The failure of Bear Stearns sent Dow down 200 on the opening. But it recovered after an hour & survived a midday pullback ending up 21, losers were ahead of decliners 5-1 & NAZ down 35. The volume was 2B, considerably ahead of 1½B which is more common. S&P 500 closed at 1276, 6 points above a very important & sensitive point - 1270. The Treasury bond rallied strongly sending it's yields to 3.31% (a level that can not be sustained over the long run). Oil fell 4½ to 105.68 on worries that a slow US economy will hurt demand for oil. In groups I follow closely, banks & REITs bounced back with modest gains by day's end. MLPs suffered with the oils, their index fell 7.58 to 268. That was an enormous decline. They are low Beta securities which feature generally have only modest moves. Before their run up in late 2006 into the first half of 2007, the index had been going sideways for a year or so (240-260). Today's sell-off could be telling for them & maybe the economy. The VIX (volatility index) was up 1.08 to 32.24, highest level in 5 years promising a very rocky road ahead.
Getting lost in today's news about the FED & Bear Stearn's failure, the Commerce Dept reported the current account deficit fell slightly in 2007 as stronger growth (agriculture products helped) in U.S. exports offset a higher foreign oil bill. There are reports of first sightings of $4 gas at the pumps. Tomorrow will bring the FED meeting where a full point cut in their rate is expected. That should rally the market as long as they don't assume that signals the economy is worse off than expected. The next day, there is no FED announcement expected. Markets will have to survive on general reports which have been by & largely negative lately.
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