that hedge funds were aggressively unwinding some of their biggest
winners. Materials (-1.2%) was the day's worst performing sector,
but it too closed well off its lows. It was down as much as 5.2%.
Renewed enthusiasm for the depressed Financial sector was the big
story of the day, though. It was down 1.5% early on but closed up
3.5%.
Throw in a handful of encouraging developments throughout the
afternoon and investors on the wrong side of the tape since credit
concerns began to surface ran for cover.
Speculation of an emergency Fed meeting around 2:00 ET helped
counter St. Louis Fed President Poole's comment earlier that only a
"calamity" would justify a rate cut.
Bear Stearns (BSC 116.60 13.45) soared 13% amid reports suggesting
it may get enough funding from a "deep pocket partner" to silence
rumors concerning potentially more adverse results. Fannie Mae (FNM
65.31 +3.86) saying it is in constructive talks with regulators to
lift portfolio caps also helped investors look past the Countrywide
Financial news.
Separately, it was reported before the start of trading that
housing starts plunged to 10-year lows.
NYSE Adv/Dec 1309/2078...Nasdaq Adv/Dec 1339/1752
------------------
Stocks Claw Their Way Back
Buyers swooped in the last hour after heavy selling pushed major
indexes 10% below their recent highs
by Karyn McCormack
http://www.businessweek.com/investor/content/aug2007/
pi20070816_476331.htm?chan=search
<snip>
U.S. Treasury Secretary Henry Paulson told the Wall Street Journal
he believes the turmoil on financial markets "will extract a
penalty" on U.S. economic growth, but "the economy and the markets
are strong enough to absorb the losses" without creating a recession.
Other market watchers wondered when the selling will turn to
buying. "The market is obviously in a heightened state of paranoia
and if we see the full fledged selling panic come in, you may have
to buy simply based on the fact we are probably a bit oversold,"
wrote Jay Collins of DT Trading in Chicago in an early morning note.
The New York Fed injected an additional $12 billion in reserves
today with overnight repurchase agreement, or "repo", on top of the
$5 billion 14-day repo put in place earlier in the morning, to help
ease the liquidity crunch. On Wednesday, the New York Fed used a
repo to add $7 billion to financial institutions.
In the last week, central banks in the U.S. and Europe have
injected money into the markets to help stabilize the credit markets.
But some experts argue that a cut in rates by the Fed may not be
needed now that market rates have fallen. Action Economics notes
that the Fed's injections over the last several sessions have kept
the effective funds rate below the 5.25% target rate, and has
traded with around 4% since last Friday. "This is an effective
easing from the Fed," says Action Economics.
Meanwhile, the Fed's rescue attempts are making investors nervous
that more financial and lending companies are in danger.
"The Fed pumping money into the system is positive, but the more
money they pump in, the more the fear factor increases," explains
Peter Cardillo, chief market economist at Avalon Partners in New York.
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