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DOW

Dow is now -26

 

Seems like its gonna be a tough road to bring it on the Green side tonight.

 

Skittish on Wall Street

Stocks set for lower open amid fresh worries about economic outlook, mortgage crisis and Merck warning.

NEW YORK (CNNMoney.com) -- Stocks were poised for a lower open Tuesday as Federal Reserve officials voiced new worries about the economy, drugmaker Merck warned about upcoming earnings and lawmakers turned their sights on credit card debt as a fresh area of worry.

At 6:26 a.m. ET, Nasdaq and S&P futures were lower, pointing to a weak open for Wall Street, which saw a four-day rally for blue chips end on Monday.

Boston Fed president Eric Rosengren and San Francisco Fed President Janet Yellen offered a bleak forecast for the housing sector and economy on Monday, renewing jitters on Wall Street. Rosengren said early in the day he was worried foreclosures would worsen, while Yellen warned late in the afternoon about weak economic growth in the fourth quarter.

Economic weakness is likely to lead the central bank to keep cutting interest rates - which is usually a positive for stocks. Last week's rally was fueled by hopes for more Fed rate cuts.

But as the outlook for the economy becomes more dismal, skittish investors could turn away from risky assets like stocks and pile into safe havens like Treasury bonds.

Drugmaker Merck, a component of the Dow Jones industrial average, said its 2007 earnings per share would be $3.08 to $3.14, and 2008 earnings would be $3.28 to $3.38. The high end of both of those ranges are just below the consensus forecast of analysts surveyed by Thomson First Call, which is for 2007 EPS of $3.15 and 2008 EPS of $3.39.

A Senate panel is set to hold a hearing Tuesday about practices in the credit card industry. The chairman of the panel, Sen. Carl Levin, D-Mich., has voiced support for legislation that would limit card issuers' ability to raise customers' interest rates if their credit scores declined. Officials of Discover (Charts), Bank of America (Charts, Fortune 500) and Capital One (Charts, Fortune 500) are due testify at Tuesday's hearing.

On the campaign trail Monday, Democratic presidential candidate Barack Obama also proposed restrictions on what he called "predatory" credit card companies, which he said deceive consumers into piling up massive debt they have little hope of repaying. He said soaring credit card debt could match the subprime mortgage market meltdown as a problem for the U.S. economy.

Fannie Mae (Charts) could be the next major financial firm to report big losses due to the mortgage meltdown. The company could face as much as $5 billion in writedowns, according to Fortune.

In other corporate news, online auction site eBay (Charts, Fortune 500) announced a partnership with Yahoo (Charts, Fortune 500) to help it return to Japan, a market it exited in 2002.

No. 1 cell phone maker Nokia (Charts) said Tuesday it expects the global market for mobile devices to grow 10 percent in 2008 to more than 1.2 billion. The company said its share will also increase and raised its target for its operating margin. But markets were disappointed in the forecasts and shares of Nokia slipped 3 percent in early trading in Helsinki.

In global trade, major markets in Asia finished the session mixed, with Japanese stocks ending lower. European stocks fell in midday trading.Oil prices, which just a week ago appeared poised to cross the $100 a barrel threshold for the first time, continued to slide ahead of Wednesday's meeting of OPEC oil ministers and the weekly report on U.S. fuel stockpiles, also due Wednesday. A barrel of light sweet crude fell 76 cents to $88.55

 

 

The August fall is quickly recovered because it reflected a lot of panic selling, as shown on the chart.

But the present weakness appears to be an orderly downtrend ie. the bear market is in progress...  

 

 

I think Ben will cut 0.5%...and dow will rally for the moment..with gold this round behaving opposite by going down..to 750..then come Jan to Mar more cockroaches will crawl out under the fridge to cause dow to tumble to 11800..then 9000..then...u guess..gold will run up to 900..hopefullyy..sell to strength is what i will do...and join the rally..and get off fast with the profit...it is best to buy stock now and wait,then sell and run..

 

Hope grows for a half-point cut

Recent comments by Fed Chairman Ben Bernanke and vice chair Donald Kohn indicate a rate cut is likely on Dec. 11. The only question is how big?

NEW YORK (CNNMoney.com) -- A quarter of a point cut or a half of a point cut? That is the big question for investors to grapple with between now and the Federal Reserve's next policy meeting on Dec. 11.

Wall Street has heard signals loud and clear that a cut is coming. First, Fed Vice Chairman Donald Kohn said on Wednesday that the central bank needed to be "nimble," and then on Thursday night Fed chair Ben Bernanke, speaking before a business group in Charlotte, N.C., indicated that the Fed will stay "alert" and "flexible."

"Bernanke gave the markets an early Christmas gift last night in Charlotte. If there were any doubts about a rate cut, they are now gone. He wrapped it up, stamped it and sent it in the mail," said John Norris, managing director of Oakworth Capital, a private bank based in Birmingham, Ala.

According to futures listed on the Chicago Board of Trade, investors are placing a 100 percent bet that the Fed will lower the key federal funds rate by at least a quarter of a percentage point to 4.25 percent. What's more, traders are factoring in a 34 percent probability of a half-point cut to 4 percent.

 

 

Suddenly good news keep coming out to push DOW further up. now DOw is over bought, due for some retracement, and become more overbought with 2 remarks from FED day after another. was expecting DOW to push till 13600+ but now it may hit that faster than i thought. abit too fast thou.

 

I would say..what we are seeing is one up and two step down...eventually further rate cut will not longer have any effect..becos of the weak dollars....do you know fed just bump into market 7b..

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1225

We got reason to believe all figure by fed are nothing but makeup for political reasons..

 

 

Quotes:

 

Dow surges 331 points

Stocks rally on hopes of more rate cuts by the Fed and help from the financials.

Stocks surged Wednesday, with the Dow industrials rallying 331 points, after comments from a Federal Reserve official sparked bets that the central bank will cut rates again at its next policy meeting.

A rebound for the embattled financial sector and plunging oil prices helped Wall Street advance for the second session in a row.

The Dow Jones industrial average (Charts) gained 331 points, its second-best single day advance of the year. The 30-stock index climbed by as much as 366 points during the session.

The broader S&P 500 index (Charts) rose about 2.9 percent and the tech-fueled Nasdaq (Charts) climbed 3.2 percent. The Russell 2000 (Charts) small-cap index gained 3.6 percent.

Stocks rallied Tuesday as well. The two-day advance boosted the Dow by 546.01 points, giving it its best two-day run on a point basis since October 2002.

Wednesday's big rally was sparked by comments from Donald Kohn, the Federal Reserve's No. 2 official. Kohn seemed to signal a change in recent Fed policy, saying that the recent market turmoil has reversed some of the improvements in market functioning seen at the time of the last Fed meeting at the end of October.

He said that the central bank needs to be "nimble" and that it can't risk a threat to the economy just to teach speculators a lesson.

Stock participants seemed to take this as an indication that the Federal Reserve plans to cut a key short-term interest rate at the Dec. 11 meeting, as investors have been hoping. Investors will be looking to see if Federal Reserve Chairman Ben Bernanke reaffirms this viewpoint when he speaks Thursday night.

Wall Street cheered the news, building on Tuesday's advance, as investors bet that it is more likely now that the central bank will cut interest rates by at least a quarter-point when it meets on Dec. 11. The fed funds rate, a key bank lending rate, stands at 4.5 percent.

But helping stocks higher was rabid bargain hunting by investors, just two days after the market fell into the technical definition of a correction. The major gauges ended Monday's session at least 10 percent off the recent highs, from October.

Stocks then bounced off those levels, led by some of the sectors hit the hardest in the recent selloff, including financials.

"We have gotten to pretty dramatic oversold levels, but that's just part of it," said Michael James, manager of equity trading at Wedbush Morgan.

"You have oil down over $6 in two days, gold down $20 in two days...the dollar rally has taken money out of those commodities and is helping U.S. equities," he said.

Thursday brings the revision to third-quarter GDP growth, and the October new home sales index. Dell (Charts, Fortune 500) earnings are due after the close of trade Thursday.

Market breadth was positive. On the New York Stock Exchange, winners beat losers six to one on volume of 1.76 billion shares. On the Nasdaq, advancers topped decliners by nearly four to one as 2.51 billion shares exchanged hands.

Among the biggest stock gainers were the embattled financials. Shares of Wall Street's biggest banks including Citigroup (Charts, Fortune 500), Goldman Sachs (Charts, Fortune 500), Merrill Lynch (Charts, Fortune 500) and Morgan Stanley (Charts, Fortune 500) were all sharply higher. The AMEX Securities Broker/Dealer index (Charts) gained nearly 6 percent.

Meanwhile, Wells Fargo (Charts, Fortune 500) said late Tuesday that it would take a $1.4 billion hit in the fourth quarter for loan losses related to home equity loans. However, shares of the bank jumped with the broader market Wednesday, perhaps on relief that the hit wasn't bigger.

Investors also sent Freddie Mac (Charts, Fortune 500) shares up over 14 percent, even after it cut its dividend in half and said it would sell $6 billion of stock to bolster its finances in anticipation of additional losses. The mortgage finance firm last week announced a $2 billion loss.

But gains were broad based, with all 30 Dow stocks rising, led by AIG (Charts, Fortune 500).

A steep decline in oil prices gave a boost to companies that directly depend on fuel, such as airlines, railroads and truckers. The Dow Jones Transportation (Charts) average gained 3.6 percent.

Oil prices fell sharply for the second straight day on a smaller-than-expected dip in crude oil and distillate supplies. Light, sweet crude for January delivery tumbled $3.80 to settle at $90.62 a barrel Wednesday on the New York Mercantile Exchange.

Treasury prices tumbled as investors pulled money out of bonds for a second straight session. Corresponding yields headed higher, lifting the yield on the 10-year note to 4.03 percent from 3.94 percent late Tuesday.

In currency trading, the dollar gained versus the euro and yen.

COMEX gold for February delivery tumbled $14 to settle at $807.20 an ounce, falling along with other dollar-traded commodities.

Investors appeared to be unfazed by a flurry of soft economic readings and more troubling news from the financial sector.

The Federal Reserve said that the economy grew at a slower pace in the late fall in its Beige Book survey of regional economic conditions. The slowdown was a result of consumers and businesses feeling the squeeze of the housing slump and the credit market crisis.

Existing new home sales fell to an all-time low in October, according to the latest reading from the National Association of Realtors. (Full story).

An earlier report showed a bigger-than-expected drop in durable goods orders in October.

 

Existing home sales fall to record low in Oct

Existing home sales fell 1.2 percent in October to a record low 4.97 million-unit pace, according to a report on Wednesday that showed the downturn in the U.S. housing market was deepening.

Home prices fell at a record pace and the inventory of homes for sales increased as the housing market felt the pinch of tighter lending standards.

The median existing home price fell 5.1 percent from a year ago to $207,800 and the total housing inventory rose 1.9 percent in October to 4.45 million existing homes for sale, a 10.8 month supply at the current sales pace.

The sales pace was the lowest since the realty trade group began tracking both single-family and condo sales jointly in 1999.

Economists polled by Reuters were expecting home resales to fall to a 5.00 million-unit pace from the 5.04 million-unit rate initially reported for September. The September sales pace was revised to a 5.03 million unit rate.

Lawrence Yun, the NAR chief economist, blamed the poor home selling market on a continuing credit crunch and failing subprime loans that were offered to borrowers despite their shaky credit.

"The subprime market has essentially disappeared," he said.

 

Now it looks more like a technical rebound from banks, which may have a sharp sell-off later today to register profit.

Let's keep our fingers cross.

Market rallies as banks extend rebound

Stocks rallied on Wednesday as financial shares extended their comeback for a second day, helped by remarks by a Federal Reserve official that raised hopes of an interest rate cut.

Financials were leading the Dow and S&P following Fed Vice Chairman Donald Kohn's comments. The group has struggled under tight credit conditions.

"Kohn had mentioned that he sees a high risk to economic growth, and given that he's claiming the Fed has to be pragmatic, that could mean rate cuts in December," said Stephen Carl, principal and head of U.S. equity trading at The Williams Capital Group LP. "That's fueling the market right now.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) was up 112.51 points, or 0.87 percent, at 13,070.95. The Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) was up 14.53 points, or 1.02 percent, at 1,442.76. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was up 36.21 points, or 1.40 percent, at 2,617.01.

Shares of Citigroup (C.N: Quote, Profile, Research), which helped kick off the rebound on Tuesday after getting a capital injection from Abu Dhabi, was the biggest contributor to the S&P's advance. Shares of insurer American International Group Inc (AIG.N: Quote, Profile, Research) was the biggest gainer on the Dow.

Citi shares rose 4.5 percent to $31.65 and AIG stock was up 5.2 percent to $57.37.

Kohn said he factored some tightening of credit from the financial turmoil into his policy decisions, but that recent turbulence may restrict credit more than previously thought.

Shares of Wells Fargo & Co (WFC.N: Quote, Profile, Research), which fell in after-hours trading on Tuesday after announcing it would take a $1.4 billion charge in the fourth quarter for mortgage losses, were up sharply.

Likewise, shares of Freddie Mac (FRE.N: Quote, Profile, Research), the second-biggest provider of money for U.S. home loans, bounced back from a decline after it cut its dividend by 50 percent and will sell preferred stock.

Freddie shares jumped more than 6 percent to $27.33. Wells Fargo stock was up 4.3 percent to $31.11.

Shares of online retailers were trading higher after data showed U.S. shoppers spent a record $733 million on "Cyber Monday," up 21 percent from the same day a year ago, according to market research firm comScore.

Shares of Amazon.com (AMZN.O: Quote, Profile, Research) were up 2 percent to $87.25. EBay (EBAY.O: Quote, Profile, Research) stock gained 3 percent to $33.48.

 

U.S. Oct existing home sales fell 1.2 pct , but the market still going strong. Looks like there is going to be a reversal after lunch break.

Positive    Negative

Market Indices   Current   Change   % Change   Date  DJ INDU AVERAGE   13,126.63  +168.19      +1.3% 28-11-2007  NAS/NMS COMPSITE  2,623.48  +42.68      +1.65% 28-11-2007  S&P/TSX COMP IDX  13,545.11  +175.99      +1.32% 28-11-2007

 

Bad news on the way. Let's see how market perceive the news.

Durable Goods Orders in U.S. Fall More Than Forecast

Orders for U.S. durable goods fell more than forecast in October, signaling companies are losing confidence the economic expansion will be sustained.

The decline bears out Federal Reserve Vice Chairman Donald Kohn's warning today that market ``turbulence'' may discourage businesses and consumers from spending. Less investment adds to risks that growth will falter and force the central bank to cut interest rates again, economists said.

``It's pretty weak,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who projected orders would drop 0.5 percent. ``We do expect growth to be weak for the next couple of quarters.''

The 0.4 percent drop in demand for cars, planes and other items made to last several years followed a revised 1.4 percent decrease in September, the Commerce Department said today in Washington. Bookings were down for a third straight month, the longest losing streak in more than three years. Excluding transportation, demand fell 0.7 percent.

The dollar pared gains after the report. Economists forecast orders would drop 0.1 percent, according to the median of 76 estimates in a Bloomberg News survey, after a previously reported 1.7 percent decline for September. Estimates ranged from a decrease of 3 percent to 2.8 percent gain.

Investment Proxy

Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, decreased 2.3 percent, the most since February, after a 1.2 percent increase in September that was larger than previously estimated. Shipments of those items, used in calculating gross domestic product, dropped 1.2 percent after rising 1.7 percent in September, which was also more than reported last month.

The economy probably grew at an annual rate of 4.9 percent in the third quarter, a percentage point more than first estimated and the most in four years, according to the median estimate of economists surveyed ahead of revised Commerce Department figures due tomorrow. The revision to September shipments of capital goods may push that forecast even higher.

Growth will probably slow to a 1.5 percent pace this quarter, according to the median estimate in a Bloomberg News survey taken earlier this month. Since then, economists at Bank of America Corp. and Merrill Lynch & Co. have been among those lowering the projected growth rate to less than 1 percent as consumer spending and business investment cool and the housing recession persists.

Bookings excluding defense equipment decreased 0.9 percent. Demand for defense equipment rose 16 percent.

Computer Demand

The drop in total orders was led by an 8.4 percent decline in demand for computers and electronic gear. Bookings for automobiles and commercial aircraft also fell.

Boeing Co., the world's second-largest maker of commercial planes, had orders for 56 aircraft in October, down from 132 a month earlier. Even so, demand this year has reached a record 1,047 planes, the company said on Nov. 21. It increased shipments last month to 42, from 34.

Sales abroad are helping some firms weather slowing U.S. demand.

Rockwell Automation Inc., the world's largest company focused solely on factory controls, said Nov. 12 that overseas sales will rise to the highest level ever this fiscal year. Demand outside the U.S. is expected to increase to 49 percent of the company's total for the year that began in October, from 46 percent last year, Chief Executive Officer Keith Nosbusch said in an interview.

Export Growth

``One of our strategies is to get 50 percent sales growth outside the U.S.,'' said Nosbusch, 56. ``It's important that we diversify our revenue base so that we reduce the cyclicality of our business.''

The Institute for Supply Management's factory report for October showed manufacturing is on the verge of stalling, with the index falling to 50.9. The group's new orders gauge decreased to 52.5 and production dropped to 49.6, contracting for the first time since January.

Regional reports provide a more optimistic look for this month. The Philadelphia Federal Reserve Bank's general economic index unexpectedly rose, to 8.2, and the New York Fed's measure was little changed from its October measure, which was the highest in three years.

 

still too early to tell, wait for confirmation after lunch time. anyway, today rise kind of showing dow not behaving as it did for the past few weeks. either reversal or bull trap to create interest for buyers to take ther bait.

 

Kohn Sees Risk of Reduced Credit From Market Upheaval

Federal Reserve Vice Chairman Donald Kohn said recent market ``turbulence'' may reduce credit to businesses and consumers, suggesting he's open to lowering interest rates next month.

``The degree of deterioration that has happened over the last couple of weeks is not something that I personally anticipated,'' Kohn said in response to a question following a speech to the Council on Foreign Relations in New York. ``We are going to have to take a look at'' the stress in credit markets ``when we meet in a couple of weeks,'' he said.

Kohn's remarks are a shift from the Federal Open Market Committee's Oct. 31 statement, reiterated by Chairman Ben S. Bernanke a week later, that risks between growth and inflation were ``roughly'' balanced. Stocks advanced after the comments reinforced some investors' expectations the Fed will cut its benchmark rate for a third straight meeting.

Kohn ``has just given the markets the green light for a rate cut on Dec. 11,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. ``Restrictive credit costs will very likely lead to a dramatic slowing of the economy if the Fed doesn't take steps to forestall them.''

Federal funds futures show traders see a 94 percent probability of a quarter-point reduction in the benchmark interest rate to 4.25 percent when the FOMC meets Dec. 11. The Standard & Poor's 500 stock index rose 1.4 percent to 1,448.79 at 9:58 a.m.

`Pragmatic and Flexible'

Kohn said ``uncertainties'' about the economic outlook are ``unusually high'' now, requiring policy makers to be ``flexible and pragmatic'' in setting policy.

His remarks were also a difference in tone from some regional Fed bank presidents, who have expressed concern that continued rate reductions may fuel inflation expectations.

Philadelphia Fed President Charles Plosser said in a speech in Rochester, New York, yesterday that further rate cuts could ``exacerbate'' moral hazard problems and raise inflation risks. Chicago Fed President Charles Evans said monetary policy was properly calibrated to achieve both full employment and low inflation in separate remarks yesterday.

``Kohn's speech dismissed the moral hazard argument, made no real mention of inflation, and dwelled extensively on growth risks,'' said Michael Feroli, a former Fed Board staff member who is now an economist at JPMorgan Chase & Co. in New York. ``Kohn's speech today suggests the crucial center of the committee is moving toward a 25 basis point ease.''

Gauge of Risk

Risk spreads on financial instruments have increased since the Fed met Oct. 30-31, an index tracked by Citigroup Global Markets Inc shows. The index rose to a high of 0.99 on Nov. 22 from 0.77 on Nov. 1, with 1 being the highest level of risk aversion.

``We will need to assess the implications of these developments, along with the vast array of incoming information on economic activity and prices, for the future path of the U.S. economy,'' Kohn said, referring to heightened market stress.

He also indicated that the continued deterioration in housing markets, now the worst recession in 16 years, have surprised him.

``The housing sector has continued to decline and to erode at a very, very rapid rate,'' Kohn said in response to a question. ``It would be nice to see some early signs that it was beginning to stabilize, and we haven't seen that yet.''

Revealing Losses

Merrill Lynch & Co., Citigroup Inc. and other banks that underwrote so-called collateralized debt obligations linked to mortgages and other credits have already warned of losses of at least $47.2 billion on CDOs and other holdings. The securities slid as investors shunned assets linked to subprime U.S. mortgages following a surge in loan defaults.

``There's further to go'' in revealing losses, Kohn said today. He added that the more information that is made public about potential losses ``the better,'' as it will help ease uncertainty.

Concern about the ultimate extent of writedowns have caused investors to flee bank stocks and bonds, and kept lending rates between banks above historical averages. Losses on CDOs at the world's biggest banks may double to $77 billion, JPMorgan analysts estimate.

``Heightened concerns about larger losses at financial institutions now reflected in various markets have depressed equity prices and could induce more intermediaries to adopt a more defensive posture in granting credit, not only for house purchases, but for other uses a well,'' Kohn said.

`Policy Actions'

He added that a ``broader repricing of risk'' that increases the cost of credit and discourages spending ``would require offsetting policy actions, other things being equal.''

Banks are trying to shore up their capital as analysts predict additional mortgage losses in 2008. Citigroup Inc., the biggest U.S. bank, agreed to sell as much as 4.9 percent of the company to the government of Abu Dhabi for $7.5 billion. Freddie Mac, the second-largest purchaser of American mortgages, plans to sell $6 billion in preferred stock and halve its dividend.

Kohn noted that the short-term funding markets for banks remain under stress. Policy makers have responded, first lowering the charge on direct loans to banks in August, then reducing interest rates in the past two months. The Fed this week also committed to a series of long-term repurchase agreements through year-end to ease funding shortages.

`Some Thought'

Still, central banks ``need to give some thought to how all their liquidity facilities can remain effective when financial markets are under stress,'' Kohn said.

Since Sept. 18, the federal funds rate has been reduced by 75 basis points. The Fed also cut the cost of direct loans from its discount window by 50 basis points in an unscheduled meeting Aug. 17 to address the liquidity needs of banks. A basis point is 0.01 percentage point.

Kohn, 65, is one of the most senior members on the Federal Open Market Committee. He was director of the Monetary Affairs Division and special adviser on monetary policy under former chairman Alan Greenspan.

Last week, Fed officials, in their first quarterly economic outlook, lowered forecasts for U.S. growth next year and suggested the expansion won't reach its trend rate until 2009.

Fed policy makers now expect U.S. gross domestic product to increase 1.8 percent to 2.5 percent in 2008, ``notably below'' the 2.5 percent to 2.75 percent they predicted in July.

`Soft' Spending

Kohn said labor markets remain strong, which provides an important ``pillar'' for the economy. ``On the other side, the spending data have been maybe a little on the soft side,'' Kohn said. ``There has been a noticeable slowing in the growth of consumption.''

Fed officials forecast prices will rise 1.8 to 2.1 percent next year. Kohn said inflation risks remain a priority for the committee. ``I don't think the sources of risk that the committee saw on inflation at the last meeting haven't gone away,'' he said.

Among private economists, the number anticipating a recession almost doubled in the past two months, the National Association for Business Economics said last week.

The Fed will release its regional survey on the economy known as the Beige Book at 2 p.m. today. Bernanke speaks on the economy tomorrow.

 

Still going strong now. Let's see how it perform after the economic data announced.

Market Indices	Current	Change	% Change		Date
DJ INDU AVERAGE	13,063.47	+105.03		+0.81%	28-11-2007
NAS/NMS COMPSITE	2,623.66	+42.86		+1.66%	28-11-2007
S&P/TSX COMP IDX	13,545.49	+176.37		+1.32%	28-11-2007

 

Market opens up

Stocks opened higher on Wednesday and the Nasdaq rose more than 1 percent as comments by Federal Reserve Vice Chairman Donald Kohn increased hopes for an interest rate cut.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) was up 94.63 points, or 0.73 percent, at 13,053.07. The Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) was up 12.56 points, or 0.88 percent, at 1,440.79. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was up 32.19 points, or 1.25 percent, at 2,612.99.

 

World stocks erase early losses

World stocks steadied while the dollar hit one-week highs on Wednesday as investors took heart from firmer U.S. stock futures and banking stocks, which calmed investor jitters about the impact of the credit woes on the financial sector.

This week's news that Citigroup (C.N: Quote, Profile, Research) received a $7.5 billion capital injection from Abu Dhabi's investment followed a Wall Street Journal report that Citigroup received a call from a prominent investment banker suggesting a merger with Bank of America, although Citigroup dismissed the informal approach.

Even with some encouraging news, investors are not without worries and price action has been choppy. Stress in the money market is worsening, with two-month euro interbank lending rates hitting fresh 6-1/2 year highs.

The outlook on the banking sector holds key to overall investor risk appetite which has deteriorated due to persistent uncertainty over further writedowns by banks.

"Banks have had a pretty poor time in the last few weeks. They have been taking a serious kicking. They are getting a bit of a rebound on the fact that... investors are saying they are not such a bad place to be," said Peter Dixon, UK economist at Commerzbank.

The FTSEurofirst 300 index rose 1.3 percent on the day, while the MSCI main world equity index erased early losses to trade steady on the day.

U.S. stock futures rose 0.7 percent, indicating a firmer open on Wall Street.

There was a positive development in investor sentiment after ABX, a derivatives index tied to subprime mortgages, edged higher on Tuesday as the latest batch of U.S. loan performance data showed some signs that delinquencies might be increasing at a slower rate.

TENSION LINGERS

Tension in money markets worsened. London interbank offered rates (Libor) -- benchmark lending rates between banks -- for two-month euro rose to 4.73875 percent (LIBOR: Quote, Profile, Research), the highest since May 2001. In early August, rates were below 4.2 percent.

Cash has become less available and more expensive since the credit crunch started in August as banks hoard cash as a contingency against credit-related losses. This general shortage is being exacerbated by liquidity concerns over the seasonally thin Christmas and New Year period.

"The level of confidence remains quite low. Banks are still reluctant to lend because of counterparty risk and balance sheet constraints on their own side," said Nathalie Fillet, senior fixed income strategist at BNP Paribas.

The dollar hit one-week highs of $1.4724 per euro and against a basket of major currencies.

UBS's equity flow indicator showed a strong decrease in selling momentum of U.S. stocks last week, while the euro zone suffered the strongest outflow since May this year.

"A sustained shift in favor of dollar-denominated assets would certainly assuage dollar-negative sentiment. Also, given that consumer spending is not deteriorating more markedly, there is some risk of a near-term squeeze of short-dollar positions," the bank said in a note to clients.

The iTraxx Crossover index, the most widely watched indicator of European credit market sentiment, narrowed slightly to 376 basis points. Emerging sovereign spreads tightened 10 basis points, while emerging stocks were steady.

The December Bund future was down 45 ticks.

U.S. light crude (CLc1: Quote, Profile, Research) steadied at $94.48 a barrel before a crucial OPEC meeting next week. Gold slipped to $798.25 an ounce.

Positive    Negative

Market Indices   Current   Change   % Change   Date  DJ INDU AVERAGE   12,958.44         27-11-2007  NAS/NMS COMPSITE  2,622.70  +41.90      +1.62% 28-11-2007  S&P/TSX COMP IDX  13,517.33  +148.21      +1.11% 28-11-2007