From Goldman: “…the FOMC gave much stronger evidence in this set of minutes that it was more concerned about unacceptably weak growth than about unacceptably high inflation.”
From Bloomberg: “Crude oil reached a record $100 a barrel and gold soared to the highest ever, leading a commodity surge as the dollar's slump against major currencies enhanced the appeal of raw materials as hedges against inflation. Spot gold climbed to $860.10 an ounce, and wheat and soybeans jumped more than 3 percent.”
From Dow Jones: “President George W. Bush is to receive an update Friday from his Working Group on Financial Markets. White House spokeswoman Dana Perino wouldn’t go into specifics of the session, saying only that it will be a broad update on the economy. The working group is chaired by Treasury Secretary Henry Paulson and includes Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox, and acting Commodity Futures Trading Commission head Walter Lukken…Facing fears that the economy could slip into recession this year, the White House is pushing lawmakers to take steps to shield the housing sector from further erosion. White House aide Ed Gillespie told reporters Tuesday on Air Force One that the administration wants Congress to “help make the market more stable.”” [Editor’s note – This group is sometimes referred to as “The Plunge Protection Team”.]
From Lehman: “Equity markets weakened over the holiday period. The S&P 500 index declined 1.1% between December 21st and 31st, and ended the year up 3.5%.” [Editor note – if dividends are included, the S&P 500 total return was 5.5% for 2007.]
From Merrill Lynch: “…the Russell 2000 posted its first loss since 2002 at -1.57%. Financial Services was the killer for the year, as the sector declined 15.66%…Energy was one of the leaders for the year at 16.15%.” [Editor note - Russell 2000 is one of the broadest equity market indicators, including all major large and small cap stocks. On price basis only, the return performance was -2.75% for 2007.]
From Merrill Lynch: “All else equal, today's construction spending numbers take our 4Q GDP to +1.7% from +1.3% QoQ annualized. We continue to track a material slowing in GDP in 1Q 2008, to 0.3%, driven by a pullback in consumer spending.”
From Goldman Sachs: “ISM index drops well below 50 in first sign of nationwide setback in industrial activity. Moves of this magnitude are usually not flukes (a drop of 3.1 points).”
From Morgan Stanley: “Latest swing in ISM series is consistent with recession.”
From Lehman: “While the [ISM manufacturing] reading does suggest a slower pace of growth in the economy, consistent with sub-2% GDP growth, it does not indicate negative growth/recession. The breakeven level of the ISM for recession in the overall economy is 41.9, well below the current level [47.7]… Also of some interest is the sharp decline in export orders”
From Merrill Lynch: “What is truly underappreciated is the extent to which the weak dollar has supercharged domestic export competitiveness, and because of the long lags, these benefits, especially for basic manufacturing, are going to linger for at least another three years…US manufacturing unit labor costs are now 30% lower than the average in the rest of the industrialized world…at no time in the last three decades has US manufacturing competitiveness relative to the rest of the world been as solidly positioned as it is today. And, to show you how important a role the currency plays, over 90% of the relative decline in our unit labor costs since 2002 has been due to the lower dollar.”
From Dow Jones: “Debt issuance worldwide fell for the first time last year since 2000 as worries over the state of the global credit market in the second half weighed heavily on sentiment, data provider Thomson Financial said. New debt issues declined 7% to US$6.6 trillion, with issuance falling 47% to US$2.3 trillion in the second half from the record-breaking US$4.3 trillion of new issues seen in the first half, Thomson said.
Issuance eased in the second half as the high spreads caused by the U.S. subprime mortgage crisis discouraged investors and lenders alike. High-yield corporate bond issuance fell 10.3% to US$165.6 billion for the whole of last year despite showing the biggest semiannual total on record during the first half, while high-grade corporate bond issuance decreased 3% to US$2.56 trillion, Thomson said.”
From Lehman: “The TAF auctions show a surprising amount of demand from smaller banks.”
From JP Morgan: “… release of the Fed's weekly consolidated balance sheet, the first since the settlement of the first Term Auction Facility (TAF), confirmed that most of the liquidity provided through the TAF was offset by a reduction in liquidity supplied through other, more conventional channels. The total amount of reserves supplied by the Fed increased by just $2.59 billion in the week ending yesterday, even though reserves supplied through the TAF increased by $20 billion. The difference is accounted for by the fact that reserves supplied through Fed holdings of securities, both outright holdings and those held under repo, decreased dramatically. Any asset purchased or borrowed by the Fed creates reserves -- liquidity -- and, as such, the TAF did not materially alter the amount of reserves in the financial system, but rather changed the composition of the Fed's assets as well as the composition of assets held by the Fed's counterparties. Its hard to say what to make of the geographical breakdown of the TAF awards, but for completeness, banks in the NY district were awarded the lion's share, ($16.49 billion), followed by Dallas ($1.4 billion), St Louis ($1 billion), San Fran. ($610 million) Chicago ($475 million) and Richmond ($25 million). Also of note, discount window borrowing remained elevated last week: average borrowing for the week ending yesterday inched up $216 million to $4.802 billion.”
From Morgan Stanley: “Buffett starting a new monoline focused on munis per WSJ. I view this as negative for the existing monolines. Amount of business in muni world is finite and BRK has a meaningful advantage vs peers - a rock-solid AAA.”
From Dow Jones: “Retailers’ credit default swaps, a gauge of investor confidence, widened by 5 to 10 basis points on concern that economic weakness is affecting consumer spending…”
From Bank of Montreal: “The Florida Association of Realtors and the California Association of Realtors released some local data on home prices and sales for November and the data were not positive. In Florida, median home prices were down a steep 10% y/y in November (or 5% YTD), with the deepest cuts coming from Punta Gorda (-18% y/y), Fort Pierce (-17% y/y), and Tampa (-15% y/y), while Miami has been the hardest hit in terms of sales at -59% y/y. In California, single-family home prices fell 11.9% y/y in November, while condo prices have only dropped 5.2% y/y. Sales in the state are down over 30% from a year-ago, while sales in Ventura and the northern portion of Santa Barbara have plunged over 50% y/y.”
From CITI: “The threat of downgrades continues to hang over the monoline insurers who collectively insure about $3.3tr dollars of debt.”
From Chart of the Day: “The stock market has had a tendency of being somewhat choppy during the first five months of an election year, but prospects tended to improve (on average) as the November election approached.” [Editor’s note - Stock prices tend to rally in election years]
The Street.com: “Analysts expect the banking sector to post a 43% year-over-year drop in fourth-quarter net income, according to Thomson Financial. Regional banks are expected to post a 50% drop in net income, Thomson says. The growth rates compare estimated net income, which excludes one-time items, in the fourth quarter to actual net income (excluding one-time items) in the fourth quarter of 2006.”
From The Financial Times: “Middle Eastern and east Asian sovereign wealth funds have made a succession of investments in four US banks…Most commentators have been inclined to welcome this global bail-out: better to bring in foreign capital than to shrink balance sheets by reducing lending. Yet we need to recognize that these “capital injections” represent a transfer of revenues from the US financial services industry into the hand of foreign governments…In other words..the balance of financial power is shifting…It remains to be seen how quickly today’s financial shift will be followed by a …geopolitical shift in favour of the new export and energy empires of the east. Suffice to say that the historical analogy does not bode well for America’s quasi-imperial network of bases and allies across the Middle East and Asia. Debtor empires sooner or later have to do more than just sell shares to satisfy their creditors.”
End-of-Day Market Update
From Dow Jones: “Treasurys prices took flight again Wednesday…The dollar fell to a five-week low against the yen…After months of anticipation, oil futures reached $100 a barrel Wednesday…The new year started with a jolt for investors as the prospect of $100 oil, inflation and a manufacturing slowdown helped kick off 2008 with a stock-market plunge.”
From Lehman: “It’s been a one way ticket in rates today, with convexity receiving kicking in and bringing spreads in off their wides,a nd sending us home at the lows in rates.”
Three month T-Bill yield fell 7.25 bp to 3.25%. (6m range 2.86% to 5.01%)
Two year T-Note yield fell 17 bp to 2.88% (Only 3bp higher than 2.85% 3yr low)
Ten year T-Note yield fell 11.5 bp to 3.91% (3y low is 3.84%)
Dow fell 221 to 13,044 (-1.7%)
S&P 500 fell 21 to 1447 (-1.4%)
Dollar index fell .68 to 75.97
Yen at 109.6 yen per dollar
Euro at 1.473 dollars per euro
Gold rose $23 to $857 – A new record high of $860 traded today!
Oil rose $3.40 to $99.37 – A new record high of $100 traded today!
*All prices as of 4:25pm
From Bloomberg: “Crude oil reached a record $100 a barrel and gold soared to the highest ever, leading a commodity surge as the dollar's slump against major currencies enhanced the appeal of raw materials as hedges against inflation. Spot gold climbed to $860.10 an ounce, and wheat and soybeans jumped more than 3 percent.”
From Dow Jones: “President George W. Bush is to receive an update Friday from his Working Group on Financial Markets. White House spokeswoman Dana Perino wouldn’t go into specifics of the session, saying only that it will be a broad update on the economy. The working group is chaired by Treasury Secretary Henry Paulson and includes Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox, and acting Commodity Futures Trading Commission head Walter Lukken…Facing fears that the economy could slip into recession this year, the White House is pushing lawmakers to take steps to shield the housing sector from further erosion. White House aide Ed Gillespie told reporters Tuesday on Air Force One that the administration wants Congress to “help make the market more stable.”” [Editor’s note – This group is sometimes referred to as “The Plunge Protection Team”.]
From Lehman: “Equity markets weakened over the holiday period. The S&P 500 index declined 1.1% between December 21st and 31st, and ended the year up 3.5%.” [Editor note – if dividends are included, the S&P 500 total return was 5.5% for 2007.]
From Merrill Lynch: “…the Russell 2000 posted its first loss since 2002 at -1.57%. Financial Services was the killer for the year, as the sector declined 15.66%…Energy was one of the leaders for the year at 16.15%.” [Editor note - Russell 2000 is one of the broadest equity market indicators, including all major large and small cap stocks. On price basis only, the return performance was -2.75% for 2007.]
From Merrill Lynch: “All else equal, today's construction spending numbers take our 4Q GDP to +1.7% from +1.3% QoQ annualized. We continue to track a material slowing in GDP in 1Q 2008, to 0.3%, driven by a pullback in consumer spending.”
From Goldman Sachs: “ISM index drops well below 50 in first sign of nationwide setback in industrial activity. Moves of this magnitude are usually not flukes (a drop of 3.1 points).”
From Morgan Stanley: “Latest swing in ISM series is consistent with recession.”
From Lehman: “While the [ISM manufacturing] reading does suggest a slower pace of growth in the economy, consistent with sub-2% GDP growth, it does not indicate negative growth/recession. The breakeven level of the ISM for recession in the overall economy is 41.9, well below the current level [47.7]… Also of some interest is the sharp decline in export orders”
From Merrill Lynch: “What is truly underappreciated is the extent to which the weak dollar has supercharged domestic export competitiveness, and because of the long lags, these benefits, especially for basic manufacturing, are going to linger for at least another three years…US manufacturing unit labor costs are now 30% lower than the average in the rest of the industrialized world…at no time in the last three decades has US manufacturing competitiveness relative to the rest of the world been as solidly positioned as it is today. And, to show you how important a role the currency plays, over 90% of the relative decline in our unit labor costs since 2002 has been due to the lower dollar.”
From Dow Jones: “Debt issuance worldwide fell for the first time last year since 2000 as worries over the state of the global credit market in the second half weighed heavily on sentiment, data provider Thomson Financial said. New debt issues declined 7% to US$6.6 trillion, with issuance falling 47% to US$2.3 trillion in the second half from the record-breaking US$4.3 trillion of new issues seen in the first half, Thomson said.
Issuance eased in the second half as the high spreads caused by the U.S. subprime mortgage crisis discouraged investors and lenders alike. High-yield corporate bond issuance fell 10.3% to US$165.6 billion for the whole of last year despite showing the biggest semiannual total on record during the first half, while high-grade corporate bond issuance decreased 3% to US$2.56 trillion, Thomson said.”
From Lehman: “The TAF auctions show a surprising amount of demand from smaller banks.”
From JP Morgan: “… release of the Fed's weekly consolidated balance sheet, the first since the settlement of the first Term Auction Facility (TAF), confirmed that most of the liquidity provided through the TAF was offset by a reduction in liquidity supplied through other, more conventional channels. The total amount of reserves supplied by the Fed increased by just $2.59 billion in the week ending yesterday, even though reserves supplied through the TAF increased by $20 billion. The difference is accounted for by the fact that reserves supplied through Fed holdings of securities, both outright holdings and those held under repo, decreased dramatically. Any asset purchased or borrowed by the Fed creates reserves -- liquidity -- and, as such, the TAF did not materially alter the amount of reserves in the financial system, but rather changed the composition of the Fed's assets as well as the composition of assets held by the Fed's counterparties. Its hard to say what to make of the geographical breakdown of the TAF awards, but for completeness, banks in the NY district were awarded the lion's share, ($16.49 billion), followed by Dallas ($1.4 billion), St Louis ($1 billion), San Fran. ($610 million) Chicago ($475 million) and Richmond ($25 million). Also of note, discount window borrowing remained elevated last week: average borrowing for the week ending yesterday inched up $216 million to $4.802 billion.”
From Morgan Stanley: “Buffett starting a new monoline focused on munis per WSJ. I view this as negative for the existing monolines. Amount of business in muni world is finite and BRK has a meaningful advantage vs peers - a rock-solid AAA.”
From Dow Jones: “Retailers’ credit default swaps, a gauge of investor confidence, widened by 5 to 10 basis points on concern that economic weakness is affecting consumer spending…”
From Bank of Montreal: “The Florida Association of Realtors and the California Association of Realtors released some local data on home prices and sales for November and the data were not positive. In Florida, median home prices were down a steep 10% y/y in November (or 5% YTD), with the deepest cuts coming from Punta Gorda (-18% y/y), Fort Pierce (-17% y/y), and Tampa (-15% y/y), while Miami has been the hardest hit in terms of sales at -59% y/y. In California, single-family home prices fell 11.9% y/y in November, while condo prices have only dropped 5.2% y/y. Sales in the state are down over 30% from a year-ago, while sales in Ventura and the northern portion of Santa Barbara have plunged over 50% y/y.”
From CITI: “The threat of downgrades continues to hang over the monoline insurers who collectively insure about $3.3tr dollars of debt.”
From Chart of the Day: “The stock market has had a tendency of being somewhat choppy during the first five months of an election year, but prospects tended to improve (on average) as the November election approached.” [Editor’s note - Stock prices tend to rally in election years]
The Street.com: “Analysts expect the banking sector to post a 43% year-over-year drop in fourth-quarter net income, according to Thomson Financial. Regional banks are expected to post a 50% drop in net income, Thomson says. The growth rates compare estimated net income, which excludes one-time items, in the fourth quarter to actual net income (excluding one-time items) in the fourth quarter of 2006.”
From The Financial Times: “Middle Eastern and east Asian sovereign wealth funds have made a succession of investments in four US banks…Most commentators have been inclined to welcome this global bail-out: better to bring in foreign capital than to shrink balance sheets by reducing lending. Yet we need to recognize that these “capital injections” represent a transfer of revenues from the US financial services industry into the hand of foreign governments…In other words..the balance of financial power is shifting…It remains to be seen how quickly today’s financial shift will be followed by a …geopolitical shift in favour of the new export and energy empires of the east. Suffice to say that the historical analogy does not bode well for America’s quasi-imperial network of bases and allies across the Middle East and Asia. Debtor empires sooner or later have to do more than just sell shares to satisfy their creditors.”
End-of-Day Market Update
From Dow Jones: “Treasurys prices took flight again Wednesday…The dollar fell to a five-week low against the yen…After months of anticipation, oil futures reached $100 a barrel Wednesday…The new year started with a jolt for investors as the prospect of $100 oil, inflation and a manufacturing slowdown helped kick off 2008 with a stock-market plunge.”
From Lehman: “It’s been a one way ticket in rates today, with convexity receiving kicking in and bringing spreads in off their wides,a nd sending us home at the lows in rates.”
Three month T-Bill yield fell 7.25 bp to 3.25%. (6m range 2.86% to 5.01%)
Two year T-Note yield fell 17 bp to 2.88% (Only 3bp higher than 2.85% 3yr low)
Ten year T-Note yield fell 11.5 bp to 3.91% (3y low is 3.84%)
Dow fell 221 to 13,044 (-1.7%)
S&P 500 fell 21 to 1447 (-1.4%)
Dollar index fell .68 to 75.97
Yen at 109.6 yen per dollar
Euro at 1.473 dollars per euro
Gold rose $23 to $857 – A new record high of $860 traded today!
Oil rose $3.40 to $99.37 – A new record high of $100 traded today!
*All prices as of 4:25pm
No comments:
Post a Comment