STOCK MARKET WATCH, Monday October 15

Source: du

STOCK MARKET WATCH, Monday October 15, 2007

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 463 LONG DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 2468 DAYS
WHERE'S OSAMA BIN-LADEN? 2186 DAYS
DAYS SINCE ENRON COLLAPSE = 2147
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES

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AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON October 12, 2007

Dow... 14,093.08 +77.96 (+0.56%)
Nasdaq... 2,805.68 +33.48 (+1.21%)
S&P 500... 1,561.80 +7.39 (+0.48%)
Gold future... 753.80 -2.90 (-0.38%)
30-Year Bond 4.91% +0.02 (+0.45%)
10-Yr Bond... 4.69% +0.03 (+0.60%)






GOLD, EURO, YEN, Loonie and Silver

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PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact actionpost@legitgov.org

For information on protests and other actions Citizens For Legitimate Government

---

Read more: du

The (Price) Discovery Channel
BY BRIAN PRETTI

How wonderful. The Fed has once again bestowed upon the masses (to say nothing of their Wall St. handlers) the magic elixir of a Fed Funds rate cut. More to come from here? C’mon, are you kidding me? Prepare yourself as I can already hear it coming. “How low can they go?” will be the question asked again and again as we move forward. I won’t even go there in this discussion, but rather pose a question. In terms of the reality of the financial and greater credit markets, what will Fed rate cuts actually accomplish in the current environment? Of course the feel good aspect of the simple perceptual act has literally been ingrained in the investment mindset throughout the Greenspan reign of monetary terror. Cut interest rates and all is well. Cut rates and stocks rally big time. Cut rates and consumers borrow. Cut rates and…..well, you get the picture. Sound familiar?

But one of the important questions certainly becomes, will Fed rate cuts necessarily help those in the real world who need to refi their mortgages over the next 12 months (and beyond)? That depends on whether those who lend in the credit markets follow the Fed as the short end of the curve declines. In a macro sense, given that so many credit spreads were at or near historic lows prior to the first Fed Funds rate cut for this cycle, it may very well be that as the Fed cuts rates, greater credit market yield spread widening is accomplished on a de facto basis, while costs of mortgages, corporate lending, etc., simply stay static on a nominal cost of funds basis. If this is to be the case, then no one is going to be helped in the world of the real US economy. As you’d guess, we need to let the markets “show us” where outcomes may lie ahead. Fed funds rate cuts in and of themselves mean very little. It’s the nominal cost of capital to consumers and businesses that make the world go around. That’s controlled by the credit markets, not the Fed.

-cut-

My bottom line macro comment of the moment is that before the credit markets can even begin to return to a sense of some type of normalcy (whatever that means in today’s much different world), we need to know what these credit market instruments are worth. Not what the models suggest they are worth, but what they can bring in a public auction – otherwise known as the global credit markets. We need to go through the process of price discovery. Period. And that clearly has not happened yet. I’m not even sure it has begun. Yes the problem has been identified. Yes, it’s the 800-pound gorilla in the room. But can those involved with this gorilla see it? Or is it that they really don’t want to see it? It seems everyone involved is simply waiting “for the next guy” to make the first move.

http://www.financialsense.com/Market/wrapup.htm

http://news.yahoo.com/s/nm/20071015/bs_nm/g7_usa_poll_dc;_ylt=AgL8cLYpUgzMmM2EGfDhre2573QA

NEW YORK (Reuters) - Economists see a 30 percent chance of a U.S. recession next year thanks to persistent weakness in housing that will probably push the Federal Reserve to cut interest rates again this year, according to a Reuters poll.

However, a survey taken Oct 9-12 showed a slight upgrade in growth forecasts for this year compared with a month ago and only 50 basis points more left for the Fed to cut after slashing rates to 4.75 percent in September.

The chances of recession have barely moved over the past month, at about 30 percent, and fare significantly better than former Federal Reserve Chairman Alan Greenspan's recent public prognostications that the odds are less than 50-50.

U.S. policymakers will need to keep one eye on sluggish growth and the soft labor market while also watching for any pick-up in price pressures as a result of the falling dollar, economists said.

"The weak dollar and elevated food and energy prices will add to inflation pressures," said Scott Brown at Raymond James & Associates in St. Petersburg, Florida.

"However, overall economic growth will remain below potential in the near term, keeping overall inflation pressures balanced, which should allow the Fed to lower rates in December," he said.

/...

8:30 AM NY Empire State Index Oct
Briefing Forecast 12.0
Market Expects 14.0
Prior 14.7

http://biz.yahoo.com/c/ec/200742.html

SINGAPORE - Oil prices were steady Monday after closing at a new record in the previous session on worries that supplies are insufficient for coming winter demand amid reports of declining crude inventories.

Light, sweet crude for November delivery added 4 cents to $83.73 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore. The contract rose 61 cents to settle at a record $83.69 a barrel on Friday after rising as high as $84.05, also a record.

Brent crude futures fell 6 cents to $80.49 a barrel on the ICE futures exchange in London.

Recent reports have indicated that crude inventories are falling. Last week, the U.S. Energy Department reported that U.S. oil supplies declined in the week ended Oct. 5, while the International Energy Agency said that oil inventories held by the world's largest industrialized countries have fallen below a five-year average.

http://news.yahoo.com/s/ap/oil_prices

http://news.yahoo.com/s/nm/20071015/bs_nm/markets_oil_dc;_ylt=AquI6D4bZOgkmJerAdE94D2573QA

LONDON (Reuters) - Oil zoomed to an all-time high above $85 a barrel on Monday, propelled by robust demand from booming commodity markets and fresh geopolitical worries.
ADVERTISEMENT

Oil has remained above $80 for most of the past month, fuelled by supply concerns ahead of winter when demand peaks and record lows for the U.S. dollar.

U.S. crude was $1.12 higher at $84.81 a barrel by 10:52 a.m. EDT, off a new record high of $85.30 -- its fifth straight session of gains. London Brent crude was 94 cents higher at $81.49, off its record high of $81.94.

"A run at $90 is now seen as reasonable," Citigroup analysts said in a note.

Oil's rally comes at a time when commodities are surging on strong demand from emerging markets such as China and India. Gold struck a 28-year high on Monday, while platinum hit a record high. Copper, lead and nickel were also firm.

"I think the demand picture looks fairly good. I don't think you have had a big effect of the credit crisis on oil or for that matter any commodity," said Merrill Lynch's head of global commodity research, Francisco Blanch.

Regulatory data released on Friday showed that speculators on the New York Mercantile Exchange crude oil market increased their net long positions in the week to October 9.

Oil has also been driven up by investors buying crude and commodities as a hedge against the weaker U.S. dollar.

/...

NEW YORK - The third-quarter earnings season begins in earnest this week, with investors hoping to learn how bad the damage was from the summer's credit crunch, and how much better the coming quarters are likely to be.

The deluge of reports will include results from technology names such as Intel Corp., International Business Machines Corp. and Google Inc.; banks like Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp.; and industrial companies including Caterpillar Inc. and Honeywell International Inc.

At this point, Wall Street is anticipating a fairly weak third quarter overall, but it expects corporate growth to bounce back robustly in the fourth quarter. Any indication that companies aren't rebounding as well as the market is hoping could derail the stock market, which has risen back into record territory.

-cut-

The National Association of Home Builders releases its housing market index Tuesday. On Wednesday, the Labor Department releases its August reading on consumer prices, the Federal Reserve puts out its Beige Book on economic conditions around the country, and the Commerce Department reports on housing starts. And Thursday, the Conference Board releases its September index of leading economic indicators.

http://news.yahoo.com/s/ap/20071015/ap_on_bi_ge/wall_street_week_ahead

NEW YORK - Citigroup Inc. and other big banks are working on a plan to support the market for mortgage-backed securities and other investments by jointly creating a fund that would buy as much as $100 billion of the debt, according to published reports.

The banks met three weeks ago at the Treasury Department, which is playing an advisory role, The Wall Street Journal reported, citing unnamed people familiar with the situation.

A New York Times report Sunday pegged the fund at about $75 billion. Talks have recently intensified and the plan could be announced as early as Monday, the Journal said.

The fund is designed to prevent a sharp sell-off in assets such as mortgage-backed securities, which would send their prices crashing. That could force banks, brokerages and hedge funds with similar investments to significantly write down the value of their assets, which, in turn, could further tighten credit markets and hurt the economy.

http://news.yahoo.com/s/ap/20071015/ap_on_bi_ge/risky_mortgages_banks

:eyes:

http://news.yahoo.com/s/nm/20071015/bs_nm/financial_fund_dc

NEW YORK (Reuters) - Banks including Citigroup (C.N), Bank of America Corp. (BAC.N) and JPMorgan Chase & Co. (JPM.N) said on Monday they were pooling money to prevent investment funds from having to dump assets into the market.

The pool is meant to bolster funds known as structured investment vehicles, which have had trouble refinancing their debt recently and in the worst case scenario would have to sell their assets to pay off investors.

These vehicles owned some $400 billion of assets at the end of August and if they sold too many assets, credit costs could rise globally, and economic growth could slow. Citi-sponsored vehicles held some $100 billion of assets at the end of August.

Some critics of the move say banks are bailing out players that made bad business decisions, but some investors were in favor of the move.

"I truly believe that companies should have to suffer from their bad business decisions, but the whole market could suffer if nothing were done," said Michael Holland, principal Holland & Co., which oversees more than $3 billion of investments.

Regulators can ensure that players that made bad business decisions are reined in appropriately, Holland added.

The size of the pool, known as the master liquidity enhancement conduit or M-LEC, and the way it is put together are still being worked out, the banks said.

The pool will agree to buy qualifying assets from SIVs, and will then issue short-term credit instruments to help finance the purchases.

/...

(Fortune) -- The glitter is already coming off Goldman Sachs' golden quarter.

Goldman (Charts, Fortune 500) wowed just about everyone when it reported very strong earnings for its fiscal third quarter, a period when rival investment banks did poorly because of the steep downturn in bond markets, from which investment banks try to generate trading profits.

However, Goldman's blow out quarter benefited from large gains in hard-to-value financial instruments, and its trading results in the period were particularly volatile, according to data contained in a Goldman filing of quarterly financial results with the Securities and Exchange Commission.

Goldman's stock has gained 13% since its earnings came out, as investors have bought into the notion that the bank is a cut above its peers and is able to weather, and even profit from, tough market conditions.

But that view could get revised, now that it can be seen in the numbers that a large proportion of its third quarter profits were 'unrealized' - i.e. paper gains, and not hard cash payments from fully closed out trades - and came from financial instruments that Goldman values largely according to its own estimates.

So what do the numbers actually say?

http://money.cnn.com/2007/10/14/news/companies/goldmanearns.fortune/index.htm?postversion=2007101505

:donut: :donut: :donut:

Time to get moving toward the door. I hope you have a wonderful time at the casino!



Ozy :hi:

:donut: and lurkers. Ozy, that slot machine reminds me of the old saying my uncle (that raised the race horses) always told me-the odd are always in favor of the house. He also said never bet on the ponies-they'll break your heart. He did it for the competition and for fun. If he won the purse-it was icing on the cake. So when the machine comes up with three images of Bush-does that mean you've crapped out, or am I thinking of another game.;)

It is so busy here. I talked with a hard core political junkie this weekend. He is totally disgusted with the HRC coronation. He was mentioning that Greenspan was commenting that Bill was the best Republican President the nation every had. He can't understand why we would vote for her with her history. She might do the right thing-but he doesn't trust her. He said that when Rupert Murdock started sucking up to her that 'the fix was in'. He said he wanted to go to the convention and do as much as he could to block it. This guy is always 6-12 months a head of most rank and file DEMS so I think this next year should be interesting. I hate that folks will crown a nominee before I even get to voice my opinion in Texas. By the time we get to vote-folks have pulled out of the race. I think the delegates should be apportioned and the convention SHOULD REALLY decide it. They use to do that when I was a kid. If they aren't going to do that anymore-then they should do away with conventions as a waste of time and money.
I have been focusing on the local races (school board, city council). I learned from Katrina that your odds of survival in a tragedy of epic proportions depends of your local leaders, Good ole boys need not apply.

Happy hunting and watch out for the bears. It is the last feeding time before winter so look for some interesting sitings.

...is a win, but you don't want what comes out of the machine. Cat turds or something.

:spray::rofl: If you got cow chips, you could actually use them. Cat turds, like Bush, are totally useless.

wishful thinking is trying to make it seem that way. They've resigned themselves to the fact that Stupid has queered the deal for their party for the foreseeable future, and are casting around for the most conservative Democratic candidate they can find.

Honestly, though, they need to look a little more closely at her voting record, which is astonishingly liberal. She is actually a whisker to the left of Dennis Kucinich, something that shocked the shoes off me when I started to compare records.

However, I agree in not trusting her completely. I think she is entirely wrong on the war, something the right wants to continue because they think it's the only thing holding their economy up, and I know her health insurance plan is a bad one.

That she's managed to fool the right into thinking she's a Goldwater Republic shows a real mastery of politics and PR. However, if they get their wish, it won't be the worst tragedy we've ever befallen.

:donut:
Good Morning All

Soon. :toast:

http://today.reuters.co.uk/news/articleinvesting.aspx?type=goldMktRpt&storyID=2007-10-15T111018Z_01_L15733510_RTRIDST_0_MARKETS-PRECIOUS-UPDATE-3.XML&pageNumber=2&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2

LONDON, Oct 15 (Reuters) - Gold struck a 28-year high on Monday, with the metal's appeal polished by a weak dollar, record high oil prices and geo-political tensions, while continued supply worries swept platinum to lifetime peaks.

Other precious metals were carried along by buoyant sentiment in gold and plantinum, with silver hitting its highest since the end of April.

Momentum has gathered on bullion as the U.S. currency's recent falls to successive record lows versus the euro made the dollar-priced metal cheaper for holders of other currencies and raised its profile as a portfolio diversification tool.

"Looking at all the underlying fundamentals, gold is extremely strong. There is a lot of expectation for further strength, there are a lot of reasons for the dollar to stay weak," Calyon analyst Michael Widmer said.

By 1017 GMT, spot gold <XAU=> had hit a 28-year high of $756.55 and was last trading at $755.30/756.00 per troy ounce, up from $748.40/749.10 quoted late in New York on Friday.

The euro was up 0.4 percent on the day at $1.4238 -- closing in on record peaks hit recently at $1.4281. Continued...

/...

I got the bug....:bounce:

http://www.coinflation.com/did-us-mint-run-out-of-gold.html

It sounds crazy, I know. But what else are we supposed to think?

On September 13th, the U.S. Mint announced they were suspending Gold Eagle coin sales due to the recent rise in the gold price. And just recently, the Buffalo Gold coin series suffered a similar fate and its product page states, "Due to the increasing market value of gold, the American Buffalo Gold Proof One Ounce Coin is temporarily unavailable while pricing for this option can be adjusted; therefore, no orders can be taken at this time."

Exactly how long does a price adjustment take?

It's unlikely they ran out of gold, but it's not impossible. They're going to have a difficult time obtaining it from the open market at some point. More people are realizing every day that the U.S. dollar is becoming worth less and less (or just plain worthless) and are scrambling to purchase gold and silver. Anyone who quotes government inflation statistics as a sign "inflation is contained" is completely out of touch with reality. I mean 2% inflation, are you flipping kidding me? There has to be a point where U.S. media outlets stop reporting these numbers.

more...

http://www.bloomberg.com/apps/news?pid=20601080&sid=aTXnKy4C_gNs&refer=asia

Oct. 15 (Bloomberg) -- Asian stocks rose, led by energy companies, as crude oil prices climbed to a record. PetroChina Co. surged 13 percent, surpassing General Electric Co. to become the world's second-largest company by market value.

``Given limited oil supplies and that China's demand continues to be strong, the outlook for oil-related stocks remains positive in the long run,'' said Carmen Au-Yeung, who helps manage the equivalent of $12 billion in global equities at Comgest (Far East) Ltd. in Hong Kong.

BHP Billiton Ltd., Australia's largest oil producer, rose to a record. Oil climbed as tensions along the Turkey-Iraq border increased concern that supplies will be threatened during a peak in global demand. China Mobile Ltd. climbed to a high after UBS AG lifted its share-price estimate. Cathay Financial Holding Co., Taiwan's largest financial-services provider by market value, gained after receiving a permit to open a branch in China.

The Morgan Stanley Capital International Asia-Pacific Index added 0.6 percent to 168.75 as of 9:20 p.m. in Tokyo. Benchmarks in China, Hong Kong and India climbed to records. Japan's Nikkei 225 Stock Average rose 0.2 percent, while the broader Topix index lost 0.1 percent.

Malaysia and Indonesia were closed for holidays. All other markets gained, except Australia.

/...

http://www.bloomberg.com/apps/news?pid=20601080&sid=aNj6Le5BAlpM&refer=asia

Oct. 15 (Bloomberg) -- India's Sensitive Index rose above the 19,000 for the first time after purchases by overseas funds propelled the benchmark past the milestone in four sessions. Reliance Industries Ltd. and ICICI Bank Ltd. led gains.

Overseas investors were net buyers of the nation's equities for a 15th straight day, taking their total purchases since the Federal Reserve cut rates on Sept. 18 to $7.08 billion. That's 43 percent of the total purchases made so far this year. Funds bought a net 9.91 billion rupees ($245.7 million) of shares on Oct. 11, according to the Securities & Exchange Board of India.

``As long as the money pours into our markets, it will continue to reach new highs,'' said Jayesh Shroff, who helps manage the equivalent of about $6.4 billion at SBI Funds Management Pvt. in Mumbai.

The Bombay Stock Exchange's Sensex rose 639.63, or 3.5 percent, to a record 19,058.67, the biggest fluctuation among markets included in global benchmarks. The index surpassed the high set on Oct. 11. Twenty-eight of the 30 stocks in the index gained. The S&P/CNX Nifty Index on the National Stock Exchange added 242.15, or 4.5 percent, to 5,670.40. Nifty futures for October delivery advanced 4.9 percent, to 5,706.25.

/...

http://today.reuters.co.uk/news/articleinvesting.aspx?type=eurMktRpt&storyID=2007-10-15T122054Z_01_L15330666_RTRIDST_0_MARKETS-EUROPE-STOCKS-UPDATE-2.XML

FRANKFURT, Oct 15 (Reuters) - European stocks traded slightly lower at midday on Monday as steep slides for Philips Electronics (PHG.AS: Quote, Profile , Research) and Northen Rock (NRK.L: Quote, Profile , Research) offset an advance for oil stocks on the back of record crude prices.

Markets were taking "a pause for breath after the strong recovery rally," said Helmut Knestel, portfolio manager at German wealth managers GECAM, with 220 million euros ($313.3 million) in assets under management.

At 1155 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was 0.2 percent lower at 1,597.82 points, having added 3.2 percent over the past fortnight.

Europe's benchmark index, up about 8 percent on the year, is 2 percent below a multi-year high set in mid-July, before the turmoil in U.S. subprime mortgages hit equities worldwide.

"Profit-taking is something that we could see at this point, particularly given the fact that problems associated with the subprime mortgage market are not completely wiped out yet," said Franz Wenzel, strategist at AXA Investment Managers in Paris.

Philips fell 4.8 percent after the Dutch company's key medical systems unit showed a surprise decline in earnings.

/...

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20071015:MTFH94236_2007-10-15_17-01-44_L15606716&type=comktNews&rpc=44

LONDON, Oct 15 (Reuters) - European stocks suffered their biggest daily fall in three weeks on Monday, led lower by financials and weakness on Wall Street, where a key index fell more than 1 percent as credit fears resurfaced.

The FTSEurofirst 300 index <.FTEU3> ended down 0.88 percent at 1,586.92 points. Europe's benchmark index, up about 7 percent on the year, is still 3 percent below a 6-1/2 high hit in mid-July before turmoil in the U.S. subprime mortgage market hit equity markets worldwide.

Shares in Dutch group Philips Electronics (PHG.AS: Quote, Profile , Research) fell 5.7 percent as its key medical systems unit showed a surprise decline in earnings.

And Finland's UPM Kymmene (UPM1V.HE: Quote, Profile , Research) fell nearly 8 percent after warning on third-quarter operating profits.

But, as a sector, banks were the worst performers, with Alliance and Leicester (ALLL.L: Quote, Profile , Research) down 5.8 percent, Royal Bank of Scotland (RBS.L: Quote, Profile , Research) losing 3.6 percent, Barclays (BARC.L: Quote, Profile , Research) falling 3.3 percent and BNP Paribas (BNPP.PA: Quote, Profile , Research) 1.8 percent.

Across the Atlantic, the Dow Jones industrial average <.DJI> stood 0.9 percent lower at 13,964.72, with investors spooked by renewed credit market fears as Citigroup (C.N: Quote, Profile , Research) said it was suspending share buybacks and reported a 57 percent drop in its third-quarter earnings.

One German dealer said plenty of stop-losses had been triggered as the Dow broke through 14,000, sparking a sell-off in European shares towards the close.

/...

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/15/ccview115.xml
By Ambrose Evans- Pritchard

The wolf packs are circling. Fifteen years after George Soros smashed the sterling and lira pegs of Europe's Exchange Rate Mechanism, central banks have invited hedge funds to pounce again. This time on a global scale.

Sitting ducks are on offer across Eastern Europe, the Middle East and emerging Asia, each offering an irresistible one-way bet for speculators with deep pockets.

What the candidates all have in common is inflation, the ever-higher penalty they pay for chaining their destinies through currency pegs and dirty floats to the dollar and the euro, the currencies of two enfeebled blocs – one a fat roué at the end of his credit, the other a stooped old gentleman with a stick.

The global M3 money supply is growing at 10.6pc as stimulus from America, Europe – and Japan, through the carry trade – leaks out to the vibrant parts of the world economy.

Money is expanding at 18pc in Saudi Arabia, 19pc in China, 24pc in India, 36pc in the United Arab Emirates, 41pc in Russia and 69pc in Venezuela.

With the usual lag, inflation has at last hit. Prices are rising at 6.5pc in China, 9pc in Russia, 9pc in Vietnam, 11pc in the UAE and 12pc in Qatar – to name a few.

Only nations with very rigorous monetary regimes seem able to resist this tide of liquidity. Most are floundering. Hence the rush by investors to profit from these unrestrained bubbles by piling into their stock markets.

/read on...

that it is impossible to protect yourself from these parasites. They're going to rob you no matter how careful you are.

There isn't an investment alternative which they won't loot.

because if you have a pension that is protected by law (ERISA), it's money that they can't take from you.

For that very reason pensions are being replaced by 401(k)'s.

jmo

<edit to add> also why they want to privatize Social Security.

who invested the pension money in risky ventures, and the pension fund went bankrupt? Oh, I guess the Pension Benefit Guaranty Corp (PBGC) would come to the rescue, for a reduced amount. But how solvent is the PBGC?

who receive their checks every month from their pension funds?

ERISA has fiduciary requirements. If the pension money is invested in risky ventures, said managers should be held accountable for such behavior.

I feel my meager pension is more safe.

:)

In the form of INFLATION. My pension is an annuity, a fixed amount of dollars payable monthly for the rest of my life. Those dollars are now worth what quarters were worth when I earned the pension! :grr:

Sooner or later these 'pegs' are going to break and the currencies in question be revalued upwards. What better way to play the bonanza than to ride the Stock Bubble wave up with Yuan, Rupee etc denominated assets. Providing you get the timing right and sell before the inevitable blow up then you can also cash in on your currency windfall. Of course as always in this situation it is those who know when to hold them and those who know when to fold them that will make the biggest killings.

http://news.yahoo.com/s/ft/20071015/bs_ft/fto101520071250158458

The yen hit a two-month low against the dollar on Monday as three leading US banks announced plans for a fund to buy mortgage-linked securities in an attempt to limit damage from the recent turmoil in the credit markets.

Analysts said the yen, which rallied sharply in August as positions funded in the low-yielding currency were unwound in the face of rising risk aversion, could come under further pressure.

Indeed, Derek Halpenny at Bank of Tokyo Mitsubishi-UFJ said the yen was already on the back foot after a week in which risk appetite returned to the financial markets in a significant way. "The announcement by some major US banks of a fund to purchase mortgage-linked securities will only help further the belief that there will be no renewed financial market turmoil," he said.

By midday in New York, the yen fell 0.2 per cent to an eight-week low of Y117.80 against the dollar, lost 0.5 per cent to Y167.50 against the euro and eased 0.3 per cent to Y240.30 against the pound.

Elsewhere, the dollar fell 0.3 per cent to $1.4230 against the euro, within half a cent of the record low around $1.4280 it hit against the single currency two weeks ago.

The dollar also fell 0.3 per cent to $2.0420 against the pound, dropped 0.4 per cent to SFr1.1800 against the Swiss franc and lost 0.2 per cent to a fresh 23-year low of $0.9060 against the Australian dollar.

However, the Canadian dollar lost ground, easing 0.3 per cent to C$0.9735 against its US counterpart as investors awaited Tuesday's interest rate decision from the Bank of Canada.

/...

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=7f283453-fde2-4f1c-a92e-e87703a9d792

LONDON (Thomson Financial) - The dollar is off earlier session lows against the euro after some further US data reinforced expectations that the US Federal Reserve will not be cutting borrowing costs again this month.

The Empire State manufacturing index nearly doubled to 28.75 in October as both new orders and shipments rebounded from September declines. Economists had expected a small drop to 14.40 after the index's 10-point plunge to 14.70 in September.

"Nevertheless, since the Fed won't have the more comprehensive ISM manufacturing survey for October available when it meets at the end of this month, this survey and the Philly Fed will be all it has to go on, and on that basis, this is another reason to adopt a wait and see approach at that meeting and leave rates on hold at 4.75 pct," said Paul Ashworth, analyst at Capital Economics.

/...

Dow 13,930.50 Down 162.58 (1.15%)
Nasdaq 2,772.26 Down 33.42 (1.19%)
S&P 500 1,544.33 Down 17.47 (1.12%)
10-Yr Bond 4.6850% Down 0.0020
NYSE Volume 1,346,605,620
Nasdaq Volume 1,099,155,620

12:30 pm : The major indices are trading slightly above their intraday lows. There doesn't seem to be any one reason for today's broad-based weakness, other than profit taking ahead of this week's flow of earnings releases.

Mattel (MAT 22.40, -0.05) reported lower third quarter profits than from a year ago as charges related to its recent product recalls weighed on results. Mattel earned $0.61 per share, which missed the consensus estimate by $0.09. DJ30 -107.87 NASDAQ -19.71 SP500 -11.37 NASDAQ Dec/Adv/Vol 1927/917/934 mln NYSE Dec/Adv/Vol 2296/835/508 mln

12:00 pm : The major indices quickly dropped to negative territory after opening with slight gains. Overall, the declines have been mostly broad-based. The indices are currently off their session lows, but are still trading with decent sized losses.

There were a few merger and acquisition headlines of note this morning. Danaher (DHR 81.48, +0.91) and Tektronix (TEK 37.64, +9.30) confirm they have reached a definitive agreement under which DHR will make a cash tender offer to acquire all of the outstanding common shares of TEK for $38.00 per share. The aggregate purchase price is approximately $2.8 billion, including debt, transaction costs and net of cash acquired.

After Friday's close, Biogen Idec (BIIB 83.20, +13.77), one of the world's largest biotech companies, said its board of directors has authorized its management to explore a possible sale.

Separately, Citigroup (C 46.54, -1.31) reported its third quarter net income dropped 57% due to "dislocations in the sub-prime and credit markets." The reported profits were above Wall Street estimates, but only because estimates had come down so much due to problems in the fixed income area.

Crude oil futures are trading at all-time high levels, up 1.9% to $85.28. Reportedly, the rally is due to supply concerns and tensions between Turkey and northern Iraq. The high oil prices have been a drag on stocks today, especially the Dow Jones Transportation Average (-1.0%) and the Amex Airline Index (-2.1 %).

The energy sector (+1.3%) stands alone in positive territory as it benefits from the high crude prices. The financial (-1.5%), consumer discretionary (-1.1%) and industrial (-1.0%) sectors are currently the main laggards.

In currency trading, the dollar index is down 0.23%. DJ30 -107.79 NASDAQ -17.79 SP500 -10.74 NASDAQ Dec/Adv/Vol 1950/862/819 mln NYSE Dec/Adv/Vol 2309/780/434 mln

11:30 am : The major indices have extended their losses in the last 30 minutes. The main laggards are the financial (-1.6%) industrial (-1.2%) and consumer discretionary (-1.2%) sectors.

The all-time high crude oil prices ($85.14) are a drag on the stock market, especially the Dow Jones Transportation Average (-1.2%).DJ30 -129.42 NASDAQ -22.55 SP500 -12.67 NASDAQ Dec/Adv/Vol 1941/851/697 mln NYSE Dec/Adv/Vol 2226/848/366 mln

11:00 am : Since the last update, the three major indices have reached fresh intraday lows. The decline has been broad-based. The energy sector (+1.0%) now stands alone in positive territory as it continues to benefit from high crude oil prices.

Biogen Idec (BIIB 84.21, +14.77) and Apple (AAPL 168.01, +0.76) are leading the Nasdaq 100 this session. Biogen's stock has rallied following its announcement that it is willing to consider a possible sale.

Meanwhile, Apple is doing well after Lehman Brothers raised its price target to $190 from $160. In addition, Bear Stearns said today it expects solid fourth quarter results from Apple. DJ30 -83.47 NASDAQ -13.90 SP500 -8.01 NASDAQ Dec/Adv/Vol 1661/1043/500 mln NYSE Dec/Adv/Vol 1912/1078/259 mln

10:30 am : The Nasdaq Composite has made it back to the unchanged mark, while the Dow and S&P continue trade with modest losses.

The homebuilding group is currently a laggard after UBS downgraded KB Homes (KBH 27.80, -1.16) to Neutral from Buy this morning. The firm noted that since 9/26, shares have gained 20%, which is well ahead of the group’s 10% average gain. The firm also believes that a recovery in housing is unlikely to materialize until 2009 at the earliestDJ30 -49.10 NASDAQ -0.29 SP500 -2.72 NASDAQ Dec/Adv/Vol 1638/1012/357 mln NYSE Dec/Adv/Vol 1854/1057/174 mln

10:00 am : The stock market currently has modest losses. The energy (+1.5%) and materials (+0.5%) sectors are providing leadership. The financial (-0.8%) and consumer discretionary (-0.7%) sectors are the main laggards.

There are a couple of merger and acquisition news items of note this morning. After Friday's close, Biogen Idec (BIIB 83.10, +13.67) said its board of directors has authorized its management to explore a possible sale. This morning, Danaher (DHR 82.19, -0.21) announced it is acquiring Tektronix (TEK 36.62, +9.28) for $38 per share, or $2.8 billion.DJ30 -37.07 NASDAQ -4.93 SP500 -3.20

09:45 am : The stock market has slipped into negative territory after opening with slight gains. Crude oil is trading in record territory at $85.01 per barrel.

Citigroup (C) reported that third quarter net income dropped 57%. The company's profits were above Wall Street estimates, but only because estimates had come down so much due to problems in the fixed income area. DJ30 -12.20 NASDAQ -1.09 SP500 -1.11

http://today.reuters.co.uk/news/articleinvesting.aspx?rpc=401&type=usMktRpt&storyID=2007-10-15T165306Z_01_N15339561_RTRIDST_0_MARKETS-STOCKS-UPDATE-9.XML

NEW YORK, Oct 15 (Reuters) - U.S. stocks fell on Monday, led lower by the financial services sector after Citigroup Inc (C.N: Quote, Profile , Research) offered a gloomier outlook and worries resurfaced about the stability of the buyout market.

The stock market also faced headwind from record high oil prices, which threatened to fan inflation and crimp consumer and business spending.

Meanwhile, an offer by the consortium that agreed to buy student lender Sallie Mae (SLM.N: Quote, Profile , Research) for $25 billion to terminate their agreement reignited worries about the health of the financing market.

Adding to that uncertainty was an announcement that major banks, including Citigroup, were assembling a fund to support the struggling asset-backed commercial paper market.

"The underwhelming earnings from Citigroup cast a pall not only on Citi, but also on other financials," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

"And when the Sallie Mae bid was pulled by the prospective buyers, that put more uncertainty into the market and changed people's views on the potential for stability in the buyout market," he added.

/...

http://www.prudentbear.com/index.php?option=com_content&view=article&id=4789&Itemid=53

<snip>

Losses from subprime mortgages are not going away, and they will be recorded in earnings over the next several quarters. As subprime mortgages default, more housing is brought onto the market, and house price declines accelerate. That process causes more previously sound mortgages to become delinquent, either because the homeowner loses his job or simply because the homeowner needs to move but is trapped by a mortgage that is now underwater. Any mortgage made at a higher loan to value ratio than the traditional 80% is endangered by a house price decline extending into the 15-20% range, with more than that on the coasts, as now seems likely.

In the mortgage market that existed before 1980, there would have been a stabilizing factor, in that the great majority of mortgages had been taken out several years earlier, when house prices were much lower, and so would remain sound. However the extraordinary volume of mortgage refinancing that took place in 2002-2006, each of which refinancings resulted in a 2-4% fee for some hyped-up mortgage broker/salesman, has destroyed that comforting but old-fashioned thought.

In today’s market, a high percentage of consumers refinanced their mortgages using a valuation close to the peak, and have subsequently spent the money raised on vulgar ostentation. They are now busily re-filling their credit card balances to continue enjoying the excessive consumption that they have come to regard as their due. The arrival of reality on their front doormats, in the form of a credit card bill they can’t pay, including atrocious increases in interest charges due to their lowered credit standing, will not only produce losses for the lenders, it will also decimate those consumers’ consumption.

The home mortgage sector, the housing sector and real estate brokerage were the largest job creators in 2001-05, accounting for 40% of the jobs created during that period, with the second largest engine of job creation being the inexorable increase in the size of governments at all levels. The rest of the economy has since 2000 proved weak at job creation, as evidenced by the anemic employment figures we have seen in 2007, even while consumption has held up and the overall economy has been alleged to grow at 3% per annum.

The real estate market has nowhere near bottomed; new home sales are still running at close to 800,000 per annum, compared to the 400,000 per annum at which they bottomed in the last four housing downturns, all of them milder than this one is proving. Since employment tends to lag activity, with layoffs occurring only after a considerable delay when business turns down, it’s likely that there is a considerable further employment squeeze in the construction, real estate brokerage and mortgage banking sectors still to come, as the market adjusts to a world in which house prices barely cover the cost of construction, a large overhang of properties causes each home sale to take an average of 8-9 months and tight lending standards and a shortage of investors make mortgage origination very difficult.

As housing and credit card woes affect consumption, that will damage the rest of the economy. If household consumption, the great engine of US economic growth for several decades, is due to fall back in real terms, capacity levels in consumer-related manufacturing and profit levels in consumer-related industries will also be squeezed.

The only offset will be profit increases in export industries, buoyed by the decline in the dollar and increase in US firms’ competitiveness. Here however a reality has to be recognized: operations that have been outsourced since 1990, and are now producing goods and services from low wage countries in the Third World, are not coming back. The initial costs of restructuring a production and distribution chain are immense; there is thus a gigantic “hysteresis” in the global economic system.

...

There are thus a number of factors likely to cause profit levels in the US economy to decline. That would not be surprising; even by the conservative government measurement, corporate profits are currently at record levels in terms of Gross Domestic Product. You would expect that; monetary policy has been extremely loose since 1995, so the share of capital in the economy has steadily increased and the returns to that capital have caused profit levels to soar. As real interest rates revert to their norms, probably now accompanied by a rapid increase in inflation rates from their current alleged 2% per annum and actual 5% per annum towards or even beyond the 10% level, causing a collapse in bond markets, profits will be squeezed back towards their historic levels and decline as a percentage of GDP.

Profits reported to shareholders, those taken in calculations of price-earnings levels, are likely to decline further than the economic profits used in government statistical calculations. The gap between the Bureau of Economic Analysis measurement of corporate profits and Wall Street’s reported profits has soared in the last few years, as it did in the late 1990s. That is almost certainly a reflection of lax accounting standards. In the late 1990s, that laxity took the form partly of not expensing stock options, transferring huge sums from shareholders to corporate management without disclosing the fact. It also included playing games whereby the costs of corporate churn were transferred “below the line” and expensed directly against equity, allowing reported profits to maintain a steady upward trend. The ratio of “extraordinary items” to reported earnings, which averaged around 5% in the 1980s has been much higher since the middle 1990s, peaking at over 100% in 2002, the year in which the corporate sector wrote off its 1999 excesses. It has been climbing again recently, and is likely to climb further in 2007’s results, as losses from misguided financial experimentation are deemed no longer part of ongoing operations and hidden from view.

Asset valuation has been a particular area of profit inflation in recent years, and should be a fruitful source of disasters in the forthcoming downturn. One particular sector to watch will be the investment banks, which normally benefit as the stock markets worldwide climb, as they have in 2007. As the most active participants in financial markets, they have the highest exposures to financial market chicanery.

/more at link...

$83.69

:wow:

Dow 13,984.80 Down 108.28 (0.77%)
Nasdaq 2,780.05 Down 25.63 (0.91%)
S&P 500 1,548.71 Down 13.09 (0.84%)
10-Yr Bond 4.673% Down 0.014
NYSE Volume 3,144,664,000
Nasdaq Volume 2,047,996,375

4:25 pm : Rising oil prices and a lousy earnings report from Citigroup (C 46.24, -1.63) combined to spark a concerted round of profit taking that got the week started on a bearish note.

There was a brief move higher at the open with some M&A news surrounding Tektronix (TEK 37.85, +9.51) and Biogen Idec (BIIB 82.51, +13.08) providing support. The major indices quickly rolled over, though, and spent the rest of the day in negative territory. At their lows for the session, which were hit around 15:30 ET, the Dow, Nasdaq and S&P were down 188, 41 and 21 points, respectively.

Some late buying interest helped pare the losses, but aside from a few select industry groups, most of which were in the energy sector (+1.1%), stock monitors were awash in red figures.

Oil prices hitting a record high of $86.22 per barrel provided a good excuse to take some money out of an overextended market. The 2.9% jump in crude futures for November delivery was driven by supply concerns that were fed by reports of rising tension between Turkey and Kurdish militants in northern Iraq.

As one might expect, rising oil prices took their toll on the transportation sector, which was evident in the 1.1% decline in the Dow Jones Transportation Average.

The influential financial sector (-1.8%), though, was the main weak spot and the biggest drag on the broader market. Dow component Citigroup was a big reason why.

Before the open, Citigroup reported a 57% drop in third quarter net income that was consistent with a warning it issued at the start of the month. Its profit of $0.47 per share actually topped the lowered consensus estimate by four cents. However, Citigroup's acknowledgment that consumer credit markets will continue to deteriorate in the fourth quarter was an unnerving revelation that compounded broader selling efforts.

Recall that Citigroup previously said it expected a return to a normal earnings environment in the fourth quarter. The warning about the consumer credit markets, then, sounded inconsistent with that view and raised some doubts as to whether the third quarter was indeed the bottom for the financial sector.

Our concerns about the market having expectations for the financial sector that were too high was a key reason why we reiterated our Underweight rating last week.

The consumer discretionary sector (-1.4%), which we also have rated at Underweight, was another notable laggard today with the homebuilding (-4.1%), apparel (-3.4%) and auto (-3.0%) groups leading the slide.

We should note that the financial and consumer discretionary sectors were among the biggest gainers following the Fed's rate cut on September 18. Accordingly, it is understandable that they would be leaders in a day of broad-based profit taking.

The same holds true for the small-cap stocks, which were the hardest hit issues today. The Russell 2000 slipped 1.40% versus declines of 0.8% for the S&P 500 and 0.7% for the S&P 400 Midcap index.

Separately, today's small batch of earnings reports was relatively disappointing as Mattel (MAT 22.22, -0.23) and Eaton (ETN 93.04, -3.36) both came up short of the Reuters Estimates consensus estimate.

The lone economic report on Monday - the NY Empire State Index - brought some good news with a reading of 28.8. That compared favorably to the prior month's reading of 14.7 and indicates the manufacturing sector held up well in the face of the financial market turmoil of late summer. A number above zero reflects expansion.

Tuesday brings a larger slate of earnings reports with Johnson & Johnson (JNJ 65.65, -0.29) highlighting the reporting calendar before the open and IBM (IBM 118.03, +0.22), Intel (INTC 25.75, +0.20) and Yahoo! (YHOO 27.86, -0.62) taking the lead after the close. DJ30 -108.28 NASDAQ -25.63 SP500 -13.09 NASDAQ Dec/Adv/Vol 2110/887/2.03 bln NYSE Dec/Adv/Vol 2364/901/1.29 bln