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Minyanville's Market Recap: ECB, BOE, Subprime, Markets Rally In The End For A Gain


Stocks were down for much of the day. But a late rally helped boost stocks into green territory!

Stocks rallied in the last hour of the trading day to sneak into positive territory. The Dow Industrials gained +0.04% to close at 13,974, the S&P 500 gained +0.22% to close at 1,542, and the Nasdaq Composite gained +0.15% to finish at 2,733.

Stocks were lower for much of the day despite central banks in Europe keeping interest rates steady as expected. The Bank of England and the European Central Bank both voted to keep rates steady at 5.75% and 4.0% respectively. Following the moves, ECB President Jean-Claude Trichet offered statements on the markets stating that the ECB expected inflation to remain elevated "significantly above 2%" for the remaining months of 2007 and early parts of 2008 before moderating. Trichet also added that the excess volatility was counterproductive to global growth. Toddo offered his thoughts on the moves by the central banks. Click here to read them in Bullets Over Broadway.

Homebuilders took a double blow today as a report by Moody's said subprime mortgage bonds created in the first half of 2007 are going delinquent at the fastest rate ever. The average rate of serious loan delinquencies, those 60 days or more past due, in the 2007 bonds are higher than one created the year before. (From Bloomberg)

Compounding the pressures, UBS issued a note saying the housing market has not shown signs of bottoming and it expects "further deterioration in the near term. The decline ended a 13% surge in the S&P Supercomposite Homebuilding Index prior to today. (From Bloomberg) Notable stocks that declined were Lennar (LEN) losing -5.7%, Ryland Group (RYL) losing -2.8%, and Pulte Homes (PHM) losing -3.3%. Toddo wondered about the homebuilders that led the rally on the Buzz. Read his questions in his Answers I Really Wanna Know. Nonetheless Professor Sedacca maintained his bullish stance suggesting he'd buy on any pullbacks.

The U.S. commercial paper market expanded for the first time in 8 weeks to $4.5 bln in the period ending yesterday. The increase marked the first gain since the August turmoil. (From Bloomberg) Nonetheless, financials ended mixed on the day. Goldman Sachs (GS) lost -0.6%, Bear Stearns (BSC) lost -0.5%, and Lehman Brothers (LEH) lost -1.3%. Morgan Stanley (MS) and Deutsche Bank (DB) both gained on the day +0.16% and +0.74% respectively.

In the tech sector, Research In Motion (RIMM) reported 2Q $0.50 EPS versus $0.49 cons on revenues of $1.37 bln versus $1.36 bln cons. The company also issued guidance to the upside. RIMM suffered an initial selloff after the announcement but recovered to over $100 per share. Professor Warner warned readers of potential consequences in the markets if RIMM did not beat estimates. Read his thoughts in Everyone Watching RIMM Earnings.

In economic data, weekly initial claims figures came in greater than expected at 317 k versus 310 k cons. Last week's figure was revised to 301 k from 298 k. Factory orders was also released showing a decline of -3.3% versus -2.8% cons.

In commodities action, crude oil performed strongly gaining almost +2% to $81.50. Metals all performed strongly as well with the exception of copper losing -0.68%. Our gold specialist Professor Lewis updated Buzz readers to watch for a divergence between gold and the euro. Professor Lewis mentioned these thought yesterday in What Will Gold Do Next?

For other summaries of today's real-time events, click her to see 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: RIMM, PCR, NMX, WYNN, ICE, AEZ, MRVL, AKAM, BX, EOG, FRK, EL, TUP

Some bearish trade or investment ideas: BIDU, FXI, MU, UTY, TOA, DF

For tomorrow, investors will be waiting for the all-important jobs report to be released at 8:30 AM EST. Consumer credit figures will also be released at 3:00 PM EST. Click here for the full trading radar.

We hope you had a great day. Come check out the Rolling Bones at the Red Lion if you're in the NYC area. Otherwise have a great night!
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