Interdum stultus opportuna loquitur...

Tuesday, January 22, 2008

USRant: Fiat Gusher Saves the Day... Sorta

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ot a lot in economic news, except for the fact that the Fed blinked. Ben Heli-chopper Bernanke decided that the US should have even more inflation, in order that the Sandy Weills of the world can abandon ship with their massive golden parachutes intact.

In all likelihood, the Fed will cut the Fed Funds rate again next week, and very probably by 50 more basis points; that's the thing that makes the motivation for today's cut so obvious - it was only a week early.

In Monetary Economics, it is generally accepted that the lag length for the transmission of monetary policy to the real economy is 12-18 months... so what difference - what genuine difference - can it make to have cut now, versus in 5 business day's time?

Well, I'll tell you (that's what I do).

They did it in order to flood the market with liquidity, so that Citibank can stay within its capital requirements and so that Ambac can be bailed out. Both of those institutions are in deep hovno, but it would be better if their stocks got a pop for a couple of weeks in order for the big money to get out. Also, the longer the market recovers, the more that media whores on CNBC and Bloomberg can tout the end of any dislocation in credit markets, and all the Masters of the Universe can go to their homosexual conclave at Davos with spirits high.

Oddly enough, neither the Euro nor the Strayan dollar got any boost from the cut; I don't mind that, since I am borrowing anti-$A for my (hopefully) impending purchase of investorweb (assuming no further issues over the coming months)... I would prefer a slightly weaker $A in the short term and then a re-appreciation... so that currency appreciation effectively pays our Y1 interest costs. Clever, non?

Fed Open Market Operations

Apart from the obvious geyser of liquidity implied by the rate cut, the Fed also did a $10 billion repurchase... but none of it was in the Treasury-backed stuff that helps goose the markets.

Headline Indices

The Dow Jones Industrial Average lost 128.11 points (1.06%) to 11971.19 points but if you look at the day's low (set after just ten minutes - as nuffnuffs did their lemming trick (something no lemming ever did without being forced...) you will see that the recovery was remarkable. The index high for the day was 12092.72 (at the open), while the low was FOUR HUNDRED AND FIFTY FIVE POINTS LOWER, at 11634.82.

The S&P500 Index lost 14.69 points (1.11%) to 1310.50 points. The index high for the day was 1321.91, while the low was 1274.29.

The Nasdaq Composite lost 47.75 points (2.04%) to 2292.27 points, while the Nasdaq100 lost 48.48 points (2.63%) to 1795.61 points. At one stage the Nasdaq Comp was down 112-odd points, and officially entered bear market territory (not really - a bear market requires two consecutive closes 20% below the recent swing high).

NYSE Volume of 4.9 billion shares was split pretty evenly between winners and losers - 2.48billion in losers just losing out to the 2.58billion traded in gainers. 54% of NYSE stocks lost ground (1863 issues) versus 1500 stocks that gained, for a one-day advance-decline statistic of -363. That's not that bad. However as far as new lows and hew highs are concerned, it was an absolute towelling; just 32 NYSE stocks made new 52 week highs, while 1091 plumbed new one-year depths.

On the Nasdaq, total volume was 2.7 billion units, but the split was nowhere near even. Advancing stocks traded 713 million units, while down volume totalled 2.041 billion. Nasdaq advancers numbered 1126, as compared with 1949 decliners. 35 stocks made new highs, and 970 made new lows.

The CBOE Volatility Index rose 3.65 points (13.43%) to 30.83 points; it got up to 37 in the opening minutes. The CBOE Nasdaq100 Volatility Index jumped 4.55 points (15.05%) to 34.78 points.

Major Advancers in the Dow were

  • HOME DEPOT INC (HD) rose 1.92 (7.31) to 28.2 on volume of 33.4 million units
  • WAL MART STORES (WMT) rose 1.83 (3.85) to 49.41 on volume of 33.7 million units
  • JP MORGAN CHASE C (JPM) rose 1.31 (3.31) to 40.9 on volume of 41.5 million units
  • CATERPILLAR INC (CAT) rose 1.34 (2.13) to 64.15 on volume of 7.8 million units
  • AMER INTL GROUP I (AIG) rose 0.43 (0.83) to 52.48 on volume of 20.8 million units

Major Decliners in the Dow were

  • MERCK CO INC (MRK) fell -2.17 (-4.07%) to 51.15 on volume of 25.1 million units
  • COCA COLA CO THE (KO) fell -1.94 (-3.19%) to 58.8 on volume of 15.8 million units
  • VERIZON COMMUN (VZ) fell -1.15 (-2.94%) to 37.94 on volume of 20.7 million units
  • PROCTER GAMBLE (PG) fell -1.93 (-2.87%) to 65.22 on volume of 22 million units
  • MICROSOFT CP (MSFT) fell -0.91 (-2.76%) to 32.1 on volume of 94.8 million units

Most Traded Dow stocks were

  • CITIGROUP INC (C) rose -0.07 (-0.29) to 24.38 on volume of 196.5 million units
  • INTEL CP (INTC) rose -0.31 (-1.63) to 18.69 on volume of 133.8 million units
  • MICROSOFT CP (MSFT) rose -0.91 (-2.76) to 32.1 on volume of 94.8 million units
  • GEN ELECTRIC CO (GE) rose -0.09 (-0.26) to 34.22 on volume of 63.8 million units
  • PFIZER INC (PFE) rose -0.27 (-1.2) to 22.23 on volume of 56.4 million units

Major Market Statistics
Index Close Gain(Loss) %
Dow Jones Industrial Average 11971.19 -128.11 -1.06%
S&P500 Index 1310.50 -14.69 -1.11%
Nasdaq Composite 2292.27 -47.75 -2.04%
Nasdaq100 1795.61 -48.48 -2.63%
CBOE Volatiity Index 30.83 +3.65 13.43%
CBOE Nasdaq100 Volatilty Index 34.78 +4.55 15.05%
NYSE Total Volume 4.9bn - -
Nasdaq Total Volume 2.7bn - -


The nine-stock group that makes up the Rant bellwethers declined on average by 0.2%. The fallout occurred as follows:

  • General Electric (GE) down $0.09 (0.26%) to $34.22 on volume of 63.81 million units.
  • Citigroup (C) down $0.07 (0.29%) to $24.38 on volume of 196.49 million units.
  • Wal-Mart (WMT) up $+1.83 (3.85%) to $49.41 on volume of 33.69 million units.
  • IBM (IBM) down $1.58 (1.53%) to $101.82 on volume of 11.52 million units.
  • Intel (INTC) down $0.31 (1.63%) to $18.69 on volume of 133.82 million units.
  • Cisco Systems (CSCO) down $0.82 (3.37%) to $23.48 on volume of 99.1 million units.
  • Google (GOOG) down $16.54 (2.76%) to $583.71 on volume of 8.78 million units.
  • Fannie Mae (FNM) up $+0.02 (0.06%) to $32.17 on volume of 19.49 million units.
  • Freddie Mac (FRE) up $+1.04 (3.76%) to $28.70 on volume of 17.82 million units.

Other Indices of Interest...

The Banks Index added 2.79 (3.47%) to 80.38 points. Index volume totalled 607.5 million shares. Of the 24 index components, 21 advanced, with volume in advancers totalling 397.9 million units. Of the remaining 3 stocks in the index, every other stock fell, with total volume traded of 209.6 million shares.

Major movers in the same direction as the index:

  • Keycorp (KEY), up 2.83 (13.41%) to $23.93 on volume of 9.8 million shares
  • Washington Mutual (WM), up 1.22 (9%) to $14.77 on volume of 49 million shares
  • Natl City Cp (NCC), up 1.01 (7.05%) to $15.34 on volume of 12.7 million shares
  • Wells Fargo & Co (WFC), up 1.55 (6.08%) to $27.03 on volume of 45.6 million shares

The Semiconductor Index lost 7.7 (2.2%) to 350.65 points. Index volume totalled 342.9 million shares. Of the 18 index components, every stock fell, with total volume traded of 342.9 million shares.

Major movers in the same direction as the index:

  • Taiwan Semicond A (TSM), down 0.545 (6.31%) to $8.095 on volume of 15.9 million shares
  • Marvell Tech Grou (MRVL), down 0.55 (5.12%) to $10.19 on volume of 17.5 million shares
  • Novellus Systems (NVLS), down 1.13 (4.52%) to $23.89 on volume of 5.2 million shares
  • Broadcom Corp Cl (BRCM), down 1 (4.26%) to $22.50 on volume of 15.4 million shares

The ChildKiller ("Defence") Index lost 2.95 (0.83%) to 356.26 points. Index volume totalled 102.9 million shares. Of the 17 index components, 3 advanced, with volume in advancers totalling 3.8 million units. Of the remaining 14 stocks in the index, every other stock fell, with total volume traded of 99.1 million shares.

Major movers in the same direction as the index:

  • Rockwell Collins (COL), down 2.66 (4.35%) to $58.52 on volume of 2.4 million shares
  • Flir Systems  (FLIR), down 0.89 (2.84%) to $30.45 on volume of 2.3 million shares
  • Teledyne (TDY), down 1.07 (2.06%) to $50.96 on volume of 280.3 thousand shares
  • Gen Dynamics Cp (GD), down 1.5 (1.86%) to $79.30 on volume of 2.9 million shares

The Gold Bugs Index added 2.87 (1.59%) to 180.17 points. Index volume totalled 115.9 million shares. Of the 16 index components, 9 advanced, with volume in advancers totalling 80.9 million units. Of the remaining 7 stocks in the index, every other stock fell, with total volume traded of 34.9 million shares.

Major movers in the same direction as the index:

  • Agnico Eagle Mine (AEM), up 3.34 (6.07%) to $58.32 on volume of 3.8 million shares
  • Kinross Gold Cp (KGC), up 1.12 (5.49%) to $21.52 on volume of 8.6 million shares
  • Barrick Gold Cp (ABX), up 2.43 (5.2%) to $49.16 on volume of 19 million shares
  • Randgold Res Ltd (GOLD), up 2.14 (5.09%) to $44.18 on volume of 1.1 million shares

The Oil Services Index lost 6.91 (2.72%) to 254.37 points. Index volume totalled 101.6 million shares. Of the 15 index components, all had a down day, with total volume traded of 101.6 million shares.

Major movers in the same direction as the index:

  • Global Inds Ltd (GLBL), down 0.72 (3.89%) to $17.79 on volume of 1.7 million shares
  • Cameron Intl Cp (CAM), down 1.72 (3.77%) to $43.86 on volume of 3.9 million shares
  • Weatherford Intl (WFT), down 2.07 (3.5%) to $57.13 on volume of 7.6 million shares
  • Oceaneering Intl (OII), down 1.95 (3.08%) to $61.26 on volume of 786.5 thousand shares