Daily Market Reports | Aug 26 2008
By Greg Peel
The Dow fell 241 points or 2.1% while the S&P and Nasdaq both fell 2%.
It was indiscriminate – all 30 Dow stocks fell, over 480 S&P 400 stocks fell and more than 90 Nasdaq 100 stocks fell. Volume, would you believe, was even lighter than last week’s “why am I even here” Friday. Yes, the summer break has entered another week in the US and the more the market bounces around the less players want to have anything to do with it. Which means it just bounces around more. Another martini please, my good man.
Australia would be much better served totally ignoring Wall Street at this time, and avoiding the heartache. We have our own game going on at home, and this week sees another major round of earnings reports before the season comes to a screaming halt after Friday. Then all the stock analysts go on holidays, and the news flow dries to a trickle ahead of the next round – AGM season.
Commodities were not in the frame last night either. After six up and six down in oil, last night saw a very narrow price range which started weak but finished up US52c to US$15.11/bbl as Tropical Storm Gustav became the latest threat in the Gulf. Edouardo, Fay, Gustav – they’re getting very multicultural, these storms. And it was a public holiday in London specifically to celebrate Beating The Aussies At The Games, which meant no metals markets in either London or New York.
LOCOG spent the time organising its demonstration sports in 2012 – darts, queuing, football rioting, and the 100m beach paddle (contestants are disqualified if they get wet above their shins).
Absolutely nothing of note happened on the currency front, leaving gold to fall US$1.10 to US$821.10/oz and the Aussie to drift lower to US$0.8632.
So what was all the fuss about in stocks?
Well it was all about financials yet again, and the ring leader last night was once again insurer AIG, which fell over 5% following an earnings downgrade from Credit Suisse and a ratings warning from Fitch. Then JP Morgan announced that it owned a decent chunk of Fannie & Freddie stock, meaning it would book losses of some US$600m on top of everything else in the third quarter. This begged the question of just how much of F’n’F is held at other institutions, and no one waited to find out.
Ironically, F’n’F were two financial stocks to actually have a positive day. This was because a US$2bn auction of paper went well, and because Lehman Bros suggested the common stock may still be valuable if the US government simply comes in to help, not take over. Well one would expect the paper to be popular – it now has government guarantee, and as for Lehman’s comments – well let’s just say Lehman stock was down 7% and feeling like closing time was fast approaching.
The news on the housing front last night came from the National Association of realtors, which brought the great news that existing home sales actually rose 3.1% in July to the highest level in five months. Woohoo! Only problem is, 40% of those sales were foreclosures. Banks don’t hang around advertising a house for a while trying to find the keenest buyer. They just hit the bid. So we know which way the prices are going.
And as house prices keep on falling in the US, expected third quarter write-downs of mortgage securities among the banks and brokerages keep on climbing.
The SPI Overnight was down 90 points. Thank you 5000 – we enjoyed our visit.
