Another rocky week is expected for stocks as investors look for indications that the Fed will lower interest rates.
August 26 2007: 12:41 PM EDT
NEW YORK (Reuters) -- Wall Street is heading for another volatile week, but the bulls could get a further reprieve if calm brought on by the Federal Reserve's liquidity injections and a surprise cut in its discount rate lasts.
The coming week has a slew of economic indicators, including July existing home sales and preliminary figures on second-quarter gross domestic product, which should shed more light on the economy's health.
But paramount to Wall Street will be what the data says about the prospects for a cut in the fed funds rate as the housing slump fuels worries that the sector's slowdown could tip the world's largest economy into a recession.
"Wall Street is banking on a mid-cycle slowdown that was expected but could get worse, suggesting that the Fed may want to lower the fed funds rate," said Rob Goodman, director of investments for Fairport Asset Management, in Cleveland. "A cut," he said, "is not out of the realm of possibilities ... and I don't expect Wall Street to be too negative going forward."
Aug 24: If the Federal Reserve is waiving a fundamental principle in banking regulation, the credit crunch must still be sapping the strength of America's biggest banks. Fortune's Peter Eavis documents an unusual Fed move. (more)
hmmm...everyone got their own trading methods and beliefs...just like technical chartists never look in the way of a fundamental analyst...vice versa the FA people don't understand why can't the TA people ride out the volatility using a longer term view...
well...just hope everything will turn rosy and uptrending....of course...that's just a normal human psychology of...HOPE
we sure do hope so this coming week will be filled with positive news ...the penny stocks that many people hold are still currently way below the prices bought months back ago...certainly need a great amount of push factors
All fiat currencies will fail...no matter what..gold and silver are the only real money...as 5000 yrs of history shown...all those crises that crop up all are cause by this fiat system...sooner or later the world will fall into a deep depression wiht the demise of thge US$...
Buy gold ..put 10% of your net worth in precious metal and hope it doesnt work..that 10% is your indsurance against the failure of all the other.No one would buy fire insurance becos they planning a fiery disaster...but everyone shuold buy just in case it does happen thro no fault of your own...
Buy gold and gold stock ...coming soon...gold ..$2600...2010.,,as the same time can still ride the bull...
He who loses money,loses much
He who loses friend,loses much more.
He who loses faith,loses ALL
Have faith in just that only10% will save you from crises..that as of current is very real..I have great faith in gold....remember me...when the day come when gold rocket...it was only me who make call to buy gold in this forum..good luck
By Bob Pisani Reporter | 24 Aug 2007 | 10:49 AM ET
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Bob Pisani on the floor of the NYSE.
Talk about a recession from a very small group of people need to be balanced against the fact that no major strategist is predicting a recession. Many are trimming their forecasts slightly, but that is a long way from a recession.
Even Ben Bernanke maintains a forecast of "moderate" growth of 2.5% in the GDP this year, and a slight expansion in 2008.
Are the conditions for a recession there? One factor often present is high interest rates, which are not present here. Indeed, mortgage rates went down this week, to 6.5% for a 30-year fixed rate mortgage.
Even the argument that housing has always led the economy into a recession, as asserted by Countrywide Chief Executive Angelo Mozillo, is not clear. Housing did not lead the economy into the last recession in 2001. In December 2000, the Fed Funds rate was 6.5% at its peak; rates were low. Home sales were relatively steady then. The contributing factor in that short recession was the bursting of the financial bubble.
Housing arguably was a contributing factor in the 1990-91 recession. There, interest rates were very high--the Fed Funds rate peaked at 9.75% in March, 1989.
Looking at across the uneven economic history of the United States, one thing is very striking: how few recessions we've had in recent memory. The National Bureau of Economic Research (NBER) has noted that there have been only two recessions (1990-91 and 8 months in 2001)-- both of them mild -- in the United States over the past 25 years; over the previous 35 years, they noted, there were eight.
This "great moderation" of the economy has been explained many ways: luck, structural changes in the economy, etc., but in the end even the cautious NBER admits that improved policies on the part of those steering the economy are the likely reason we have avoided recessions:
"This hypothesis has obvious appeal. In our own work, we have found that monetary policymakers have been guided by a better understanding of the economy in recent decades and have largely avoided episodes where they first pursued expansionary policies that caused inflation to rise and then pursued extremely tight policies to bring inflation back down."
This is why the markets have faith in the Fed--since Paul Volcker broke the back of inflation in 1982, the Fed has learned to use its "toolbox" better. They are better at injecting and extracting liquidity; the recent move to lower the discount rate and remove the stigma of borrowing is another example.
Recessions of the 20th Century
Date
Duration
Sept. 1902-Aug. 1904
23
May 1907-June 1908
13
Jan. 1910-Jan. 1912
24
Jan. 1913-Dec. 1914
23
Aug. 1918-March 1919
7
Jan. 1920-July 1921
18
May 1923-July 1924
14
Oct. 1926-Nov. 1927
13
Aug. 1929-March 1933
43
May 1937-June 1938
13
Feb. 1945-Oct. 1945
8
Nov. 1948-Oct. 1949
11
July 1953-May 1954
10
Aug. 1957-April 1958
8
April 1960-Feb. 1961
10
Dec. 1969-Nov. 1970
11
Nov. 1973-March 1975
16
Jan. 1980-July 1980
6
July 1981-Nov. 1982
16
July 1990-March 1991
8
March 2001-Nov. 2001
8
source: NBER
NBER uses a slightly different metric than the classic definition of two negative quarters of GDP growth. The consider depth as well as duration of the decline, though most recessions under their definition did involve at least two negative quarters of GDP growth.
Dont take what they said at face value...all figure are manipulated by politician for their own selfish ends...america will do a Enron once again...and that will cause the world a long recession and worse a deep dpression like 1929..with all these subprime problem..all of a sudden housing sale improve..how to believe..the more they cover the greater the explosion...
Hey guy,it is a trading market...if more cockroaches crawl out fr under the fridge..there will be hell..pls dont commit till end sept and oct..this is when they reset the ARM...in the mean time trade,,,provided fed cut fund rate...but i dont think so..the dollar already weaken..a weaken dollar is just as bad for economy...it send inflation up across the board..bad for stock also..and comsumer..reduce rate is not cure,but delay the pain only,later to hace create another crises...that is the dollar crises..
Look like the fed and the dollar are toast for sure...just a matter of time..buy a little gold...i believe we see a 1000 gold soon!
Aug. 24 (Bloomberg) -- Sales of new homes in the U.S. unexpectedly rose for the second time this year in July, suggesting the housing market was stabilizing before the rout in credit markets.
When was the correction? 1st week of august right?
Hmm....seems like rolling out good news to push the market up.
Aug. 24 (Bloomberg) -- Sales of new homes in the U.S. unexpectedly rose for the second time this year in July, suggesting the housing market was stabilizing before the rout in credit markets.
Purchases increased 2.8 percent to an annual pace of 870,000 last month from a revised 846,000 rate in June that was greater than previously estimated, the Commerce Department said today in Washington. The level exceeded the highest estimate in a Bloomberg News survey of 73 economists.
New-home sales are likely to show renewed weakness as turmoil in credit markets pushes some mortgage lenders out of business and prompts others to tighten requirements for loans. Federal Reserve policy makers are predicting the worst housing slump in 16 years will remain a drag on economic growth.
``Given the current restrictiveness of credit, there's no question that home sales are going to be curtailed, certainly in the short run,'' Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, said before the report.
A separate government report earlier today showed that orders for goods made to last several years rose more than forecast in July. Durable goods orders climbed 5.9 percent after gaining 1.9 percent the month before, the Commerce Department said.
Treasuries, Stocks
U.S. Treasury notes pared gains after the home-sales report and stocks gained. The yield on the benchmark 10-year note was 4.63 percent at 10:05 a.m. in New York, from as low as 4.61 percent earlier. The Standard & Poor's 500 stock index rose 0.3 percent to 1,466.78 and the S&P homebuilders index increased 0.6 percent.
Economists forecast today's figure would total 820,000 from a previously reported 834,000 pace in June. Predictions ranged from 770,000 to 860,000.
Compared with a year earlier, purchases were down 10 percent in July.
The median price of a new home rose 0.6 percent to $239,500 last month, today's report showed. Inventories of unsold homes dropped to 7.5 months at the current sales pace.
The number of homes for sale at the end of the month declined to 533,000 in July, from 538,000 a month earlier. The number of places that are completed and waiting to be sold fell by 4,000 to 175,000.
Sales increased in two of four regions, today's report showed. They rose 22 percent in the West and 0.6 percent in the South, the largest region for new home purchases. Sales dropped 24 percent in the Northeast and 0.9 percent in the Midwest.
Credit Crunch
The American housing recession shook global credit markets last week as sinking values of mortgage debt led to a freezing up of some firms' access to capital. Countrywide Financial Corp., the largest U.S. mortgage lender, tapped a credit line from its banks after being shut out of the commercial-paper market. Bank of America Corp. this week agreed to invest $2 billion in the company, helping a turnaround in its stock.
Fed officials, who said all year that the housing slump was contained, have acknowledged the downturn will extend further than they anticipated.
``Recent data on actual housing-market activity have dampened my optimism'' about a bottoming-out in the industry, Richmond Fed President Jeffrey Lacker said on Aug. 21. Tighter credit conditions ``could further dampen residential investment,'' he added.
Fed Chairman Ben S. Bernanke and his team are trying to calm the upheaval in credit markets without cutting the benchmark U.S. interest rate. On Aug. 17, the central bank cut the discount rate, on direct loans to banks, in an effort to increase the availability of capital.
Rate Expectations
Investors and many economists expect the central bank to cut the main rate, for overnight loans between banks, by at least a quarter point at or before the next meeting, on Sept. 18. Lacker said the impact of ``financial turbulence'' on the broader economy will determine the Fed's decisions.
Even before last week's market rout, the National Association of Realtors lowered its 2007 forecast for new and existing home sales for an eighth time this year. The Chicago-based group forecast that new home purchases will total 852,000 this year, down from 1.05 million in 2006.
Toll Brothers Inc., the largest U.S. luxury homebuilder, said Aug. 22 that its fiscal third-quarter profit fell 85 percent as it was forced to write down property values. Revenue from traditional home sales declined 21 percent and order cancellations jumped 18 percent.
``During this downturn, we have experienced a much higher rate of cancellations than at any time in our 21-year history as a public company,'' Chief Executive Officer Robert Toll said in a statement.
Weighing on Growth
Residential construction subtracted 0.5 percentage point from growth in the second quarter, following a 0.9 percent drag in the first three months of the year, according to Commerce Department estimates released July 27. The government is scheduled to release revised estimates for the period from April through June on Aug. 30.
Homebuilding continued to fall at the start of this quarter. An Aug. 16 Commerce Department report showed that housing starts fell 6.1 percent in July to an annual rate of 1.381 million, the lowest level in a decade.
``Larger declines in residential construction are quite possible,'' said Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc. in New York.
The Realtors group is scheduled to release its existing home sales report on Aug. 27.
Home resales, which make up about 85 percent of the housing market, are counted when a contract is closed. New home purchases are considered a leading measure of demand because they are recorded when an agreement is signed.
Sales pace bucks forecast to show increase as builders cut prices in effort to cut inventories.
August 24 2007: 10:08 AM EDT
NEW YORK (CNNMoney.com) -- Lower prices helped give new home sales an unexpected lift in July, according to a government report Friday that was a rare ray of good news about the state of the battered housing market.
The pace of new home sales rose 2.8 percent to an annual rate of 870,000 from a revised 846,000 rate in the June reading. Economists surveyed had been looking for a small decline.
NEW YORK (Reuters) - U.S. stocks were heading for a flat open on Friday, as lingering nervousness about the housing and credit markets offset the benefit of stronger-than-expected data on U.S. durable goods orders.
The Dow and the S&P indexes briefly ventured into positive territory after data showed new orders for long-lasting U.S.-made manufactured goods surged a much-bigger-than-expected 5.9 percent in July, their biggest gain since September.
Concerns about the economy remained, however, with housing data on tap for 10 a.m.
On Thursday the head of Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the biggest U.S. mortgage company, said the persistent downturn in the U.S. housing market could lead to a recession.
The durables number is "a July number, so it doesn't reflect the impact of the recent financial crisis," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.
"I think that's why it's less likely to have a meaningful impact on investors who are trying to answer the question, 'what will the be the impact of changing credit market conditions on the economy?' This doesn't answer that question."
S&P 500 futures were flat, roughly in line with fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures edged down 1 point and Nasdaq 100 futures fell 5.50 points.
A Commerce Department report on new home sales for July is likely to show they remained in a slump at an annual rate of 820,000 homes, down from 834,000 in June, according to the median forecast in a Reuters poll of economists.
Fueling fears about the wider fallout from U.S. subprime mortgages was news that four of Asia's biggest banks, including the state-run commercial Bank of China (3988.HK: Quote, Profile, Research), had revealed bigger-than-expected exposure to U.S. subprime mortgages.
Shares of Marvell Technology Group Ltd (MRVL.O: Quote, Profile, Research) fell 10 percent to $16.05 before the bell after the chipmaker posted a quarterly net loss late on Thursday, due in part to higher spending on research and development.
My bet is down too. What abt the rest? Gosh, based on the past few weeks performance, when Dow traded negatively, generally monday price will be greatly affected. Do trade with cautious... Just my 2 cents worth.
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