Goldman Sachs might be following Bear Sterns in subprime issues qualms investors
After an entire day of wild volatile trading, US stocks ran out of gas in the final couple of hours of trading and all three indices ended in the red today, Monday, 25 June, 2007. Dow, which was up as much as 129 points in the morning session, slipped once subprime worries continued to haunt the market.
The absence of its leadership, coupled with potential spillover effects weighed heavily on overall sentiment. Eight of the ten sectors closed lower for the day.
Twenty one out of 30 Dow stocks retreated into the red at the day’s close. The Dow Jones Industrials lost 8.21 points to close at 13352.05. Tech heavy Nasdaq shed 11.88 points to close at 2577.08. S&P 500 closed lower by 4.82 points at 1497.74.
Mc-Donalds, Altria, GM and IBM were the main Dow winners. Du-Pont, Alcoa, Citigroup and JP Morgan Chase were the major Dow laggards today.
A renewed wave of selling interest within the last half an hour before closing bell rang, left the major averages trading in split fashion. With the near collapse of two Bear Stearns hedge funds, reports that that Goldman Sachs could follow Bear Sterns on the subprime issue took enough of a toll on the Financial sector to push it into the red.
There were also multiple reports that suggested that investment bank Bear Stearns was having more problems than disclosed with some of its hedge funds. Bear Stearns was down 3.2% on the day to $139.10; the percentage loss was the fourth-worst performance of any S&P 500 stock today.
Existing home sales for May flat
When market opened in the morning, stocks opened slightly higher. Health Care, Telecom, and Utilities sector were the only areas attracting buyers.
Around 10 E.T, the day’s only economic report hit the wires. Existing home sales, which account for about 85% of the U.S. housing market for May were essentially flat, checking in at 5.99 mln (consensus 6.00 mln) but that was the lowest reading since June 2003. Anyway, the news did not have much of an impact though.
A renewed wave of buying interest in the pre lunch hours pushed the indices to fresh session highs. The influential Financial sector spiked higher and that was the biggest reason behind the market's improved stance. The Industrials sector wasn't too far behind as falling oil prices made transportation stocks more attractive.
The indices kicked off the afternoon session with a renewed sense of confidence that stocks remain oversold at current levels. But within an hour or so, selling became the name of the game. Today's reversal was first seen in Financials led by a spike lower among Investment Banks following several headlines pertaining to the near collapse of two Bear Stearns hedge funds.
Bond yields finished near session lows for a second straight session. However, the yield on the 10-year note (+11/32) merely pulled back to 5.08% but this did little to comfort investors.
GM and Mc Donalds come to Dow’s rescue
GM shares today rose 2.3% after the U.S. automaker was upgraded to buy from neutral at Goldman Sachs.
Crude oil futures were relatively steady today after strike of oil workers in Nigeria ended, easing concern supplies from Africa's biggest producer would be further disrupted. But prices stayed steady and did not slip much as traders continued to be concerned about fresh problems at Venezuela.
Crude-oil futures for light sweet crude for August delivery closed at $69.18/barrel (higher by $0.04/barrel or 0.06%) on the New York Mercantile Exchange. The price fell as low as $67.55 a barrel earlier in the session.
On the broad market for equities, trading volumes showed 1.7 billion shares exchanging hands on the New York Stock Exchange, while 2.1 billion traded on the Nasdaq stock market. Rising issues topped decliners by 11 to 5 on the NYSE and by 19 to 10 on Nasdaq.
Tomorrow’s new Home Sales report, which are recorded when a contract is signed, should garner some attention given today’s report. The only other economic report will be Consumer Confidence, which also hits the wires at 10:00 ET. After the close, Nike and Oracle will be out with their quarterly earnings reports.