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Market Recap: Margin Calls Spook Bulls

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Thornburg Mortgage started a slide that didn't end until the closing bell.

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Equity markets took a beating today. The Dow Industrials lost 214 points, or 1.75%, to 12,040, the S&P 500 fell 29 points, or 2.20%, to 1,304, and the Nasdaq Composite dropped 52 points, or 2.3%, to 2,220.

Stocks experienced a broad-based sell-off with weakness only increasing as the day carried on. Sentiment was weak this morning after The WSJ reported a mortgage bond fund of Carlyle Group missed margin payments. This came days after Thornburg Mortgage (TMA) said it had trouble selling assets to meet margin calls. The news took a heavy toll on the financial sector. Notable decliners included Bear Stearns (BSC) and Merrill Lynch (MER) which both fell over 7%. Goldman Sachs (GS) fell 3.8% to $158.65. Wachovia (WB) fell 4.5% to $27.41, and JP Morgan (JPM) dropped 4.4% to $37.37. Read Minyanville Editor Andrew Jeffery's Distressed Pools Flood Market.

In retail, stocks reported their monthly sales figures but Professor Macke said the numbers were of little importance. "February Same Store Sales are rolling in and, on the surface, seem roughly as dismal as expected. Should you care? Let's be honest here: not really." Nonetheless, stocks took a beating. JC Penney (JCP) dropped 11% to $42.77. American Eagle (AEO) dropped 17% to $17.56. Macy's (M) fell 6.8% to $23.56. Wal-Mart (WMT) was one of the lone gainers closing 0.86% to $49.98. Read Professor Jeff Macke's Ugly February For Retail.

The carnage was noteworthy in the homebuilders as well even though pending home sales should have provided some type of relief. The National Association of Realtors reported pending home sales for the month of January came in flat. Economists had expected a decline of 1.5%. Professor Depew noted, however, that the bad news was rooted in the release of data by the Mortgage Bankers Association. "The proportion of all mortgages nationwide that fell into foreclosure shot up to a record high of 0.83% in the fourth quarter of 2007….the previous high was 0.78% in the third quarter of last year.

"Year-over-year, the foreclosure start rate for prime Adjustable Rate Mortgages (ARMs) increased from 0.41% to 1.06% and the rate for subprime ARMs increased from 2.70% to 5.29%. The foreclosure start rate for prime fixed loans increased from 0.16% to 0.22% and the rate for subprime fixed loans increased from 1.09% to 1.52%."

Notable decliners included Hovnanian (HOV) 10.9% to $8.09, Standard Pacific (SPF) -12% to $3.83, Meritage Homes (MTH) 9.4% to $13.05, and Pulte Homes (PHM) fell 7% to $12.19. The Homebuilders ETF (XHB) fell 6.2% to $18.75. For more read Professor Depew's Five Things You Need To Know.

In commodities, gold fell 8.60 to 979.90. Crude oil gained 0.94 to 105.47. Silver fell 0.572 to 72.905, and copper lost 7.45 to 391.05.

The dollar index fell 0.575 to 72.903.

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: GFI, AAPL, AON, DHR, MDR, WLT, ALOG, APC, UNG, GENZ, gold, gold shares

Some bearish trade or investment ideas: DBA, AEM, FLS, UBS, CY, dollar


It's Friday tomorrow! Can't wait! Have a good night!

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No positions in stocks mentioned.

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