Although the markets were essentially flat for the day, I’ll consider it a victory for the bulls. The market opened flat and sold off 100 points because of weaker-than-expected economic data. We could have easily sold off big on this bad news, but stocks rallied to finish the day well off their early morning lows. The Nasdaq was the relative winner once again.
The Consumer Confidence number came in at its worst levels since 1973. The market was looking for a reading of 73.4, but the actual reading was 64.5. Last month’s reading was 75.0.
Also, the “S&P/Case-Shiller Home Price Index, which measures prices in 20 U.S. metropolitan areas, declined 10.7% versus the year-ago period, the largest drop on record since the measurement began in 2001 (Source: Briefing.com). This measure has fallen for 13 consecutive months now. “January home prices fell 2.4% from a month earlier, following a 2.1% decline the prior month” (Source: Bloomberg.com). This bad news regarding the housing market pretty much wiped out all of yesterday’s gain after the up beat home sales data. The dollar sold off hard (while gold rallied $16) on this news as investors were still fearful the worst of the housing decline isn’t over.
For the second day in a row, agricultural commodity prices rallied as did the agriculture stocks thanks to Monsanto raising their profit outlook for 2008. “The company said it now expects second-quarter earnings per share of $1.98, including a gain of 23 cents per share for a settlement of claims related to a subsidiary's emergence from bankruptcy.” The consensus estimate was $1.34 per share. “For the year, Monsanto now expects earnings per share between $3.38 and $3.48, including the gain of 23 cents per share…The company previously expected earnings in the range of $2.70 to $2.80 per share. Analysts anticipate earnings of $2.87 per share” (Source: Forbes.com). From its early Thursday morning lows of $90.50, Monsanto rallied as high as $116 today. That’s a 28% gain in three days!
The financial companies were in the news once again. Shares of Merrill Lynch declined today after JPMorgan cuts its 2008 profit estimate “by 45% on concerns that further write-downs may reduce earnings.” The estimate was lowered to $2.75 per share from $5 per share (Source: Bloomberg.com). Merrill Lynch “may report $5B in additional losses on collateralized debt obligations and other mortgage-related securities in the first quarter.” Bank of America was also downgraded to “sell” by Merrill Lynch and it had its profit forecast cut (Source: Bloomberg.com). Bank of America “may set aside a record $6.5B in the first quarter to cover possible future loan losses” (Source: CNBC.com).
Citigroup upgraded Yahoo! to “buy” from “hold” and increased its price target to $34 from $31. “Microsoft remains committed to it unsolicited $31 bid offer and is capable of and willing to increase that bid in order to conclude this deal” (Source: Bloomberg.com).
Thornburg Mortgage was up big after the company announced it plans to raise an additional $1.35B in bonds in an effort to avoid bankruptcy. “Thornburg needs to raise almost $1B this week to meet margin calls from its bankers…The cash shortage prompted Thornburg to suspend preferred dividends today” (Source: Bloomberg.com).
Today, the Fed announced the results of its eighth Term Auction Facility where $50B was available for commercial banks to bids for short-term loans. “Commercial banks' paid an interest rate of 2.615%, the lowest rate for any of the auctions of this kind conducted so far. There were 88 bidders for the latest slice of the $50 billion in loans. Demand was high. The Fed received bids for $88.9 billion worth of loans” (Source: CNNMoney.com).
Finally, the Fed released the summary of terms and conditions of the JPMorgan Chase – Bear Stearns deal. “The Federal Reserve Bank of
DJIA 12,532.60 -16.04 (-0.13%)
Nasdaq 2,341.05 +14.30 (+0.61%)
S&P 500 1,352.99 +3.11 (+0.23%)
NYSE Volume 4,155,744,000
2-Yr Bond 1.79% -0.05
10-Yr Bond 3.51% -0.05
30-Yr Bond 4.30% -0.03
Crude Oil (May) 101.22 +0.36
Nat Gas (May) 9.511 +0.088
Gold (Apr) 935.00 +16.30
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