AI
Tuesday, December 11, 2007 7:59:11 PM
Market Update 071211
http://biz.yahoo.com/mu/update.html
4:25 pm : Stocks plummeted Tuesday following the FOMC announcement at 2:16 ET, even though the Fed cut rates by the expected 25 basis points. The Dow, Nasdaq and S&P plunged 344, 83 and 46 points, respectively, from their session highs to their closing levels. As stocks faltered, bonds rallied in a flight to safety.
The reaction to the FOMC decision was decidedly negative. The 25 basis point cut on the fed funds rate was expected, but there was increased chatter that the Fed would be inclined to cut the discount rate by 50 basis points to 4.50% to address some of the liquidity strains weighing on the financial markets.
The aggressive discount rate cut didn't happen, which provided the first source of disappointment.
Strikingly, the Fed's directive no longer references the thinking that the upside risks to inflation roughly balance the downside risks to growth. On the contrary, while the statement did note elevated energy and commodity prices may put upward pressure on inflation, the bulk of the statement seemed to revolve around slower economic growth.
The Fed acknowledged an intensification of the housing correction, some softening in business and consumer spending, and strains in financial markets. It also said recent developments have increased the uncertainty surrounding the outlook for economic growth and inflation. In light of the emphasis on growth factors, the initial response from the stock market is likely rooted in a sense of disappointment the FOMC didn't take a more aggressive stance at this meeting.
The Fed policy statement did, however, leave open the prospect of further rate cuts. If credit market conditions do not improve, the Fed will presumably cut rates further.
Although the FOMC statement stole the limelight, there were several corporate news items of note on Tuesday.
After the FOMC meeting, General Electric (GE 37.03, -0.38) provided a 2008 earnings forecast that was below the market's expectation, which was another negative focal point that prevented stocks from staging a late-day comeback. Specifically, GE said it expects 2008 earnings to be $2.42 per share, which is below the First Call consensus estimate that now stands at $2.49. GE's forecast still equates to 10% growth.
Washington Mutual (WM 17.59, -2.29) announced it is cutting its quarterly dividend to $0.15 from $0.56, will write-down $1.6 billion worth of its home lending portfolio, and will likely incur a fourth quarter earnings loss. The company plans to make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion.
Shares of WaMu closed down 11.5% as the capital raise was being criticized by some analysts as not being enough, and the stock was downgraded by several brokerages.
On a positive note, AT&T (T 34.91, +1.51 ) shares traded higher after the San Antonio-based telecommunications company said it will raise its dividend 12.7% to 40 cents per share and repurchase up to 400 million shares under a new buyback authorization.
Meanwhile, in its mid-quarter update, Texas Instruments (TXN 32.93, +0.26) raised the low end of its revenue and earnings per share guidance provided in October.
Nine sectors finished lower, all posting a loss in excess of 1%. The financial sector (-4.9%) was the main laggard, with the thrifts & mortgages group (-9.1%) posting the largest loss in response to the WaMu news. The materials sector was also a laggard.
Only the telecom sector (+1.0%) posted a gain, thanks to the strength in AT&T, which accounts for over 50% of the sector. DJ30 -294.26 NASDAQ -66.60 NQ100 -2.4% R2K -3.2% SP400 -3.0% SP500 -38.31 NASDAQ Dec/Adv/Vol 2390/644/2.23 bln NYSE Dec/Adv/Vol 2685/511/1.54 bln
3:30 pm : Stocks continue to fall as they digest the Fed’s decision to cut the fed funds and discount rates by 25 basis points.
Nine sectors are now trading lower, with only telecom (+1.5%) able to hold its gains thanks to AT&T’s (T 40.00, +2.10) strength.
Financials have been the hardest hit, posting a loss of 4.5%. The thrifts & mortgages group is down 8.8% and residential REITs is down 5.8%.
Homebuilding has also been clipped, as it posts a loss of 10%.
DJ30 -251.54 NASDAQ -51.04 SP500 -30.92 NASDAQ Dec/Adv/Vol 2233/773/1.68 bln NYSE Dec/Adv/Vol 2570/619/1.05 bln
3:05 pm : Some choppy action as investors continue to be disappointed with the 25 basis point cuts. From their peaks reached shortly before the FOMC announcement to their current levels, the Dow, Nasdaq and S&P 500 have dropped 257, 56, and 33 points, respectively. The 10-year note has rallied, pushing its yield below 4%.
The stock market bounced off its lows, but some negative news regarding General Electric's (GE 36.98, -0.43) earnings guidance sent the indices lower.
The breadth of the market has changed dramatically. Decliners outpace advancers by more than a 3-to-1 ratio on the NYSE, while the Nasdaq comes in at 22-to-8.
Meanwhile, Citigroup (C 33.95, -0.82) confirmed that it has appointed Vikram Pandit as the company’s new Chief Executive Officer and as a member of the Board of Directors.DJ30 -207.53 NASDAQ -39.83 SP500 -25.45 NASDAQ Dec/Adv/Vol 2155/832/1.44 bln NYSE Dec/Adv/Vol 2430/735/873 mln
2:35 pm : The initial reaction to the FOMC decision was decidedly negative. The 25 basis point cut on the fed funds rate was expected, but there was increased chatter that the Fed would be inclined to cut the discount rate by 50 basis points to 4.50% to address some of the liquidity strains weighing on the financial markets.
The aggressive discount rate cut didn't happen, which provided the first source of disappointment.
Strikingly, the Fed's directive no longer references the thinking that the upside risks to inflation roughly balance the downside risks to growth. On the contrary, while the statement did note elevated energy and commodity prices may put upward pressure on inflation, the bulk of the statement seemed to revolve around slower economic growth.
The Fed acknowledged an intensification of the housing correction, some softening in business and consumer spending, and strains in financial markets. It also said recent developments have increased the uncertainty surrounding the outlook for economic growth and inflation. In light of the emphasis on growth factors, the initial response from the stock market is likely rooted in a sense of disappointment the FOMC didn't take a more aggressive stance at this meeting.
DJ30 -180.95 NASDAQ -31.99 SP500 -21.77 NASDAQ Dec/Adv/Vol 1712/122/1.17 bln NYSE Dec/Adv/Vol 1437/1685/711 mln
2:20 pm : The FOMC announced that it has cut the fed funds rate by 25 basis points to 4.25% and the discount rate by 25 basis points to 4.75%.
The initial reaction in the stock market has been negative.
Briefing.com will provide additional analysis at the bottom of the hour.DJ30 -88.60 NASDAQ -9.69 SP500 -8.96 NASDAQ Dec/Adv/Vol 1324/1613/1.07 bln NYSE Dec/Adv/Vol 1508/1603/659 mln
2:00 pm : With the FOMC announcement only about 15 minutes away, the major indices hit fresh intraday highs. The financial sector (+0.2%) has led the recent buying interest as it reverses into the green after spending the session in negative territory. The Wall Street Journal reports that Citigroup (C 34.99, +0.22) is expected to name Vikram Pandit as CEO.
There is a strong possibility that there will be some volatility as investors digest the decision and any commentary from Mr. Bernanke.
Stocks are trading modestly higher. The 10-year note is up 17 ticks to yield 4.09%
DJ30 +25.93 NASDAQ +14.80 SP500 +4.94 NASDAQ Dec/Adv/Vol 1424/1499/988 mln NYSE Dec/Adv/Vol 1638/1465/616 mln
1:30 pm : Stocks continue to trade modestly above the unchanged mark with five sectors trading higher. Volume is somewhat light, but will likely pickup following the FOMC directive at 2:15 ET. The Dow and S&P were able to make it back in the green after the financial sector (-0.3%) pared the majority of its intraday losses.
The breadth of the market pains a picture of the lack of direction in stocks this session. On the NYSE decliners outpace advancers by a slight 17-to-14 margin. The Nasdaq clocks in at a nearly 1-to-1 ratio.
DJ30 +5.69 NASDAQ +11.45 SP500 +2.50 NASDAQ Dec/Adv/Vol 1456/1441/906 mln NYSE Dec/Adv/Vol 1696/1393/557 mln
1:00 pm : A pickup in buying interest pushes the major indices back in positive territory. The stock market is still trading near yesterday's closing price.
Bloomberg.com reports that Wells Fargo (WFC 32.00, -0.64) Chairman Richard Kovacevich said he expects FOMC to cut the discount rate by 50 to 75 basis points. The discount rate is the rate at which banks borrow directly from the Fed.
Briefing.com feels a more aggressive action on the discount rate will address the liquidity concerns in the financial market while the more moderate reduction in the fed funds rate will be aimed at offsetting the downside risks to growth presented by the renewed turbulence in the financial markets.DJ30 +14.80 NASDAQ +8.52 SP500 +1.90 NASDAQ Dec/Adv/Vol 1466/1422/827 mln NYSE Dec/Adv/Vol 1795/1274/502 mln
12:30 pm : The major indices make up some ground, but continue to trade in mixed fashion. The Nasdaq is outperforming on a relative basis.
The Dow has a bit of a negative bias, with 19 of its 30 components trading lower. Boeing (BA 91.51, -1.13) and American Express (AXP 56.46, -1.12) are the main laggards in the price-weighted Average. AT&T (T 40.42, +2.52) and McDonald's (MCD 63.10, +1.19) are posting the largest gains.DJ30 -9.18 NASDAQ +4.47 SP500 -1.08 NASDAQ Dec/Adv/Vol 1489/1379/737 mln NYSE Dec/Adv/Vol 1797/1254/449 mln
12:00 pm : The stock market slipped from its modest opening gains into negative territory, but is still trading near the unchanged mark ahead of the FOMC directive at 2:15 ET.
Briefing.com, and most economists, expects a 25 basis point cut in the fed funds rate to 4.25%. We think, too, that there will be a 50 basis point cut in the discount rate - the rate at which banks borrow directly from the Fed - to 4.50%. Given that there wasn't a unanimous vote for a rate cut at the last FOMC meeting, we suspect the committee will refrain from a 50 basis point cut in the fed funds rate, lest it risk fanning inflation concerns.
Fed funds futures indicate a 62% chance of a 25 basis point cut and a 38% chance of a 50 basis point cut.
Corporate news was mixed this morning.
On the negative side, Washington Mutual (WM 18.30, -1.58) is cutting its quarterly dividend to $0.15 from $0.56, will write-down $1.6 billion worth of its home lending portfolio, and will likely incur a fourth quarter earnings loss. The company plans to make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion.
Shares of WaMu are down 7.9% as the capital raise was being criticized by some analysts as not being enough, and the stock was downgraded by several brokerages.
On a positive note, AT&T (T 40.29, +2.39) shares traded higher after the San Antonio-based telecommunications company said it will raise its dividend 12.7% to 40 cents per share and repurchase up to 400 million shares under a new buyback authorization.
Meanwhile, in its mid-quarter update, Texas Instruments (TXN 33.57, +0.90) raised the low end of its revenue and earnings per share guidance provided in October. The Dallas-based chipmaker also said demand trends in the analog market are tracking in-line with expectations while the outlook for wireless has improved since the start of the quarter, despite market share erosion.
Four of the ten sectors are trading higher. The companies making major headlines have had a major impact on their respective sectors this session. Telecom is up 3.1% on the AT&T news, as the company makes up more than 50% of the sector. The second best performing group, tech (+0.5%), is getting a boost from Texas Instruments.
Financials (-1.2%) are the main laggards, led lower by the thrifts & mortgages group (-4.7%) as it follows shares of WaMu lower. DJ30 -11.38 NASDAQ -1.62 SP500 +4.59 NASDAQ Dec/Adv/Vol 1495/1339/638 mln NYSE Dec/Adv/Vol 1776/1253/386 mln
11:30 am : The major indices climb off their lows as shares of AT&T (T 40.06, +2.16) continue to soar. Six of the ten economic sectors are now in the red. The only sector posting a loss in excess of 1% is financials (-1.2%).
H&R Block (HRB 19.77, -0.18) is a laggard today after the company reported this morning that second quarter losses totaled $1.55 per share, primarily driven by underwhelming results from the company's discontinued subprime mortgage business. Though a net loss was expected, the company's underperformance was more pronounced than anticipated.DJ30 -11.54 NASDAQ +3.56 SP500 -1.48 NASDAQ Dec/Adv/Vol 1466/1328/532 mln NYSE Dec/Adv/Vol 1780/1214/313 mln
11:00 am : A pickup in selling interest in the financial sector (-1.2%) sends the S&P into negative territory, although it is still trading close to the unchanged mark. All of the sector's industry groups are in the red. There is significant weakness in the thrifts & mortgages (-4.8%) group due to the negative response to the Wells Fargo (WFC 31.85, -0.80) news.
Fannie Mae's (FNM 35.31, -1.60) CEO on CNBC says stock issuance was a "once and for all" transaction, and it is to be in position to have enough capital to get through 2008 and have incremental extra capital. Fannie Mae announced on Dec. 5 it is cutting its dividend and selling $7 billion in non-convertible preferred stock in order to shore up its capital position due to the ongoing challenges in the housing market.
Meanwhile, on a conference call, Freddie Mac (FRE 33.36, -1.67) said it expects housing prices to fall 10% from peak to trough. DJ30 -24.30 NASDAQ +2.62 SP500 -1.98 NASDAQ Dec/Adv/Vol 1345/1395/417 mln NYSE Dec/Adv/Vol 1513/1407/221 mln
10:30 am : The major indices are vacillating near the unchanged mark. The Dow has slipped, and is now trading slightly below yesterday's closing level.
Texas Instruments (TXN 33.36, +0.69) is giving the market a boost this morning. In its mid-quarter update, Texas Instruments raised the low end of its revenue and earnings per share guidance provided in October. The Dallas-based chipmaker also said demand trends in the analog market are tracking in-line with expectations while the outlook for wireless has improved since the start of the quarter, despite market share erosion.
October wholesales inventories came in flat, compared to the consensus expectation of a 0.5% rise. As expected, the market ignored this release. DJ30 -5.20 NASDAQ +8.43 SP500 +0.62 NASDAQ Dec/Adv/Vol 1136/1465/272 mln NYSE Dec/Adv/Vol 1274/1527/136 mln
10:00 am : The stock market is trading slightly above the unchanged mark. The major indices have not strayed far from the unchanged mark as investors appear to be reluctant to make any concerted moves ahead of the FOMC decision.
Of the seven sectors trading higher, telecom (+2.4%) is showing the most strength. Dow component AT&T (T 39.96, +2.06), which makes up more than half of the sector, is providing support after the company announced it is increasing its dividend by 12.7% to $0.40 and has authorized up to $15 billion in share repurchases.
The financial sector (-0.7%) is the main laggard. Washington Mutual (WM 18.08, -1.80) is trading sharply lower after the company announced $1.6 billion write-down and cut its dividend to $0.15 per share from $0.56 per share. The company also said it plans to issue $2.5 billion in convertible stock, which some analyst criticized as not being enough. Several brokerages downgraded the company this morning. DJ30 +8.38 NASDAQ +5.94 SP500 +1.05 NASDAQ Dec/Adv/Vol 998/1376/123 mln
09:40 am : Stocks open slightly higher ahead of the Fed policy decision at 2:15 ET this afternoon. On Fed policy days the market is often stable ahead of the announcement, and very volatile afterwards. The current fed funds rate is 4.5% and the discount rate is 5.0%.
Fed fund futures suggest at least a 25 basis point cut in the fed funds rate is expected, with a 38% chance of a 50 basis point cut. The chance of a higher cut is up from yesterday, when futures suggested a 28% chance of a 50 basis point cut.
In addition, the market expects the discount rate will be sliced by 50 basis points. DJ30 +10.49 NASDAQ +2.95 SP500 +1.13
09:15 am : S&P futures vs fair value: +1.4. Nasdaq futures vs fair value: +2.3.
09:00 am : S&P futures vs fair value: +2.2. Nasdaq futures vs fair value: +4.3. It is still shaping up to be a slightly higher start. AT&T (T) announced this morning that it is raising its dividend to 40 cents from 35.5 cents and has authorized the repurchase of as much as 400 million shares.
08:29 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +4.8. Futures indicate a slightly higher to flat open. The Wholesale Inventories report for October will be released at 10:00 ET, but it won't have any impact as the market will remain preoccupied with the FOMC decision.
08:00 am : S&P futures vs fair value: +3.5. Nasdaq futures vs fair value: +6.0. Early indications suggest a slightly higher open ahead of the FOMC policy directive at 2:15 pm ET. The majority of market participants expect a 25 basis point cut in the fed funds and 50 basis point cut in the discount rate. In corporate news, Texas Instruments (TXN) provided a mid-quarter update that raised the low end of its prior guidance ranges for earnings and revenue. On a negative note, Washington Mutual (WM) is cutting its quarterly dividend to $0.15 from $0.56 and will make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion. Washington Mutual was downgraded to Sell from Hold at Citigroup, and Friedman billings cut its price target to $12 from $14.
06:23 am : S&P futures vs fair value: +0.3. Nasdaq futures vs fair value: +0.8.
06:23 am : FTSE...6528.80...-36.60...-0.6%. DAX...8010.71...-22.65...-0.3%.
06:23 am : Nikkei...16044.72...+120.33...+0.8%. Hang Seng...29226.84...+725.74...+2.5%.
http://biz.yahoo.com/mu/update.html
4:25 pm : Stocks plummeted Tuesday following the FOMC announcement at 2:16 ET, even though the Fed cut rates by the expected 25 basis points. The Dow, Nasdaq and S&P plunged 344, 83 and 46 points, respectively, from their session highs to their closing levels. As stocks faltered, bonds rallied in a flight to safety.
The reaction to the FOMC decision was decidedly negative. The 25 basis point cut on the fed funds rate was expected, but there was increased chatter that the Fed would be inclined to cut the discount rate by 50 basis points to 4.50% to address some of the liquidity strains weighing on the financial markets.
The aggressive discount rate cut didn't happen, which provided the first source of disappointment.
Strikingly, the Fed's directive no longer references the thinking that the upside risks to inflation roughly balance the downside risks to growth. On the contrary, while the statement did note elevated energy and commodity prices may put upward pressure on inflation, the bulk of the statement seemed to revolve around slower economic growth.
The Fed acknowledged an intensification of the housing correction, some softening in business and consumer spending, and strains in financial markets. It also said recent developments have increased the uncertainty surrounding the outlook for economic growth and inflation. In light of the emphasis on growth factors, the initial response from the stock market is likely rooted in a sense of disappointment the FOMC didn't take a more aggressive stance at this meeting.
The Fed policy statement did, however, leave open the prospect of further rate cuts. If credit market conditions do not improve, the Fed will presumably cut rates further.
Although the FOMC statement stole the limelight, there were several corporate news items of note on Tuesday.
After the FOMC meeting, General Electric (GE 37.03, -0.38) provided a 2008 earnings forecast that was below the market's expectation, which was another negative focal point that prevented stocks from staging a late-day comeback. Specifically, GE said it expects 2008 earnings to be $2.42 per share, which is below the First Call consensus estimate that now stands at $2.49. GE's forecast still equates to 10% growth.
Washington Mutual (WM 17.59, -2.29) announced it is cutting its quarterly dividend to $0.15 from $0.56, will write-down $1.6 billion worth of its home lending portfolio, and will likely incur a fourth quarter earnings loss. The company plans to make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion.
Shares of WaMu closed down 11.5% as the capital raise was being criticized by some analysts as not being enough, and the stock was downgraded by several brokerages.
On a positive note, AT&T (T 34.91, +1.51 ) shares traded higher after the San Antonio-based telecommunications company said it will raise its dividend 12.7% to 40 cents per share and repurchase up to 400 million shares under a new buyback authorization.
Meanwhile, in its mid-quarter update, Texas Instruments (TXN 32.93, +0.26) raised the low end of its revenue and earnings per share guidance provided in October.
Nine sectors finished lower, all posting a loss in excess of 1%. The financial sector (-4.9%) was the main laggard, with the thrifts & mortgages group (-9.1%) posting the largest loss in response to the WaMu news. The materials sector was also a laggard.
Only the telecom sector (+1.0%) posted a gain, thanks to the strength in AT&T, which accounts for over 50% of the sector. DJ30 -294.26 NASDAQ -66.60 NQ100 -2.4% R2K -3.2% SP400 -3.0% SP500 -38.31 NASDAQ Dec/Adv/Vol 2390/644/2.23 bln NYSE Dec/Adv/Vol 2685/511/1.54 bln
3:30 pm : Stocks continue to fall as they digest the Fed’s decision to cut the fed funds and discount rates by 25 basis points.
Nine sectors are now trading lower, with only telecom (+1.5%) able to hold its gains thanks to AT&T’s (T 40.00, +2.10) strength.
Financials have been the hardest hit, posting a loss of 4.5%. The thrifts & mortgages group is down 8.8% and residential REITs is down 5.8%.
Homebuilding has also been clipped, as it posts a loss of 10%.
DJ30 -251.54 NASDAQ -51.04 SP500 -30.92 NASDAQ Dec/Adv/Vol 2233/773/1.68 bln NYSE Dec/Adv/Vol 2570/619/1.05 bln
3:05 pm : Some choppy action as investors continue to be disappointed with the 25 basis point cuts. From their peaks reached shortly before the FOMC announcement to their current levels, the Dow, Nasdaq and S&P 500 have dropped 257, 56, and 33 points, respectively. The 10-year note has rallied, pushing its yield below 4%.
The stock market bounced off its lows, but some negative news regarding General Electric's (GE 36.98, -0.43) earnings guidance sent the indices lower.
The breadth of the market has changed dramatically. Decliners outpace advancers by more than a 3-to-1 ratio on the NYSE, while the Nasdaq comes in at 22-to-8.
Meanwhile, Citigroup (C 33.95, -0.82) confirmed that it has appointed Vikram Pandit as the company’s new Chief Executive Officer and as a member of the Board of Directors.DJ30 -207.53 NASDAQ -39.83 SP500 -25.45 NASDAQ Dec/Adv/Vol 2155/832/1.44 bln NYSE Dec/Adv/Vol 2430/735/873 mln
2:35 pm : The initial reaction to the FOMC decision was decidedly negative. The 25 basis point cut on the fed funds rate was expected, but there was increased chatter that the Fed would be inclined to cut the discount rate by 50 basis points to 4.50% to address some of the liquidity strains weighing on the financial markets.
The aggressive discount rate cut didn't happen, which provided the first source of disappointment.
Strikingly, the Fed's directive no longer references the thinking that the upside risks to inflation roughly balance the downside risks to growth. On the contrary, while the statement did note elevated energy and commodity prices may put upward pressure on inflation, the bulk of the statement seemed to revolve around slower economic growth.
The Fed acknowledged an intensification of the housing correction, some softening in business and consumer spending, and strains in financial markets. It also said recent developments have increased the uncertainty surrounding the outlook for economic growth and inflation. In light of the emphasis on growth factors, the initial response from the stock market is likely rooted in a sense of disappointment the FOMC didn't take a more aggressive stance at this meeting.
DJ30 -180.95 NASDAQ -31.99 SP500 -21.77 NASDAQ Dec/Adv/Vol 1712/122/1.17 bln NYSE Dec/Adv/Vol 1437/1685/711 mln
2:20 pm : The FOMC announced that it has cut the fed funds rate by 25 basis points to 4.25% and the discount rate by 25 basis points to 4.75%.
The initial reaction in the stock market has been negative.
Briefing.com will provide additional analysis at the bottom of the hour.DJ30 -88.60 NASDAQ -9.69 SP500 -8.96 NASDAQ Dec/Adv/Vol 1324/1613/1.07 bln NYSE Dec/Adv/Vol 1508/1603/659 mln
2:00 pm : With the FOMC announcement only about 15 minutes away, the major indices hit fresh intraday highs. The financial sector (+0.2%) has led the recent buying interest as it reverses into the green after spending the session in negative territory. The Wall Street Journal reports that Citigroup (C 34.99, +0.22) is expected to name Vikram Pandit as CEO.
There is a strong possibility that there will be some volatility as investors digest the decision and any commentary from Mr. Bernanke.
Stocks are trading modestly higher. The 10-year note is up 17 ticks to yield 4.09%
DJ30 +25.93 NASDAQ +14.80 SP500 +4.94 NASDAQ Dec/Adv/Vol 1424/1499/988 mln NYSE Dec/Adv/Vol 1638/1465/616 mln
1:30 pm : Stocks continue to trade modestly above the unchanged mark with five sectors trading higher. Volume is somewhat light, but will likely pickup following the FOMC directive at 2:15 ET. The Dow and S&P were able to make it back in the green after the financial sector (-0.3%) pared the majority of its intraday losses.
The breadth of the market pains a picture of the lack of direction in stocks this session. On the NYSE decliners outpace advancers by a slight 17-to-14 margin. The Nasdaq clocks in at a nearly 1-to-1 ratio.
DJ30 +5.69 NASDAQ +11.45 SP500 +2.50 NASDAQ Dec/Adv/Vol 1456/1441/906 mln NYSE Dec/Adv/Vol 1696/1393/557 mln
1:00 pm : A pickup in buying interest pushes the major indices back in positive territory. The stock market is still trading near yesterday's closing price.
Bloomberg.com reports that Wells Fargo (WFC 32.00, -0.64) Chairman Richard Kovacevich said he expects FOMC to cut the discount rate by 50 to 75 basis points. The discount rate is the rate at which banks borrow directly from the Fed.
Briefing.com feels a more aggressive action on the discount rate will address the liquidity concerns in the financial market while the more moderate reduction in the fed funds rate will be aimed at offsetting the downside risks to growth presented by the renewed turbulence in the financial markets.DJ30 +14.80 NASDAQ +8.52 SP500 +1.90 NASDAQ Dec/Adv/Vol 1466/1422/827 mln NYSE Dec/Adv/Vol 1795/1274/502 mln
12:30 pm : The major indices make up some ground, but continue to trade in mixed fashion. The Nasdaq is outperforming on a relative basis.
The Dow has a bit of a negative bias, with 19 of its 30 components trading lower. Boeing (BA 91.51, -1.13) and American Express (AXP 56.46, -1.12) are the main laggards in the price-weighted Average. AT&T (T 40.42, +2.52) and McDonald's (MCD 63.10, +1.19) are posting the largest gains.DJ30 -9.18 NASDAQ +4.47 SP500 -1.08 NASDAQ Dec/Adv/Vol 1489/1379/737 mln NYSE Dec/Adv/Vol 1797/1254/449 mln
12:00 pm : The stock market slipped from its modest opening gains into negative territory, but is still trading near the unchanged mark ahead of the FOMC directive at 2:15 ET.
Briefing.com, and most economists, expects a 25 basis point cut in the fed funds rate to 4.25%. We think, too, that there will be a 50 basis point cut in the discount rate - the rate at which banks borrow directly from the Fed - to 4.50%. Given that there wasn't a unanimous vote for a rate cut at the last FOMC meeting, we suspect the committee will refrain from a 50 basis point cut in the fed funds rate, lest it risk fanning inflation concerns.
Fed funds futures indicate a 62% chance of a 25 basis point cut and a 38% chance of a 50 basis point cut.
Corporate news was mixed this morning.
On the negative side, Washington Mutual (WM 18.30, -1.58) is cutting its quarterly dividend to $0.15 from $0.56, will write-down $1.6 billion worth of its home lending portfolio, and will likely incur a fourth quarter earnings loss. The company plans to make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion.
Shares of WaMu are down 7.9% as the capital raise was being criticized by some analysts as not being enough, and the stock was downgraded by several brokerages.
On a positive note, AT&T (T 40.29, +2.39) shares traded higher after the San Antonio-based telecommunications company said it will raise its dividend 12.7% to 40 cents per share and repurchase up to 400 million shares under a new buyback authorization.
Meanwhile, in its mid-quarter update, Texas Instruments (TXN 33.57, +0.90) raised the low end of its revenue and earnings per share guidance provided in October. The Dallas-based chipmaker also said demand trends in the analog market are tracking in-line with expectations while the outlook for wireless has improved since the start of the quarter, despite market share erosion.
Four of the ten sectors are trading higher. The companies making major headlines have had a major impact on their respective sectors this session. Telecom is up 3.1% on the AT&T news, as the company makes up more than 50% of the sector. The second best performing group, tech (+0.5%), is getting a boost from Texas Instruments.
Financials (-1.2%) are the main laggards, led lower by the thrifts & mortgages group (-4.7%) as it follows shares of WaMu lower. DJ30 -11.38 NASDAQ -1.62 SP500 +4.59 NASDAQ Dec/Adv/Vol 1495/1339/638 mln NYSE Dec/Adv/Vol 1776/1253/386 mln
11:30 am : The major indices climb off their lows as shares of AT&T (T 40.06, +2.16) continue to soar. Six of the ten economic sectors are now in the red. The only sector posting a loss in excess of 1% is financials (-1.2%).
H&R Block (HRB 19.77, -0.18) is a laggard today after the company reported this morning that second quarter losses totaled $1.55 per share, primarily driven by underwhelming results from the company's discontinued subprime mortgage business. Though a net loss was expected, the company's underperformance was more pronounced than anticipated.DJ30 -11.54 NASDAQ +3.56 SP500 -1.48 NASDAQ Dec/Adv/Vol 1466/1328/532 mln NYSE Dec/Adv/Vol 1780/1214/313 mln
11:00 am : A pickup in selling interest in the financial sector (-1.2%) sends the S&P into negative territory, although it is still trading close to the unchanged mark. All of the sector's industry groups are in the red. There is significant weakness in the thrifts & mortgages (-4.8%) group due to the negative response to the Wells Fargo (WFC 31.85, -0.80) news.
Fannie Mae's (FNM 35.31, -1.60) CEO on CNBC says stock issuance was a "once and for all" transaction, and it is to be in position to have enough capital to get through 2008 and have incremental extra capital. Fannie Mae announced on Dec. 5 it is cutting its dividend and selling $7 billion in non-convertible preferred stock in order to shore up its capital position due to the ongoing challenges in the housing market.
Meanwhile, on a conference call, Freddie Mac (FRE 33.36, -1.67) said it expects housing prices to fall 10% from peak to trough. DJ30 -24.30 NASDAQ +2.62 SP500 -1.98 NASDAQ Dec/Adv/Vol 1345/1395/417 mln NYSE Dec/Adv/Vol 1513/1407/221 mln
10:30 am : The major indices are vacillating near the unchanged mark. The Dow has slipped, and is now trading slightly below yesterday's closing level.
Texas Instruments (TXN 33.36, +0.69) is giving the market a boost this morning. In its mid-quarter update, Texas Instruments raised the low end of its revenue and earnings per share guidance provided in October. The Dallas-based chipmaker also said demand trends in the analog market are tracking in-line with expectations while the outlook for wireless has improved since the start of the quarter, despite market share erosion.
October wholesales inventories came in flat, compared to the consensus expectation of a 0.5% rise. As expected, the market ignored this release. DJ30 -5.20 NASDAQ +8.43 SP500 +0.62 NASDAQ Dec/Adv/Vol 1136/1465/272 mln NYSE Dec/Adv/Vol 1274/1527/136 mln
10:00 am : The stock market is trading slightly above the unchanged mark. The major indices have not strayed far from the unchanged mark as investors appear to be reluctant to make any concerted moves ahead of the FOMC decision.
Of the seven sectors trading higher, telecom (+2.4%) is showing the most strength. Dow component AT&T (T 39.96, +2.06), which makes up more than half of the sector, is providing support after the company announced it is increasing its dividend by 12.7% to $0.40 and has authorized up to $15 billion in share repurchases.
The financial sector (-0.7%) is the main laggard. Washington Mutual (WM 18.08, -1.80) is trading sharply lower after the company announced $1.6 billion write-down and cut its dividend to $0.15 per share from $0.56 per share. The company also said it plans to issue $2.5 billion in convertible stock, which some analyst criticized as not being enough. Several brokerages downgraded the company this morning. DJ30 +8.38 NASDAQ +5.94 SP500 +1.05 NASDAQ Dec/Adv/Vol 998/1376/123 mln
09:40 am : Stocks open slightly higher ahead of the Fed policy decision at 2:15 ET this afternoon. On Fed policy days the market is often stable ahead of the announcement, and very volatile afterwards. The current fed funds rate is 4.5% and the discount rate is 5.0%.
Fed fund futures suggest at least a 25 basis point cut in the fed funds rate is expected, with a 38% chance of a 50 basis point cut. The chance of a higher cut is up from yesterday, when futures suggested a 28% chance of a 50 basis point cut.
In addition, the market expects the discount rate will be sliced by 50 basis points. DJ30 +10.49 NASDAQ +2.95 SP500 +1.13
09:15 am : S&P futures vs fair value: +1.4. Nasdaq futures vs fair value: +2.3.
09:00 am : S&P futures vs fair value: +2.2. Nasdaq futures vs fair value: +4.3. It is still shaping up to be a slightly higher start. AT&T (T) announced this morning that it is raising its dividend to 40 cents from 35.5 cents and has authorized the repurchase of as much as 400 million shares.
08:29 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +4.8. Futures indicate a slightly higher to flat open. The Wholesale Inventories report for October will be released at 10:00 ET, but it won't have any impact as the market will remain preoccupied with the FOMC decision.
08:00 am : S&P futures vs fair value: +3.5. Nasdaq futures vs fair value: +6.0. Early indications suggest a slightly higher open ahead of the FOMC policy directive at 2:15 pm ET. The majority of market participants expect a 25 basis point cut in the fed funds and 50 basis point cut in the discount rate. In corporate news, Texas Instruments (TXN) provided a mid-quarter update that raised the low end of its prior guidance ranges for earnings and revenue. On a negative note, Washington Mutual (WM) is cutting its quarterly dividend to $0.15 from $0.56 and will make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion. Washington Mutual was downgraded to Sell from Hold at Citigroup, and Friedman billings cut its price target to $12 from $14.
06:23 am : S&P futures vs fair value: +0.3. Nasdaq futures vs fair value: +0.8.
06:23 am : FTSE...6528.80...-36.60...-0.6%. DAX...8010.71...-22.65...-0.3%.
06:23 am : Nikkei...16044.72...+120.33...+0.8%. Hang Seng...29226.84...+725.74...+2.5%.
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