This was the second straight day of choppy trading and we ended slightly up on the major indexes. Strength in the financials and the agriculture names kept the markets in positive territory.
Economic news this morning was mixed. The initial jobless claims number came in at its highest level since September 2005 – 407K. Analysts were looking for only 365K. Last week’s reading was 369K. “The number of workers remaining on jobless benefits climbed 97,000 to 2.94 million in the week ending March 22…This compared with forecasts for 2.87 million so-called continued claims” (Source: CNBC.com). Tomorrow is the much more important unemployment number, and it looks like analysts are expecting the rate to increase to 5.0% from 4.8% last month. This piece of data will set the tone for the markets tomorrow.
Also, the Institute for Supply Management’s Service Index came in at 49.6, slightly better than expectations. Last month’s reading was 49.3. Any number below 50 indicates contraction.
According to the Federal Reserve, investment banks are taking full advantage of the Fed’s new lending facility. “Firms average $38.1B in daily borrowing over the past week…that compares with $32.9B in the previous week and $13.4B in the first week the lending facility opened…[commercial] banks also stepped up their borrowing from the Fed’s discount window. Banks averaged $7B in daily borrowing for the week ending April 2. That compared with $550M the previous week” (Source: CNBC.com). This data is a great sign that investment banks are utilizing the Fed’s new lending instrument to fix their balance sheets.
The financials continued their rally today, although I’m still not a buyer. Shares of Merrill Lynch spiked today after CEO John Thain said there is no need for the company to raise extra capital (Source: CNNMoney.com). The big news, however, came from testimony on Capitol Hill regarding the Bear Stearns bailout. Bear CEO Alan Schwartz explained that if the Fed acted earlier, the company may have survived. “Had the discount window been opened to investment banks for their high-quality collateral, I think it is highly, highly unlikely in my personal opinion that we would be in the situation we find ourselves today” (Source: Bloomberg.com).
The agriculture stocks rallied as corn surpassed $6 per bushel and profit estimates at Monsanto were raised. All the commodity names were strong on the day.
In other news…
- Cisco was downgraded to “neutral” by UBS
- MEMC Electronics (WFR) reported worse-than-expected results because of a maintenance delay at one of their plants and they lower their Q1 guidance
- Goldman Sachs, Morgan Stanley, and Merrill Lynch had their earnings estimates lowered by Lehman Brothers
- Lehman Brothers had its earnings estimates cut by Goldman Sachs
DJIA 12,626.03 +20.20 (+0.16%)
Nasdaq 2,363.30 +1.90 (+0.08%)
S&P 500 1,369.31 +1.78 (+0.13%)
NYSE Volume 3,889,506,000
2-Yr Bond 1.91% +0.03
10-Yr Bond 3.61% +0.01
30-Yr Bond 4.40% +0.02
Crude Oil (May) 103.83 -1.00
Nat Gas (May) 9.417 -0.415
Gold (June) 909.60 +9.40
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