Daily Market Commentary for May 16, 2008 from Millennium-Traders.Com
Traders and day traders are focusing on not making more trades but, trying
to make the best of the trades they can make. An increase of quiet trading
action over the lunchtime period indicates that those playing these
markets, are doing so with caution and avoiding the normal slow trading
periods. (read more
http://www.millennium-traders.com/news/newscommentary.aspx)
At the closing bell on the Stock Exchange, here is how the major world
indices and major U.S. indices ended the session on the U.S. Markets:
DOW (Dow Jones Industrial Average) loss of 5.86 points on the day to end
the session at 12,986.80
NYSE (New York Stock Exchange) gain of 49.49 points to end the session at
9,603.01
NASDAQ loss of 4.88 points for a close at 2,528.85
S&P 500 gain of 1.78 points for a close at 1,425.35
FTSE All-World ex-U.S. gain of 0.45 points to close at 257.29
FTSE RAFI 1000 closed at 5,731.19
BEL 20 gain of 12.74 points to close at 3,811.73
CAC 40 gain of 20.31 points to close at 5,077.82
FTSE100 gain of 29.3 points to close at 6,281.1
NIKKEI 225 loss of 32.2 points to close at 14,219.50
News on the New York Stock Exchange (NYSE) today: advanced stocks 1,654;
declined stocks 1,489; unchanged stocks 118; stocks hitting new highs 150;
stocks hitting new lows 26. Daily Trading Range and end of day trading
results for volatile stocks on the NYSE traded by active Day Traders
today: Rio Tinto plc (NYSE: RTP) gained 8.43 points on the trading day,
high on the trading day $557.55, low on the trading day $543.18, for a
closing price at $554.83; Mosaic Company (NYSE: MOS) gained 0.73 points on
the trading day, high on the trading day $132.16, low on the trading day
$127.69, for a closing price at $129.66; BMC Software Incor****ated (NYSE:
BMC) gained 2.22 points on the trading day, high on the trading day
$39.37, low on the trading day $37.02, for a closing price at $38.65;
Kohl's Cor****ation (NYSE: KSS) shed 1.22 points on the trading day, high
on the trading day $49.60, low on the trading day $47.95, for a closing
price at $49.27; Maguire Properties Incor****ated (NYSE: MPG) shed 1.35
points on the trading day, high on the trading day $16.56, low on the
trading day $13.94, for a closing price at $15.20; Giant Interactive
Group, Incor****ated (NYSE: GA) shed 0.69 points on the trading day, high
on the trading day $15.76, low on the trading day $14.97, for a closing
price at $15.60; Apache Cor****ation (NYSE: APA) gained 7.33 points on the
trading day, high on the trading day $143.49, low on the trading day
$138.22, for a closing price at $143.49; Mastercard Incor****ated (NYSE:
MA) shed 3.37 points on the trading day, high on the trading day $288.80,
low on the trading day $280.60, for a closing price at $283.40; Uniao de
Bancos Brasileiros S.A. (Unibanco) (NYSE: UBB) gained 3.00 points on the
trading day, high on the trading day $155.22, low on the trading day
$150.68, for a closing price at $152.04; InterContinental Exchange,
Incor****ated (NYSE: ICE) shed 4.49 points on the trading day, high on the
trading day $160.39, low on the trading day $153.26, for a closing price
at $154.51; Wimm-Bill-Dann Foods OJSC (NYSE: WBD) gained 6.98 points on
the trading day, high on the trading day $137.32, low on the trading day
$125.86, for a closing price at $134.98; Mechel Open Joint Stock Company
(NYSE: MTL) gained 11.58 points on the trading day, high on the trading
day $171.90, low on the trading day $158.66, for a closing price at
$168.99; Cantel Medical Cor****ation (NYSE: CMN) shed 0.35 points on the
trading day, high on the trading day $11.80, low on the trading day $9.41,
for a closing price at $9.72; Free****t-McMoRan Copper & Gold Incor****ated
(NYSE: FCX) gained 4.75 points on the trading day, high on the trading day
$124.50, low on the trading day $120.04, for a closing price at $124.18;
Petroleo Brasileiro (NYSE: PBR) gained 2.38 points on the trading day,
high on the trading day $70.65 low on the trading day $68.98, for a
closing price at $70.65; CME Group, Incor****ated (NYSE: CME) gained 3.75
points on the trading day, high on the trading day $480.84, low on the
trading day $473.93, for a closing price at $478.00; Fluor Cor****ation
(NYSE: FLR) shed 0.27 points on the trading day, high on the trading day
$193.83, low on the trading day $188.95, for a closing price at $191.37;
Potash Cor****ation of Saskatchewan, Incor****ated (NYSE: POT) gained 2.85
points on the trading day, high on the trading day $207.94, low on the
trading day $204.34, for a closing price at $207.00; Telephone & Data
Systems Incor****ated (NYSE: TDS) gained 5.04 points on the trading day,
high on the trading day $54.00, low on the trading day $47.62, for a
closing price at $52.85.
News on the NASDAQ today: advanced stocks 1,218 declined stocks 1,655;
unchanged stocks 146; stocks hitting new highs 60; stocks hitting new lows
67. Trading range and end of day trading results for volatile NASDAQ
stocks
traded by active Day Traders today: Trico Marine Services Incor****ated
(TRMA) shed 2.43 points on the trading day, high on the trading day
$33.94, low on the trading day $32.26, for a closing price at $33.01;
Zoltek Companies Incor****ated (ZOLT) gained 4.47 points on the trading
day, high on the trading day $32.07, low on the trading day $26.97, for a
closing price at $30.98; Intuitive Surgical, Incor****ated (ISRG) gained
6.77 points on the trading day, high on the trading day $304.28, low on
the trading day $292.30, for a closing price at $299.75; Stericycle
Incor****ated (SRCL) gained 4.00 points on the trading day, high on the
trading day $56.81, low on the trading day $54.19, for a closing price at
$56.68; Esmark, Incor****ated (ESMK) shed 1.77 points on the trading day,
high on the trading day $16.48, low on the trading day $14.60, for a
closing price at $14.63; First Solar, Incor****ated (NasdaqGS: FSLR) gained
4.36 points on the trading day, high on the trading day $313.43, low on
the
trading day $306.21, for a closing price at $311.14; Dry****ps,
Incor****ated
(NasdaqGS: DRYS) gained 4.24 points on the trading day, high on the
trading
day $112.00, low on the trading day $108.03, for a closing price at
$110.74.
News on the American Stock Exchange (AMEX) today: advanced stocks 716;
declined stocks 463; unchanged stocks 95; stocks hitting new highs 58;
stocks hitting new lows 22.
University of Michigan Mid-May Sentiment came in at 59.5 as compared to
April reading at 62.6; University of Michigan Mid-May Current Index came
in at 71.7 as compared to April reading at 77.0; University of Michigan
Mid-May Expectations came in at 51.7 as compared to April reading at 53.3;
University of Michigan 12-Mo Inflation Forecast increased by 5.2% as
compared to April reading of an increase by 4.8%; University of Michigan
5-Yr Inflation Forecast increased by 3.3% as compared to April reading of
an increase by 3.2%;
University of Michigan Mid-May Sentiment lowest since June 1980.
U.S. April Housing Starts increased 8.2% to 1.032M compared to consensus
of a drop by 1.4%; Building Permits increased 4.9% to rate of 978,000 in
April; March Housing Starts Revised to a decrease by 13.8% from a decrease
by 11.9%.
Remarks by Secretary Henry M. Paulson, Jr. on the U.S. Economy, Housing
and Capital Markets before the Wa****ngton Post 200 Lunch Wa****ngton - Over
the last forty years, Wa****ngton has transformed into a diverse cor****ate
center. Congratulations to the Post for recognizing this through their
annual list of 200. And I am pleased to join you and represent the "old"
Wa****ngton, the less than ten percent of the region's workers who work for
the federal government. While the Post 200 companies may be headquartered
here, your operations span the nation and the world and so I will provide
an update on the housing and credit markets and the U.S. economy, and look
forward to learning your views of the same.
Housing Markets
The housing correction began in 2006, and most forecasters expect a
prolonged period of adjustment. Four points sum up my current view of the
progress of that correction and our efforts to minimize its spillover into
the rest of the economy. First, our focus since last summer - to help
homeowners avoid preventable foreclosures is the right focus and it has
been successful. We encouraged the creation of the HOPE NOW Alliance of
mortgage lenders, servicers and counselors, to streamline efforts to help
struggling borrowers. The Alliance re****ts that, since July, the industry
has helped 1.4 million homeowners with loan workouts that allowed them to
stay in their homes. The rate of workouts has now increased to about 2
million per year. In addition, we've taken administrative steps to expand
access to FHA programs and enabled almost 200,000 borrowers to refinance
into affordable FHA mortgages since August. These are significant numbers,
and a significant achievement, particularly when you consider that 2
million is also the estimated number of homes that will go into
foreclosure this year. Second, there is no silver bullet to undo the lax
underwriting practices of recent years. Because of these past excesses,
foreclosures will remain elevated even if we avoid every single
preventable foreclosure. Third, we know the correction has further to go,
and so we should not be surprised at headlines that note rising
foreclosures and falling home prices. But the correction is progressing.
We are working through the excess inventory the inventory of new
single-family homes for sale is down 18 percent from its 2006 peak. As of
April, single-family housing starts are down to a 692,000 annual rate, off
62 percent from their January 2006 peak. We didn't get here quickly. There
were years of excesses. And this won't be resolved quickly. Fourth, our
work is not complete. Housing is the biggest risk to our economy; we are
constantly monitoring the situation and examining approaches to address
the problem. We are particularly focused on monitoring and continuously
improving the execution of the HOPE NOW Alliance efforts, and working with
Congress to complete work that is crucial to mortgage financing –
creating a world-class regulator for Fannie Mae, Freddie Mac and the
Federal Home Loan Banks, and modernizing the programs of the FHA so it can
assist more homeowners without imposing additional burden on taxpayers.
The
mission of Fannie and Freddie, the two largest public companies on the
Post
200 list, is more critical now than ever. Together, they touch 80 percent
of current mortgage originations, and a regulator on par with other
financial regulators will bring confidence to all mortgage market
participants. I will elaborate on these points and start by putting the
American housing market and the size of the problem in perspective.
Although I am going to talk numbers and statistics, I know that beneath
these numbers are many who are struggling and their situation is both real
and difficult. As of the end of 2007, there were 55 million mortgages
outstanding and 92 percent were being paid on time, every month. About 6
percent had missed one or more payments and the remaining 2 percent, about
1 million, were in the foreclosure process. There were 1.5 million
foreclosures started in all of 2007. Between 2001 and 2005, a time of
solid U.S. economic growth and high home price appreciation, about 650,000
foreclosure starts occurred, likely due to financial setbacks and
unforeseen life events. In this correction, we see additional foreclosures
because some people bought more home than they could ever hope to afford.
Many of these people are becoming renters again. Foreclosures are also up
due to an increased number of speculators who bought homes on the
assumption that housing prices would endlessly appreciate. As housing
prices decline some homeowners find they have negative equity in their
homes. Negative equity is not a trigger for foreclosure and it doesn't
alter your monthly payment. When you are in your home for the long run, to
raise a family and be part of a community, prices will fluctuate
throughout
the years. Homeowners who can afford their payment should honor their
obligations and we know that the vast majority do. If someone can't afford
their home and must move, it is painful. If someone walks away from a
mortgage they can afford, it is irresponsible. In both these cases,
however, there is little government or industry should do to prevent
foreclosure. We are focused on those homeowners who both want to stay in
their home and, with a little flexibility, can afford to do so. We
encouraged the formation of HOPE NOW in order to avoid a market failure.
As mortgages have been securitized and those securities spread around the
world, this complexity reduced the ability of investors to quickly respond
to help struggling homeowners who both wanted to keep their homes and were
financially able to do so. The Alliance has worked to overcome legal,
technical and accounting complexities, and to speed up and simplify the
refinancing and modification process so that more people can be helped.
Avoiding Preventable Foreclosures
HOPE NOW has made enormous progress. I have met with Alliance members, and
am pleased that they are focused on continuously learning from their
experience, adapting their practices and improving execution across the
industry. Subprime adjustable rate mortgages account for about 40 percent
of all foreclosures, and we have focused much of our efforts on preventing
foreclosures here, when possible. Our objective is not to maximize
modifications; it is to minimize foreclosures for those who could afford
the starter rate. Because lower interest rates have significantly reduced
the reset problem, and because industry has acted to fast-track eligible
borrowers, we are achieving our objective. Of the more than 400,000
subprime mortgage resets originally scheduled for the first quarter of
2008, only 553 loans that were current at reset have entered foreclosure.
We will continue tracking that number closely to monitor progress. Of
course homeowners have responsibility as well. HOPE NOW members send over
200,000 letters a month to at-risk homeowners. While the response rate has
increased from less than 3 percent to 20 percent, that still means that 80
percent of at-risk borrowers do not respond to offers of assistance. We
can't help those who aren't willing to help themselves, and we must
continue to urge struggling borrowers that if they haven't already, they
need to reach out for help. We will continue to look for additional tools
to reach and help homeowners and to make existing programs work more
smoothly.
Mortgage Finance
As you all know, the availability of mortgage finance has been an enormous
challenge in recent months. Subprime loan originations are virtually
non-existent today. The Administration has stepped up to that challenge by
making FHA mortgages available to a broader group of borrowers. FHA
originations are on pace to more than double in FY 2008. And this is
occurring without significantly increasing taxpayer risk. The new
FHASecure program has refinanced over 200,000 borrowers into affordable
mortgages in the past eight months and HUD is examining means of expanding
access further. We are also working with Congress to complete work on FHA
modernization legislation proposed by President Bush last year, which
would increase the number of affordable FHA mortgages without imposing new
costs on taxpayers. This legislation would reach another 250,000 potential
FHA borrowers. Fannie Mae and Freddie Mac are guaranteeing a greater share
of mortgages than ever before. It's never been more critical that markets
have confidence in how these companies are overseen and regulated. Given
their size, complexity and im****tant role, we need to ensure that they
have a regulatory structure on par with other financial institutions. I
believe there is a renewed commitment in the Congress to completing
meaningful GSE reform legislation. The House has passed a bill that makes
good progress towards this goal and I am pleased to see the Senate Banking
Committee working hard to reach agreement on its version. The time has
come
to get this done.
Capital Markets
The excesses in the mortgage market were just one of numerous examples of
excesses in the broader capital markets as investors reached for yield.
This translated into undue leverage in financial instruments and
institutions, which was not adequately recognized by market participants
and regulators, and in increased complexity of financial products. It will
also take time for markets to work through these excesses. That being
said,
we are seeing signs of progress as capital and credit markets stabilize.
The markets are considerably calmer now than they were in March. The
de-leveraging and re-pricing of risk continue, as does the capital-raising
that is so essential for our financial institutions to continue to sup****t
the broader economy. Market liquidity and investor confidence are
gradually improving, not across the board, but in several sectors
including cor****ate bonds, leveraged loans and high yield debt. Credit
default swap, or CDS, spreads on major bank, brokerage firm, and Fannie
Mae and Freddie Mac debt have declined appreciably since March. Broader
CDS indexes of investment grade and high yield bonds have fallen as well,
and while spreads generally are still elevated and significant parts of
the market, including securitized credit and interbank lending, are not
functioning as normal, the trends indicate on-going improvement. Likewise,
we are seeing issuance gradually grow in certain credit sectors. We meet
often with market participants and investors, to understand the remaining
obstacles. They routinely re****t that time is the critical factor it
simply takes time to re*****s and re-price risk, and regain confidence. We
should not expect to work through this process quickly and we should
expect
some bumps in the road ahead. But in my judgment we are closer to the end
of the market turmoil than the beginning. Looking forward, I expect that
financial markets will be driven less by the recent turmoil and more by
broader economic conditions and, specifically, by the recovery of the
housing sector.
President's Working Group Recommendations
Our highest priority these past several months has been to address the
short term issues arising from market turmoil, so as to reduce its impact
on the rest of the economy. At the same time, the President's Working
Group on Financial Markets, the PWG, reviewed the causes of the recent
turmoil and has made recommendations to address them. Our review found
that the turmoil was fueled by an abundant supply of easy credit, a
decline in mortgage and other credit lending standards, increasingly
complex and opaque financial instruments and structures, excessive
leverage in our financial system, and investor and credit ratings agency
issues. The PWG presented specific near-term steps to address underlying
weaknesses, steps that should be implemented by regulators, investors,
financial institutions and credit ratings agencies. Among these, we
identified improvements to be made in every step of the mortgage
originate-to-distribute model, including stronger oversight of mortgage
origination, national licensing standards for mortgage brokers, more
disclosure from ratings agencies, improved due diligence by investors and
safeguards in mortgage securitization. We also outlined specific steps
that credit rating agencies should take to provide information investors
need to make more fully-informed decisions about risk. This will require
reforming structured credit product rating processes and implementing
changes suggested by the SEC review of conflict of interest issues.
Regulators must also review how they encourage the use of ratings in rules
and guidance. In recent years, credit default swaps and over-the-counter
(OTC) derivatives have become integral for hedging credit and default
risk. Due to innovation and demand, we have seen tremendous expansion in
the scale, diversity and impact of these instruments and markets. As
trading volumes have surged, so has price volatility, but market
infrastructure has not sufficiently evolved to sup****t this expansion. We
need a functional, well-designed industry cooperative that can meet the
needs of the OTC derivatives markets in the years ahead. Such an industry
cooperative must capture all significant processing events, and
accommodate all major asset cl***** and product types over the entire
lifecycle of trades. It must be operationally reliable and scalable, and
enhance counterparty risk management through netting and collateral
agreements by promoting ****tfolio reconciliation and accurate valuation of
trades. We are working to implement these PWG recommendations, and will
re****t on our progress later this year. Another issue that has been raised
in recent weeks is investment bank access to the Federal Reserve's
liquidity facilities. The Federal Reserve has made these available for a
tem****ary period. Policymakers are considering the difficult issues
associated with this extension of credit to non-banks.
Blueprint for a Modernized Financial Regulatory Structure
We are also focused on the long-term. In March, we released a Blueprint
for financial regulatory reform to frame the needed discussion that should
lead to modernizing our regulatory structure to keep pace with our
financial system. The ultimate beneficiaries from improved financial
market regulation are America's workers, families and businesses – both
small and large. Our current regulatory system has largely evolved from
early 20th century financial models; it's a system that has been patched
together over time in response to the issues of the day. Regulators have
adapted to keep pace with innovation, but they do so within a rigid
structure that can not readily adapt as the financial services industry
evolves. The Blueprint included several immediate steps that we are
already working to implement. One is a new executive order to clarify the
PWG mission and increase the PWG member****p to include additional
financial regulators. Through this, we will formalize current coordination
and communication. This will sup****t the PWG's efforts to enhance
financial
market integrity and promote consumer and investor protection. Second, we
recommended creating a federal Mortgage Origination Commission. The MOC
would establish minimum conduct and competency standards for mortgage
originators and require information to evaluate each state's mortgage
compliance standards for improved transparency in the securitization
process. This Commission, coupled with the Federal Reserve's strong
regulatory proposal regarding the Home Owner****p and Equity Protection Act
(HOEPA) rules, should go a long way in preventing recent issues from
recurring. Third, we recommended that the Federal Reserve and the SEC
enter into a formalized information-sharing agreement. I am pleased to see
this process underway. Fourth, we recommended the creation of an office of
insurance oversight housed at the Department of Treasury, and legislation
has been introduced that is consistent with our recommendation. Beyond
these steps, the Blueprint's recommendations are intended to provoke
thoughtful discussion that will ultimately lead to change. And we must
begin that discussion now, because these changes are im****tant to the
long-term strength and effectiveness of our capital markets.
U.S. Economy and Stimulus Package
Although we are still working through housing and capital markets issues,
and expect to be doing so for some time, we also expect to see a faster
pace of economic growth before the end of the year. This is in part
because the Administration and Congress worked together and worked quickly
to pass the Economic Stimulus Act of 2008, a robust, broad-based and
tem****ary package that will put money into our economy this year, when
it's needed. By the middle of July, about 130 million households will have
received nearly $100 billion. These payments, along with the incentives
for
business investment included in the Act, will provide a boost to our
economy in the coming months and add over 500,000 jobs this year that
wouldn't have been created otherwise. This fiscal stimulus will provide
sup****t to the economy as we weather the housing correction, capital
markets turmoil and higher energy and food prices. Unemployment remains
low and increased ex****ts are partially offsetting other less positive
factors. Overall, I believe we are on the right path to resolving market
disruptions and building a stronger financial system. We are working
through this period and our long term prospects remain strong. One thing
is very clear to me whatever our current difficulties, I wouldn't bet
against the U.S. worker or the U.S. economy.
Conclusion
America's workers have benefited from six years of strong economic growth.
We know that now, they are also feeling the current strain. The President
and his entire economic team are vigilant. We are working to help
Americans get through today's difficulties. And while we do this, I remind
all of us that our economy is structurally sound, with long-term
fundamentals that compare favorably to any other place in the world.
Commodities Markets
Energy Sector: Light Crude (NYM) gained $2.17 on the day to close at
$126.29 a barrel ($US per bbl.); Heating Oil (NYM) gained $0.08 on the day
to close at $3.71 a gallon ($US per gal.); Natural Gas (NYM) shed $0.30 on
the day to close at $11.26 per million BTU ($US per mmbtu.); Unleaded Gas
(NYM) gained $0.06 on the day to close at $3.22 a gallon ($US per gal.).
Metals Markets: Gold (CMX) gained $19.90 to close at $899.91 ($US per Troy
oz.); Silver (CMX) gained $0.28 to close at $16.96 ($US per Troy oz.);
Platinum (NYM) gained $55.10 on the day to close at $2,132.00 ($US per
Troy oz.) and Copper (CMX) gained $0.09 to close at $3.83 ($US per lb.).
Livestock and Meat Markets (cents per lb.): Lean Hogs (CME) shed 0.80 to
close at 76.25; ****k Bellies (CME) shed 2.95 to close at 77.67; Live
Cattle (CME) shed 0.40 to close at 99.10; Feeder Cattle (CME) shed 0.20 to
close at 113.08.
Other Commodities (cents per bu.): Corn (CBT) shed 8.00 to close the
session at 591.00 and Soybeans (CBT) gained 30.50 to close session at
1,378.00.
At the close of the week, performance results for our Moderators:
Stocks Trading Room:
Jeannie - $4,595
Barry - $8,602
Marty - $4,865
Sam - $2,147
Futures Trading Room:
JT - $5,597.50
Forex Trading Room:
JT - $13,050
Daily Swing Trades:
Barry - $7,640
Weekly Swing Trades:
Jeannie - $-2,200
Bond action for the day: 2 year bond closed with no change at 99 12/32
with a Yield of 2.44, Yield Change +-0.01; 5 year bond closed with no
change at 100 1/32 with a Yield of 3.11, Yield Change 0.00; 10 year bond
shed 2/32 to close at 100 5/32 with a Yield of 3.85, Yield Change +0.01;
the 30 year bond shed 5/32 to close at 96 19/32 on the day with a Yield of
4.58, Yield Change +0.01.
The e-mini Dow $5 ended the commodity session today at 12,985 with a loss
of 11 points on the trading session. Futures Traders should review
workshops available at the CBOT (Chicago Board of Trade). Educational
in-person seminars schedules available on the CBOT (Chicago Board of
Trade) website.
Monitor scheduled economic data every market morning by viewing the Daily
Market Re****t from Millennium-Traders, free access to visitors on our
website.
Subscribe to our free Weekly MarketNews for a review of the past weeks
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