US Market turns around to close mixed

Dow recovers from a 340 point drop to close marginally lower

US Market witnessed an amazing turnaround today, Thursday, 16 August, 2007 in the final fifteen minutes of trading. The Dow Jones Industrial Average recovered from being down by more than 340 points and finished marginally lower for the day. In fact minutes before closing bell rang, Dow had inched up in the positive territory. The hardest hit sector for weeks, the financials, led the late day rally going into close.

Market finally closed mixed with S&P 500 being the only index gaining for the day. The Dow Jones Industrial Average closed down by 15.69 points at 12845.78. Tech-heavy Nasdaq shed 7.76 points to close at 2451.07. S&P 500 gained 4.56 points to close at 1411.26.

Seventeen of the thirty Dow stocks closed in the red today. JP Morgan, American Express and Citigroup were the main Dow winners today. General Motors and Intel were the notable Dow laggards. JP Morgan, Bank of America, Citigroup – all stocks gained more than 4%-5% for the day.

Sellers were in full control for major part of the day after Countrywide Financial said it was being forced to use its 100% lines of credit ($11.5 billion) to fund its operations because other sources of short-term credit were not available.

Weak housing starts and Building permits in July

When market opened in the morning, all the three indices opened in red. Since the day’s start, weak economic data and more distress signals from Countrywide Financial, spread overall nervousness about credit markets in Wall Street. Indices lingered in the red for most part of the day.

Fed stepped in for a second time this morning adding $12 bln in overnight repos making it a total of $17 billion for the day. But St. Louis Fed President made it clear that rate cut possibility is out of question and only a "calamity" would justify a rate cut.

Also, during the morning hours, the Commerce Department reported that housing starts (the number of privately owned new homes on which construction has been started over some period) fell 6.1% in July to a seasonally adjusted annual rate of 1.38 million. That was the lowest level since January 1997.

Also, Building permits (permit required in most jurisdictions for new construction, or adding onto pre-existing structures, and in some cases for major renovations), an indication of future construction, fell 2.8% last month to a seasonally adjusted annual rate of 1.37 million, the lowest level since October 1996.

Rediff.com slips by more than 7%

Among the Indian ADRs, the banking stocks continued to be hard hit even today. ICICI Bank fell by 3.6% while HDFC Bank fell by 2.6%. Other ADRs which were hard hit were VSNL and MTNL and were down by 6.2% and 4.5% respectively. Rediff.com suffered loss of 7.1%.

Trading volume remained very high at the New York Stock Exchange, where 2.9 billion shares traded, with declining stocks beating advancers by 20 to 13. At the Nasdaq, 3.4 billion shares traded, and decliners topped advancing issues 17 to 13.

H-P comes out with a blowout report

Crude oil futures finished considerably lower today after stock market continued to to affected from mortgage problems. Traders speculated that economic expansion might slowdown leading to reduced energy demand. Crude-oil futures for light sweet crude for September delivery closed at $71.00/barrel (lower by $2.33/barrel or 3.1%) on the New York Mercantile Exchange.

After the close, H-P came out with a blowout third quarter earnings report. The company reported a 29% gain in profit and a 16% gain in revenue for its fiscal third quarter. The company also upped its guidance for the next quarter. The stock which ended in red today, was trading marginally up in the after hours trading.

For tomorrow, the only economic report expected is the Consumer Sentiment Survey issued by the University of Michigan. The report polls households inquiring about their financial condition and attitude toward the economy and such sentiment can be related to expectations for consumer spending, which represents roughly two-thirds of the economy.