Replies to post #3663 on Options Wonderland

[ballyhooo]

Damage control!!!

Subprime Situation 'Manageable,' Treasury Official RepeatsLast update: 3/13/2007 6:47:29 PM

By Siobhan Hughes
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--A top Treasury Department official re-emphasized that the government is aware of concerns about the subprime lending industry, but said that the situation is "manageable." "We've discussed the situation with regard to subprime that you ask about," Robert Steel, undersecretary for domestic finance, told reporters on Tuesday at a briefing on the competitiveness of the U.S. capital markets. He said that Treasury Secretary Henry Paulson has viewed the subprime markets as a "contained, manageable situation," and that "we continue to believe that." Steel's comments came amid another day of concerns about subprime lenders, who provide loans to borrowers with low credit ratings. Shares of Accredited Home Lenders Holding Corp. (LEND) fell 65% on Tuesday after the company said it may seek to raise additional capital and cut more jobs while negotiating with lenders about extending financing. The New York Stock Exchange meanwhile moved to delist shares in New Century Financial Corp. (NEWC) one day after the mortgage provider disclosed that all of its bank lenders were pulling their funding. - By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; [e-mail]

[3xBuBu]

Market Update 070314
http://biz.yahoo.com/mu/update.html

4:20 pm : After the Dow posted its second-biggest drop in nearly four years on Tuesday, a growing sense that yesterday's broad-based downturn was an overreaction eventually prompted some afternoon short covering and helped investors get over an underlying pessimistic hump Wednesday.

Technical breakdowns on all major averages, as evidenced by the Dow slipping below the 12,000 mark intraday for the first time since November 6, 2006, exacerbated intraday declines before things finally turned around.

Today's whipsaw trading activity was also attributed to this Friday's quarterly options expiration. Also known as "quadruple witching," the simultaneous expiration of index options, stock options, index futures, and single stock futures typically adds to market volatility... and Wednesday was no exception.

With concerns still looming about a possible liquidity crunch tied to an unwinding of the carry trade, further deterioration in the yen following a narrower than expected current account deficit helped to alleviate such worries. However, the bigger issue on investors' minds again was whether potential defaults by subprime borrowers will spill over into the broader economy -- a concern we still believe is overblown.

With the market closely eyeing today's Q1 report from Lehman Brothers (LEH 71.59 -0.41) to provide some clarity on the health of the troubling subprime mortgage market, management following up its record report by saying the sector will "continue to face headwinds in the near term" pushed the stock down as much as 5.5%.

That exacerbated the mortgage delinquency news that rattled stocks Tuesday and left investors questioning whether the Financial sector's earnings potential will play out as expected.

After tumbling 3.2% yesterday, Financials was down as much as 1.5% today, removing some notable leadership in the process. It wasn't until the sector turned the corner, due in part to Goldman Sachs (GS 200.03 +1.00) reportedly bankrolling subprime lenders with credit in anticipation of a rebound, that the rest of the market took notice and garnered enough confidence to suggest that stocks may have finally bottomed.

Couple the Financial sector's recovery with widespread bargain-hunting efforts throughout the next most heavily-weighted sector - Technology - and stocks turned in a respectable performance.

Dow component Microsoft (MSFT 27.40 +0.68), surging 2.5% on news Lenovo Group will make Microsoft's search technology the main portal on its PCs, was a big reason why all three major indices closed near session highs. All 10 economic sectors were posting losses at one point but all three finished with gains. DJ30 +57.44 NASDAQ +21.17 SP500 +9.22 NASDAQ Dec/Adv/Vol 1405/1619/2.15 bln NYSE Dec/Adv/Vol 1394/1904/1.93 bln

3:30 pm : Onward and upward is now today's mantra as sellers continue to run for cover going into the close. Just over two hours ago, the VIX (CBOE Volatility Index) was up more than 17%, suggesting investors were still actively buying put options in anticipation of further deterioration in equities. However, the index has since slipped into negative territory, further underscoring a change in sentiment that is also reflected in market internals now holding a positive bias for the first time since market opened.

Advancers outpace decliners on the NYSE a 9-to-7 margin while advancing issues on the Nasdaq have finally edged past declining issues and now hold a slim 15-to-14 advantage. The latter's narrower margin amid a much healthier ratio of up to down volume on the tech-heavy Composite illustrates the fact that noticeable gains in several large-cap names (e.g. MSFT +2.1%, CSCO +1.4%, GOOG +1.1%, QCOM +3.8%, DELL +3.2%, AAPL +1.5%, YHOO +1.4%, and EBAY +2.1%) have been responsible for this afternoon's turnaround.DJ30 +64.69 NASDAQ +21.01 SP500 +10.14 NASDAQ Dec/Adv/Vol 1414/1583/1.85 bln NYSE Dec/Adv/Vol 1446/1829/1.64 bln

3:00 pm : Finally, investors get the leadership they've been waiting for all day. The influential Financials sector is now in positive territory while a turnaround in Health Care is also providing a notable floor of support behind the renewed wave of buying interest.

As evidenced by the Nasdaq turning in the best performance among the majors, Technology is providing the bulk of support. A 2.1% surge in Microsoft (MSFT 27.28 +0.56), which is the Dow's best performer on news Lenovo Group will make Microsoft's search technology the main portal on its PCs, is a big reason why the three major indices are at session highs. Systems Software ranks fourth among today's best performing S&P industry groups (+1.3%). DJ30 +26.67 NASDAQ +13.88 SP500 +4.88 NASDAQ Dec/Adv/Vol 1500/1477/1.74 bln NYSE Dec/Adv/Vol 1470/1788/1.55 bln

2:30 pm : The major averages are back to trading in split fashion. While gains on the S&P 500 and Nasdaq are minimal, it is worth noting that both were down nearly 1.0% on average.

The Dow, which was off more than 136 points earlier (-1.1%) briefly turned positive within the last 10 minutes and is now unchanged as the Financials sector is also relatively flat after having been down as much as 1.5% less than two hours ago. DJ30 -3.54 NASDAQ +5.60 SP500 +1.91 NASDAQ Dec/Adv/Vol 1788/1182/1.58 bln NYSE Dec/Adv/Vol 1994/1255/1.40 bln

2:00 pm : The recovery try continues as selling pressure has abated over the course of the past hour. Stability, however, is not a word that has been associated with recent market activity so there is no telling if this effort will persist.

The market is watching the financials for leadership. Right now, they're looking better than they did earlier, but the sector still remains underwater (-0.4%) and is currently down 9.1% from its February high. A pullback of 10% from a high is typically regarded as the definition of an official correction.DJ30 -27.08 NASDAQ -0.57 SP500 -1.77 NASDAQ Dec/Adv/Vol 1690/1254/1.45 bln NYSE Dec/Adv/Vol 2046/1179/1.26 bln

1:30 pm : It has been a volatile day of trading with any number of factors contributing to that condition. One factor receiving attention as a source of volatility is this Friday's quarterly options expiration, which will include the expiration of index options, stock options, index futures, and single stock futures.

Beyond that, the headlines continue to point to subprime concerns and the unwinding of the yen carry trade as more prominent causal factors.

Look for the volatility to continue. At the moment, all sectors are off their worst levels of the session, the most prominent of which is the financial sector (-0.49%), which was down as much as 1.5% a little more than 30 minutes ago.

DJ30 -45.66 NASDAQ +1.13 SP500 -2.98 NASDAQ Dec/Adv/Vol 1919/1021/1.29 bln NYSE Dec/Adv/Vol 2303/910/1.13 bln

1:00 pm : The bottom is falling out of the market as an overly pessimistic market continues to exaggerate the implications of subprime concerns that we still believe are vastly overblown.

The Dow is now down more than 1% as 26 of 30 components are now posting losses. All 10 economic sectors are now trading lower, led for a second straight day by a sell-off in Financials (-1.4%) and spearheaded by a recent reversal in Technology. Consumer Discretionary, Materials, Telecom are also logging declines of more than 1%. DJ30 -126.73 NASDAQ -17.94 SP500 -13.38 NASDAQ Dec/Adv/Vol 2020/897/1.13 bln NYSE Dec/Adv/Vol 2329/864/984 mln

12:30 pm : In similar fashion to yesterday's midday downturn, U.S. stocks are taking a bearish cue from a late-day selloff in European bourses which are poised to close at their lows of the day, averaging declines of about 2.5%.

A technical breakdown is adding to the market's recent struggles. The Dow has slipped below the 12,000 level for the first time since November 6, 2006. The S&P 500 and Nasdaq have also been unable to find support, recently slipping through key technical levels of 1369 and 2330, respectively.DJ30 -100.50 NASDAQ -15.81 SP500 -10.50 NASDAQ Dec/Adv/Vol 1928/957/964 mln NYSE Dec/Adv/Vol 2038/1081/808 mln

12:00 pm : After lackluster attempts to recover some of yesterday's bloodletting, stocks are trading near session lows midday as subprime mortgage concerns continue to act as an overhang.

With the market closely eyeing this morning's Q1 report from Lehman Brothers (LEH 69.55 -2.45) to provide some color on the health of the subprime mortgage market, management saying the troubling sector will "continue to face headwinds in the near term" has prompted shareholders to push the stock further into negative territory for the year.

On a positive note, Goldman Sachs (GS 200.50 +1.47) reportedly bankrolling subprime lenders with credit in anticipation of a rebound is helping to offset more aggressive deterioration in the brokerage space and minimizing consolidation in yesterday's worst performing sector, Financials. However, the absence of the latter's leadership again is sorely missed since Financials, today's worst performer (-0.7%), accounts for more than 22% of the total weighting on the S&P 500.

Consumer Discretionary ranks a close second as Specialty Consulting Services remains today's worst performing S&P industry group (-2.7%). H&R Block (HRB 19.51 -0.54) delayed its Q3 regulatory filing because it needs added time to account for "rapidly declining loan values" at its subprime-lending subsidiary. Autos have also been in focus after General Motors (GM 30.07 -0.44) swung to a profit in Q4, but its delayed report checked in well shy of Wall Street expectations. That has given investors a reason to keep selling GM shares following news yesterday that it agreed to pay about $1 bln to make up for subprime-lending losses at its part-owned GMAC unit. DJ30 -40.53 NASDAQ -5.78 SP500 -2.75 NASDAQ Dec/Adv/Vol 1598/1229/822 mln NYSE Dec/Adv/Vol 1790/1302/710 mln

11:30 am : The indices remain confined to relatively tight trading ranges as both buyers and sellers continue to err on the side of caution. Such uncertainty is further reflected in the fact that sector leadership is now evenly split. Of the five sectors trading higher, Energy (+1.0%) leads the way, extending its reach to the upside as oil prices climb back into positive territory and stall the market's recent momentum.

Technology is posting a respectable gain, but that's due in large part to Qualcomm (QCOM 43.19 +1.36) tacking on an analyst upgrade induced 3.3% surge onto yesterday's 4.3% advance. Two of the other areas attracting buyers are Consumer Staples and Utilities, but that's due primarily to their defensive characteristics. DJ30 -10.37 NASDAQ +1.72 SP500 +0.70 NASDAQ Dec/Adv/Vol 1522/1251/692 mln NYSE Dec/Adv/Vol 1646/1399/592 mln

11:00 am : The market has rebounded but not nearly enough to make a significant change in the standings. Sure, all three indices are retracing their highs of the morning but gains remain modest at best.

As was expected, oil prices have had an impact on today's choppy trading. Crude for April delivery has spiked lower since the last update as traders were expecting a larger than expected build in weekly crude supplies. Fortunately for the bulls, not only are oil prices now languishing near one-month lows below $58/bbl, but the Energy sector's (+0.8%) resilience so far in the face of oil's reversal is also acting as an additional source of market support.

DJ30 +17.65 NASDAQ +6.52 SP500 +4.44 XOI +0.4% NASDAQ Dec/Adv/Vol 1468/1262/552 mln NYSE Dec/Adv/Vol 1594/1370/450 mln

10:30 am : The major averages are still trading in split fashion as investors have few market-moving news items to sustain early recovery efforts. Oil prices, however, may act as a catalyst to set a more definitive tone to today's action.

Crude for April delivery is currently flat near $58/bbl ahead of the Energy Dept's weekly inventories, which will be out momentarily. DJ30 -4.80 NASDAQ +0.96 SP500 +1.41 NASDAQ Dec/Adv/Vol 1806/842/370 mln NYSE Dec/Adv/Vol 2010/865/282 mln

10:00 am : As we presaged less than an hour ago, with regard to this morning's surprise start to the upside potentially running into some headwinds amid volatile market conditions, the market's recent reversal isn't all that unexpected. The Dow and Nasdaq are now in negative territory, but basically flat, as split sector leadership dictates what has so far been little more than a reflexive bounce.

Financials, yesterday's huge disappointment (-3.2%), has recently relinquished what little momentum bargain hunters were trying to muster and is now in the red. With the market closely eyeing this morning's Q1 report from Lehman Brothers (LEH 70.09 -1.91) to provide some color on the health of the troubling subprime mortgage market, the lack of any overwhelming evidence to suggest weakness in the U.S. residential-mortgage sector won't continue to weigh on its securitized products has prompted shareholders to push the stock further into negative territory for the year (-10.1%). ..XBD -1.2%.DJ30 -1.28 NASDAQ -1.56 SP500 +1.06 NASDAQ Dec/Adv/Vol 1073/1372/156 mln NYSE Dec/Adv/Vol 930/1686/86 mln

09:40 am : What was shaping up earlier to be a much lower open for stocks, due largely to follow-through from yesterday's sell-off and ongoing concerns about subprime mortgage woes spilling over into the broader economy, has actually turned out to be a decent open for equities.

A growing sense that yesterday's broad-based downturn was an overreaction is prompting some early bottom fishing. Investors are also finding comfort on the subprime mortgage front after it was reported that Goldman Sachs (GS 199.95 +0.92) and several Wall Street firms are bankrolling subprime lenders with credit in anticipation of a rebound in the troubling sector. With concerns still looming about a possible liquidity crunch tied to an unwinding in the carry trade, further deterioration in the yen following a narrower than expected current account deficit is helping to alleviate such worries. DJ30 +36.16 NASDAQ +8.39 SP500 +6.40 NASDAQ Vol 92 mln NYSE Vol 26 mln

09:15 am : S&P futures vs fair value: +1.2. Nasdaq futures vs fair value: -1.2. Futures trade continues to inch higher heading into the open, now suggesting a mixed start for the major averages. There is, however, little conviction on the part of buyers looking for bargains and, with market action increasingly volatile of late, the market’s improved disposition is certainly subject to change since sentiment continues to err on the side of caution.

09:00 am : S&P futures vs fair value: -1.0. Nasdaq futures vs fair value: -5.0. Early indications continue to point to a lower open for equities as an overly pessimistic market continues to focus on everything negative. Subprime mortgage concerns continue to act as an overhang even though we believe the broad economic impact of such problems is vastly overblown. The futures market has improved a bit since the last update, though, perhaps getting some help from a reversal in the yen following the deficit data. Nonetheless, the overall tone remains slightly negative as investors look for a bottom to be put in place after such an extensive sell-off yesterday.


see how those R and S work as wonder