|
|
|
Sinclair Noe’s
Financial Review
Thursday, October 04, 2007
DOW + 6 = 13974
SPX + 3 = 1542
NASDAQ + 4 = 2733
DJTA – 10 = 4838
DJUA + 4 = 512
RUT + 3 = 829
A strong jobs report tomorrow could
revive fears that the Fed is one and done. If the report is weak, that's going
to suggest more easing coming our way. It really is a matter of degrees. The
market clearly understands that severe job losses are bad for the economy. The
Fed meets again at the end of the month, October 30th and 31st.
This is the last jobs report before the next FOMC meeting. It is widely
expected that the report will show the economy added about 100,000 new jobs
last months and the unemployment rate inched up to 4.7 percent, but one reason
that tomorrow’s report will be so important is that
the estimates are all over the board. I’ve heard guesses ranging from 175,000
on the high side to 55,000 on the low side.
The Labor Department reported that the
number of newly laid off workers filing claims for unemployment benefits
increased by 16,000 to a total of 317,000. The gain was the largest one-week
rise in four months.
The Commerce Department reports that factory
orders dropped by 3.3 percent in August. Orders for durable goods, items
expected to last at least three years, fell by 4.9 percent, while demand for
nondurable goods, items such as food, clothing and gasoline, fell
by 1.6 percent.
A drop in factory orders and an increase in
unemployment claims was enough to push Treasury prices higher. The benchmark 10-year Treasury note rose
10/32 with a yield of 4.52 percent, down 2 basis points. The 30-year long bond
gained 17/32 with a 4.75 percent yield, down from 4.79 percent. The 2-year note
gained 2/32 to 100 1/32 with a yield of 3.99 percent.
The Federal
Reserve says the level of outstanding commercial paper -- top-rated short-term
corporate debt -- increased on a seasonally adjusted basis for the first time
in eight weeks. The increase was small and it comes at a price; financing
is more expensive and harder to obtain for many firms, especially in the
mortgage business. This does not mean the credit markets have purged
questionable debt instruments. It means that there has been and continues to be
good quality debt instruments that can be assigned fair and honest value, and
this paper continues to trade; there are also debt instruments that are
probably quality and can be assigned some sort of value, and for a price – this
paper continues to trade.
Moody’s Investors Services says
subprime mortgage bonds created in the first half of the year contain loans
that are going delinquent at the fastest rate ever.
Bear Stearns held a pep rally today to
cheer investors and say that liquidity has improved and they will weather the
storm. I’m sure there were a few other clichés as well. And I’m sure Bear
Stearns felt they were pretty solid at the start of the year, and they probably
didn’t expect their share price to tumble 25 percent.
BSC -- .67 = 127.61
The European Central Bank held its benchmark
interest rate steady at 4 percent; they signaled that
the bank was still worried about inflation and has not ruled out future rate
increases. The euro was down slightly against the dollar, but just a bit; but
then the weak factory orders report pushed the dollar lower. The Bank of
England left its interest rates unchanged at 5.75 percent.
Dollar down, gold up.
Gold futures for December delivery rose $8.10 to $743.80 an ounce. Silver futures for December
delivery rose 3 cents to $13.50 an ounce.
Wheat futures for December delivery fell 6
cents to $9.21 a bushel. Wheat prices have been outrageous. We saw something
like this a year ago in corn. Corn, converted to ethanol, was touted as the
best thing since gasoline; prices skyrocketed; farmers planted near record
acreage. High prices for wheat will encourage farmers to plant more acreage.
An Energy Department report showed that fuel
inventories unexpectedly dropped last week. Down one, day up the next; recently
we’ve seen more up than down days. Crude oil seems to have found some support
around 80. Today, crude oil for November delivery rose
$1.50 to settle at $81.44 a barrel.
Yesterday an analyst at Citigroup said the
worst was over for homebuilders. Today an analyst at UBS Investment Bank said
the worst isn't over for the housing market and industry profits may decline in
the third quarter.
LEN – 1.48 = 24.34
DHI -- .42 = 14.39
PHM -- .54 = 15.42
CTX --.74 = 28.31
BZH --.84 = 9.40
Once again, this is why you can’t pay
much attention to most of the analysts on Wall Street. This is why you have to
develop your own discipline for investing. If nothing else, pull up a chart of
these stocks, just pull up a chart for the past year.
Even if you don’t know anything about charts; just look at the chart for a
minute or two. Which way is the price headed?
