Posted on 08/10/2007 5:26:48 AM PDT by Moonman62
NEW YORK (AP) -- U.S. stocks moved toward another sharply lower open Friday after Thursday's huge sell-off and as bank regulators in Europe and Asia injected cash into money markets, stoking concerns of a more pronounced liquidity crunch. In Asia, which had largely missed the worldwide pullback Thursday, stocks skidded after regulators including the Bank of Japan added liquidity. The European Central Bank for the second day added currency.
These banks and others around the world haven't worked together to inject liquidity into the markets since the aftermath of the Sept. 11, 2001, attacks. But the measures, which are intended to keep currency markets well-oiled, also seemed to confirm investor fears of a larger problem in the credit markets.
Such unease sent the Dow Jones industrials down 387 points, or 2.8 percent, Thursday. The broader Standard & Poor's 500 index fell 2.96 percent.
Early Friday, Dow futures expiring in September fell 141, or 1.06 percent, to 13,186. S&P 500 futures fell 17.70, or 1.21 percent, to 1,440.20. Nasdaq 100 futures fell 20.25, or 1.04 percent, to 1,925.25.
Stock markets abroad took a drubbing Friday amid concerns that diminishing access to credit will derail the global economy's strong growth and bring a halt to the corporate dealmaking that has spurred stock markets in the U.S. and abroad.
Overseas, Japan's Nikkei stock average fell 2.4 percent. Hong Kong's Hang Seng Index fell 2.9 percent.
In early afternoon trading, Britain's FTSE 100 fell 3.16 percent, Germany's DAX index fell 1.66 percent, and France's CAC-40 fell 3.17 percent.
Bonds rose again Friday as investors again sought the relative safety of Treasurys. The yield on the benchmark 10-year Treasury note fell to 4.74 percent from 4.79 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
The concerns about credit and the effect of subprime loans, those made to borrowers with weak credit, were undiminished Friday, perhaps in part because of comments from Countrywide Financial Corp.
The nation's biggest mortgage lender said in a regulatory filing Thursday that disruptions in credit and secondary mortgage markets pose a risk to the company and could hurt its financial standing in the short-term. Earlier in the week, Countrywide said it still has access to capital despite the credit crunch.
In economic news, the Commerce Department is set to release data on July import prices before the opening bell Friday. Economists are expecting that prices will have risen at a slower pace than in June.
Light, sweet crude fell 80 cents to $70.79 per barrel in premarket electronic trading on the New York Mercantile Exchange
I disagree. I think the market should be up around 70 to 100 pts. Bargin shoppoing today.
I am holding.
When this is all over and done, there’s going to be some screamin’ bargains out there.
I think that the actions of the ECB are the most interesting so far. Their injections have not stopped the LIBOR rate from going higher (by about 10+ BP), and they injected more today. The ECB’s actions are why the Fed now has room to act without threatening the dollar’s value, IMO.
Hope you are right.
You’ve got bigger, harder ones that I do.
To me, the end won’t be in sight until we see a monster short-covering rally — and that won’t be “70 to 100 points” unless you’re talking about the SP-500.
“...there’s going to be some screamin’ bargains out there.”
I think you’re exactly right. Stay sharp and pounce.
The DOW has been on quite a roller coaster of late. Funny how the MSM only brings out the cheerleaders when it drops or there is speculation of a poor opening.
I still cant get over how more difficulty in getting loans would have such an enormous, and continuous negative overall impact on the markets. I realize the home and lending segments make up a good chunk of the market, but how negative news in that sector can cause such broad, continous selloffs in a market that is this strong confuses me.
You're right on all counts. I just can't tell you the right time to buy those bargains.
Mike
It isn’t just getting loans.
The debt market has a hierarchy. You, the consumer, are at the bottom of the heap.
When you take out debt (eg, a mortgage or car loan), the company that loaned you the money wraps your loan up into a package with dozens to hundreds of loans just like yours, and sells the whole conglomeration into the debt market.
That conglomeration of debt is what no one on Wall St. wants to buy any more. If your lender can’t sell a package of debt into the primary lending market, they in turn have no money to lend you.
Then there are loans made between banks/brokers. One example is “margin debt,” loans made to allow a trader to buy/short larger positions than they could if they traded only the money they have. Hedge funds, for example, are “levered up” to their necks — they might have $1B from investors, but by getting a margin line of debt of say, $10B, they can be leveraged 10:1.
Trouble is, when things go against the fund, the lender gets nervous and they either want the hedge fund to sell off their losing positions, or pay back the margin loan. This is where Wall St. is quickly becoming vapor-locked: they’re selling pell-mell, because the margin lenders are demanding more money to cover the margin calls on positions that are going negative.
I can’t tell you. Timing the market and predicting bottoms requires more luck than skill. Diversifying and holding for the long term means you shouldn’t have to worry about those things.
My feelings exactly, the spread out of subprime and general tightening in ALL credit markets is having a domino effect that who knows where it will stop. I guess super easy credit sucked in way more people and corporations than anyone expected...
Mike
there’s going to be some screamin’ bargains out there.
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Question is when? August? September? October? I’ve seen overvalued markets really tank twice in my adult life in September and October so this is a dangerous time of the year to go all in. Is this one of those years with a significant late summer/fall correction? How much longer does our economy go without a recession and when does the possibility of a recession factor in? What will the effect of the housing downturn be on the perception of wealth and well-being? Is there really a liquidity crises? Does Hillary overturn the economic apple cart?
Reminds me of the old Mark Twain quote; "October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."
Here’s the thing:
This market isn’t over-valued. That’s not why this market is going down. Equities are going down because hedge funds and investment banks are having to sell anything liquid to raise liquidity to bail out the debt markets.
The root of all evil in this situation are the CDO’s and CDO-squareds. They’re mark-to-model, and as a result of the debt crisis, no one wants to sell those dogs at a 50 to 70% haircut — they want to carry them on their books and sell them later, when the panic is over.
So they’re selling commodities and equities, because those are mark-to-market, and they won’t take a 50 to 70% haircut on those positions — only a 5 to 10% in this down market. They use the cash raised from selling equities/commodities to meet the margin calls on their debt/CDO positions, so that they’re not forced to sell off the CDO’s or asset-backed mortgage debt.
Twain wrote before 1929, 1987, and 1997 . . .
Perception is reality in this case.
Course if you get scared of October you also miss big bounces when everyone figures out it’s all “ok.”
“...there’s going to be some screamin’ bargains out there.”
I think you’re exactly right. Stay sharp and pounce.
Thats the same view here.
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