Financial worries further cripple US Market
US Market made a strong start to the day on Monday, 14 July, 2008 but
made a sudden turnaround soon after that. Finally it ended the day with
losses. Traders tried to digest the news regarding the third largest
bank failure in U.S. history and that the government had a plan to prop
up government sponsored enterprises Fannie Mae and Freddie Mac. Eight
out of the ten sectors ended in the red today. Energy and consumer
staples were the only winners while financials were the largest
laggard.
After being up by almost 110 points earlier during
the day, The Dow Jones industrial Average ended the day with a loss of
45 points at 11,055. The Nasdaq Composite Index, finished lower by
26.21 points at 2,212.87. S&P 500 finished lower by 11.17 points at
1,228.3.
In the morning, Treasury Secretary Paulson announced
a plan to temporarily increase the line of credit that Fannie and
Freddie have with the Treasury, give temporary authority for the
Treasury to purchase equity in the companies and give the Federal
Reserve more oversight on the companies. Fannie opened 32% higher and
Freddie opened with a gain of 26%, leading the market sharply higher.
But the market soon slipped into red following the result of Freddie's $3 billion sale in short-term notes.
The regional banks group came under selling pressure today on fears
that some banks will meet the same fate as IndyMac Bancorp. Over the
weekend, a run on IndyMac spurred its collapse and takeover by the
FDIC.
In the merger and acquisition arena, Anheuser-Busch
finally agreed to be bought by InBev, after the Belgian company
increased its offer to $70 per share, or $52 billion, from $65 per
share. Also, Waste Management offered to acquire Republic Services for
$34 per share in cash, or roughly $6.2 billion, a 22% premium over
RSG's closing price.
In the technology sector, Yahoo! was one
of the worst-performing Nasdaq names. Over the weekend, Yahoo rejected
a joint proposal from Microsoft and Carl Icahn that called for a
restructuring of Yahoo, which would include Microsoft taking over
Yahoo's search business.
Crude oil was little changed today
amid concern that supplies from Brazil may be disrupted and as the
dollar strengthened against the euro, reducing the appeal of
commodities as a currency hedge for investors. Prices witnessed
considerable volatility throughout the day. Crude-oil futures for light
sweet crude for August delivery today closed at $145.18/barrel (higher
by $0.10/barrel or 0.01%) on the New York Mercantile Exchange. It fell
$2.59 to an intraday low of $142.49 in overnight electronic trading,
but also rose to an intraday high of $146.37.
At the currency
markets on Monday, the dollar pared most of its gains as the
government's weekend rescue of Fannie and Freddie highlighted fears
about the U.S. financial sector. The dollar index which tracks the
performance of the greenback against a basket of other major
currencies, edged up 0.1% to 71.96.
For tomorrow, Johnson &
Johnson lists among a few of the companies confirmed to report before
tomorrow's opening bell. The Empire State Manufacturing Survey for July
and the June Producer Price Index are due before tomorrow's session
opens for trading followed by a tally of retail sales for June.
Business inventories for May are also due later in the morning. But
most important of all will be Fed Chairman Bernanke?s scheduled
semiannual monetary policy testimony before the Senate Banking
Committee tomorrow.
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