Market Recap: Just Kidding, No Bailout!
Rumors of a bailout never came true. Just a game of chicken?
Ambac (ABK) topped headlines today. Investors had been waiting since last week for news of a bailout by the investment banks. But the bond insurer dropped as much as 25% after revealing its plans to raise $1.5 bln in equity and discontinue certain structured finance businesses including CDOs. Further the company stated it had written virtually no new business to date in 2008 and scared Wall Street by stating it could still operate with AA ratings.
"Why is ABK raising equity?" asked Prof. Sedacca. "Why is there no bailout? Why will it go to zero? Why is its model irreparably harmed? Because you can't
value the garbage on its balance sheet. Just like Lehman (LEH), Bear Stearns (BSC), etc… the creation of credit and money has caused disruption never seen before in my opinion."
Stocks fell overall in the financial sector. Gainers, which edged into the green, included Goldman Sachs (GS) +0.84% to $164.97; Morgan Stanley (MS) +0.29% to $41.47; and Citigroup (C) +0.23% to $22.15. Notable decliners were Wachovia (WB) -2.5% to $28.73; Merrill Lynch (MER) -1.03% to $49.32; and Bear Stearns (BSC) -1.8% to $75.78. For context on the financials, read Prof. Sedacca's Credit Default Swaps Signal Brokerage Trouble.
Lost in the hustle and bustle was the release of the Fed's Beige Book, which didn't give uplifting news either. The Fed spoke the language of a slowing economic environment stating manufacturing was subdued citing slowing vehicle sales and weak retail sales. The Fed also noted inflationary pressure on prices from materials and energy price in almost all districts and saw two-thirds of areas in the United States softening or weakening. Other economic data released today showed Nonfarm Productivity coming in better than expected at +1.9% and Factory Orders was inline with ISM services data slowing less than expected.
Read Toddo's Ten Tips For A Tough Tape.
Elsewhere, in the retail sector, Costco (COST) reported earnings. The largest U.S. warehouse chain said profits were inline at $0.74 EPS on $16.617 bln in revenues which was slightly lower than expected. And BJ's (BJ) beat estimates with earnings coming in at $0.80 per share on $2.4 bln in revenues which was largely inline. COST shares fell -2.9% to $60.50, and BJ gained +6.7% to $35.52. But the broader retail ETF (RTH) fell -0.49% to $90.20. Read Prof. Depew's Five Things You Need To Know.
In commodities, gold's decline was short-lived gaining +24.90 to 991.20. Prof. Lewis noted a breakout on a gold play ASA (ASA). "The stock is 75 cents away from breaking a 28-year trading range and is still around 10% below its NAV although that gap between it and its NAV has been closing of late." ASA shares settled +2% to $90.01.
Silver gained +0.942 to 20.680. Crude oil gained +4.90 to 104.42, and copper finished +15.05 to 397.75.
The dollar index fell -0.183 to 73.481.
For more summaries, click on Minyanville's Buzz Bits.
Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.
Some bullish trade or investment ideas: QQQQ, DBA, GOOG, ASA, CY, DIVX, YHOO, T, CIEN, INFN, CSCO, ADCT, JNPR, FLSR, IWM
Some bearish trade or investment ideas: LEH, BSC, TMA, MON, MOS, SPY, CF, COST
Over da hump, Minyans. Have a great night!
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