Thread: Market Talk / March 18th - 24th

Weekly Wrap

Last Update: 16-Mar-07 16:43 ET


This week the S&P 500 index lost everything it had gained the week before, leaving it down 1 point over the two-week period. The reason for the decline this week was simple. Concerns remain about the economic outlook. The focal point of these concerns is the risk that troubles in the sub-prime mortgage sector will have a broader economic impact.
The market started the week fine. The S&P gained 4 points on Monday despite a warning from Countrywide Financial that its earnings would be hurt by problems in the non-prime sector.
The problems erupted on Tuesday. The MBA said that delinquencies on sup-prime mortgage loans hit 13.3%. That is the highest since the third quarter of 2002. Countrywide's CEO used the term "liquidity crisis" in reference to the sub-prime issue. A mini-panic set in. The S&P plunged 29 points.
Stability returned through the end of the week. The S&P recovered 10 points on Wednesday and 5 on Thursday. On Friday, the index lost 5 points, but that was due more to concerns about weekend risk than any specific sub-prime issues.
It is possible that some of the fears about the risks associated with the sub-prime issue eased as the week progressed, but it is also possible that these fears could erupt again in the near future. It is also possible that other reasons for selling arise, and that sub-prime gets pulled into the fray. The sub-prime issue persists.
The negativity associated with sub-prime mortgages was evident in a Wall Street Journal survey on Friday. The headlines said "Subprime Mortgage Woes are Likely to Spread" but the specifics belied the headline. Only 19% of economists said that it was very likely that the issue would have an impact on the prime market. And economists had only lowered their first quarter real GDP forecasts to a 2.3% annual rate of growth from 2.5% a month ago. That isn't much of a reduction, and it certainly isn't a recession. Earnings forecasts have yet to be broadly lowered either, but that doesn't mean the sub-prime issue will go away.
There were only a few earnings releases this week. Goldman Sachs had another great report. Lehman Brothers and Bear Sterns posted decent numbers. General Motors disappointed, but at least posted a profit.
The economic releases were also mixed. February retail sales were up a modest 0.1% due in part to cold weather. February industrial production rose 1.0% as the key manufacturing component was up a solid 0.4%. The core PPI for February was up a stronger than expected 0.4%, but the core CPI for February was in line with expectations at +0.2%.
The mix of data did little to alter economic perceptions. Economic growth is sluggish, and there are concerns that the housing sector will become an increasing problem. The modest core CPI increase eased inflation fears that briefly arose with the PPI data. Inflation is widely expected to hold steady of ease in the months ahead due to weak economic demand.
Market risks are believed to lie more with the economy than with inflation.
That is reflected in Fed policy expectations. The fed funds rate futures currently reflect expectations of a 1/4% rate cut by August.
Oil prices ended the week at $57.11 a barrel, down a bit for the week but hardly a focus. The 10-year note yield dipped slightly to 4.55%.
Market sentiment remains dicey. Reaction to any signs of economic weakness could be exagerrated. Any negative news from the sub-prime mortgage market will undoubtedly be the top talking point that day. But the fundamentals have been steady in terms of the economic, earnings, inflation, and interest rate outlooks.

http://www.briefing.com/GeneralConte...terHoursReport

Four Horsemen of the apocalypse - financial


Fundamentals ....... Horsemen ........ Horses

Inflation ............... Inflate ........... Gouger
Economics
..(Energy) ............. Krude ............ Fillerup
Interest Rates ....... Rats .............. Squeezee
Earnings ............... Earnie ............ Layoffer

Four Horsemen 02.jpg

The Fifth Horseman-Unbridled Greed



Gordan Gecko -Greed is Good speech.

Greed Is Good!

Some folks don't believe that it's better to give, then recieve!.....

Market Talk

Generally speaking

These are some old mutual fund stats so they have to be taken with a grain of salt. Where they came from, don't know!

A routine adjustment happens about 3 times per year where the market drops 5-10%. It lasts about 47 days.

A moderate correction happens about 1 time per year where the market drops 11-15%. It lasts about 114 days.

A severe correction happens about ever 2 years where the market drops over 15%. It last about 216 days.

A drop of 20% or more can lead to a recession. It can happen around 3.5 years and can last up to 331 days. After 180 days it's called a bear market.

A recession is defined, informally but not officially, as two consecutive quarters of negative real (inflation-adjusted) growth in the gross domestic product.

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Our latest drop using the Wilshire 5000 [$WLSH](total stock market index). Had a high of about 14800 and it dropped to about 13900. Roughly a 6% drop.

The three 90% down volume days we recently experienced are typically downside exhaustion events, and not always initiation signals for future price crashes. The 200 DMA on the Dow is around 11820 and I think the day the market was down 136 intraday was the test of the 1% trend before it recovered. We may have seen the worst for this cycle process - I've got a new list to buy from. It's never wise to stick one's neck out, but I think we move up aggressively from this point.

Originally Posted by Birchtree

The three 90% down volume days we recently experienced are typically downside exhaustion events, and not always initiation signals for future price crashes. The 200 DMA on the Dow is around 11820 and I think the day the market was down 136 intraday was the test of the 1% trend before it recovered. We may have seen the worst for this cycle process - I've got a new list to buy from. It's never wise to stick one's neck out, but I think we move up aggressively from this point.

I hope you right Birchy, because we should know by the end of the week....

overseas markets are up about 0.5% on average so far.

Briefing.com-
09:00 am : S&P futures vs fair value: +7.2. Nasdaq futures vs fair value: +9.2. Futures trade is holding steady above fair value, setting the stage for stocks to stage a respectable rebound. Aside from M&A activity and a rally in overseas markets contributing to the positive disposition, the market also appears to be pricing in the possibility that this week's Fed policy directive will provide a more balanced approach to monetary policy. Any softening of the statement's wording on Wednesday and improvement in the interest rate outlook will be welcome news, especially since lowered earnings expectations of late restrict the upside potential for equities and will continue to underpin a cautious tone until the market receives more convincing evidence of a possible rate cut.

Originally Posted by weatherweenie

, the market also appears to be pricing in the possibility that this week's Fed policy directive will provide a more balanced approach to monetary policy. Any softening of the statement's wording on Wednesday and improvement in the interest rate outlook will be welcome news, especially since lowered earnings expectations of late restrict the upside potential for equities and will continue to underpin a cautious tone until the market receives more convincing evidence of a possible rate cut.

It sounds like a cheerleader wrote that report.