Market Recap: Stocks Close Strong With Ackman-Fed Combo
Bulls were shaken with CPI data but Ackman and FOMC boosted confidence.
Stock futures took a turn for the worse early this morning due to today's CPI data. This morning the Labor Department's Bureau of Labor Statistics surprised investors stating consumer prices in the U.S. had risen in January by 0.4%. The figure was more than the 0.3% increase economists had expected. Core CPI increased 0.3%, above expectations of 0.2%. For more of a look inside the numbers, read today's Five Things You Need To Know by Professor Kevin Depew.
But a recovery was underway after details of hedge fund manager Bill Ackman's plan to restructure the bond insurers emerged. Under Ackman's proposal the bond insurers would be broken into two companies with the structured finance unit owning the municipal insurer and receiving dividends to help pay claims. Ackman's note sounded a positive note in the markets. For more analysis see Professor Kevin Depew's The Ackman-Barksdale Proposal.
As usual, financial stocks were the first to lead the way. As Toddo often says, "As goes the piggies, so goes the poke." Notable gainers included Bear Stearns (BSC) +3.79% to $83.05, Lehman Brothers (LEH) +3.4% to $55.39, Morgan Stanley (MS) +4.9% to $43.55, and Goldman Sachs (GS) +2% to $177.25. See Toddo's Random Thoughts.
Housing stocks also rallied. The lift started this morning after Meritage Homes (MTH) was upgraded by analysts at UBS from "neutral" to "buy." The analysts said the company would generated significant cash flows in the second half of 2007 and that it could be profitable before competitors according to Bloomberg. MTH shares surged on the news settling +18% to $15.53. Other stocks included Standard Pacific (SPF) +10% to $4.25. Ryland Homes (RYL) +5.3% to $28.29, and D.R. Horton (DHI) +8% to $15.45. The broader Philadelphia Housing Index (HGX) gained +2.7% to $138.58. Check out Minyanville Editor's Andrew Jeffery's interesting discussion Is US Next Japan?
The markets rose to the highest levels of the day after the release of the FOMC minutes. In its statement Professor Lance Lewis noted that the Fed indicated that further easing was likely and that low interest rates 'were appropriate for a time.' "[It means] that it's going to remain low for a while until the Fed deems the financial system to be healed." "It's no coincidence that both spot gold and spot silver moved to new highs today, as did crude oil.
As such, commodities finished higher. Gold finished +8.0 to 934.60. Crude oil closed +0.73 to 100.74. Silver closed +0.252 to 17.760, but copper fell -1.95 to 370.55.
The dollar index added +0.125 to 76.123.
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, MA, XLF, BAC, C, AIG, GS, AEM, KGC, NEM, GOOG, AKAM, LLNW, FCN, RIMM, GRMN, VZ, ABX, GG, T, JBX, HRL, TKLC
Some bearish trade or investment ideas: POT, BIDU, RAND (currency), GRMN, WFMI, NTRI, ARS (Auction Rate Securities)
Down the stretch we come! Have a great night!
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