Market Recap: Stocks Move Higher On Rate Cut Expectations
Fed-funds futures are pricing in an 88% chance the Fed will cut by 50 basis points. Bulls are happy.
Interest-rate-sensitive stocks were boosted in part by increased expectations of a 50 basis point cut in the overnight Fed Funds rate. Trading in Fed-funds futures suggested an 88% probability for a 50 bps move to 3.0% which was up the previous day from a 70% probability. Banking and Homebuilder stocks rallied in the news. The Philadelphia Bank Index (BKX) gained +3.6% to $89.59 and the Financial Select SPDR ETF (XLF) gained +3.57% to $28.15. Some of the biggest winners in the sector were Washington Mutual (WM) adding +5.52% to $17.01, JP Morgan Chase (JPM) +4.42% to $45.57, Bear Stearns (BSC) +4.68% to $91.10, and Lehman Brothers (LEH) +4.77% to $60.63.
In the homebuilding sector, stocks surged even as new home sales for December fell to a 12-year low capping the worst sales year since records began in 1963. The Philadelphia Housing Index (HGX) gained +4.30% to 144.65 and individual stocks included Ryland Group (RYL) +6.20% to $31.36, Lennar (LEN) +8.95% to $18.50, Beazer Homes (BZH) +22.19% to $8.81, and Hovnanian (HOV) +20.44% to $8.78. For more on new home sales, read Professor Depew's Five Things You Need To Know.
Yet not all were as sanguine about the markets. "Is the 'easy trade' a drift higher into 2:15 PM EST Wednesday," asked Toddo, "and if they don't snip fitty bips, sell 'em with both paws?" For more read his Monday Morning Quarterback and Random Thoughts.
Gold continued to move higher on the rate cut sentiment, yet power outages in South Africa continued to weigh on a few gold stocks. AngloGold Ashanti (AU) settled -2.93% to $41.75 and Gold Fields (GFI) closed -0.66% to $15.05. But gold specialist Professor Lewis maintained an upbeat forecast: "The only people selling this stock today are the ones that are valuing stocks based on whether the company meets or beats some expectation on what some analyst has written. They are the same people that will be buying the stock higher when some company like Gold Fields 'beats' expectations after analysts have lowered production estimates."
Gold closed +16.40 to 927.10. Crude oil added +0.35 to 91.06. Silver added +0.262 to 16.690, and copper finished +0.60 to 318.20.
The dollar index closed -0.410 to 75.563.
For more summaries, check out 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: SPX, GIS, K, MRK, BX, AAPL, WM, BSC, VMW, MCD, SBUX, SYY, LNY, RT, MRT, RUTH, DAVE, AFCE, BNHNA, BKX, GLW, XHB, DDS, LTD, CHS, Gold, Gold shares
Some bearish trade or investment ideas: SPX, GOOG, BIDU, AMZN, MSFT, RIMM
Have a great night, Minyans! See y'all in the morning!
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