Week in Review: August 24, 2007
A look back at the week that was...
After the late summer's wild ride, markets stabilized this week as the VIX dropped 25%. The SPX was able to retake its 200 day moving average as renewed takeover chatter resurfaced mid week while the DJIA retraced over 50% of its losses. Despite a sluggish Thursday after Countrywide's (CFC) CEO dropped the "r word" investors' jitters were eased after Friday's upbeat durables and improved new home sales report.
With a lot of traders away from their desks next week before the Labor Day weekend, markets should be fairly range bound. It's similar to a heavyweight fight… after several rounds of delivering heavy blows the Bulls and the Bears are now in the middle of the ring leaning on each other trying to catch their collective breath. When traders return to their desk post holiday, the battle will continue. With the damage done to the financial complex and the latest bounce coming on light volume, probabilities lie in retesting the August lows. For the Bears to gain the upper hand they must crack SPX 1375 and consequently cause the VIX to explode and the BKX to fall out of bed. Bulls need to hold above 1425 to change the psychology of the tape before moving higher and forcing the shorts to cover. Minyans it is important to remember during these volatile times… nobody likes a draw.
The Four Sisters Performance
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Leading Indicators rose 0.4% in the month of July. This increase indicates likely economic growth in the near future lead by consumer expectations, vendor performance and jobless claims. (8/20)
News of a possible merger between brokers TD Ameritrade (AMTD) and ETrade (ETFC) sent the markets higher this week. Also discussing possibilities are hotel giants MGM and Dubai World. After minimal M&A activity this past month, investors looked favorably upon these announcements. (8/22)
Bank of America (BAC) invested $2 bln into Countrywide Financial (CFC) preferred stock. Bank of America says the deal will be mutually beneficial and strengthen both parties. (8/22)
The Bank of Japan held interest rates at 0.5% this week. The move did not surprise analysts due to recent turbulence in the global credit markets. (8/23)
Durable Orders rose to 5.9% for the month of July. This gain was marked by an increase in demand for airplanes, vehicles, computers, machinery and steel. (8/24)
New home sales increased 2.8% in the month of July to 870,000. While this number was higher than 820,000 expected by economists, sales are down 10.2% compared with last July.
Lowe's (LOW) shares soared after reporting a 9% increase in second quarter income. The homebuilder said it was able to keep costs down to compensate for the housing slowdown. (8/20)
Target (TGT) pleased investors this week with news of $686 million in 2Q income, compared to $609 million a year ago. The retailer contributed much of this growth to a 34% increase in credit card operations. (8/21)
Toll Brothers (TOL) reported third quarter income of $26.5 million, down from $174.6 million a year ago. The nation's largest luxury home builder cites the housing market downturn and credit worries for the 84% drop in income. (8/22)
Market Movers: Winners & Sinners
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