DOW Tanks 370 Points on Economic Woes


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Daily Market Commentary for February 5, 2008 from Millennium-Traders.Com

At the closing bell on the Stock Exchange, here is how the major indices ended the session on the U.S. Markets:

DOW (Dow Jones Industrial Average) triple digit loss of 370.03 points on the day to end the session at 12,265.13

NYSE (New York Stock Exchange) triple digit loss of 327.61 points to end the session at 8,874.50

NASDAQ loss of 73.28 points for a close at 2,309.57

S&P 500 loss of 44.18 points for a close at 1,336.64

RUSSELL 2000 loss of 21.88 points to close at 701.58

FTSE Global Equity Index Series (GEIS) loss of 7.16 points to close at 238.56

FTSE RAFI 1000 triple digit loss of 174.99 points to close at 5,510.21

BEL 20 triple digit loss of 120.82 points to close at 3,688.83

CAC 40 triple digit loss of 196.78 points to close at $4,776.86

FTSE100 triple digit loss of 158.2 points to close at 5,868.00

NIKKEI 225 triple digit loss of 114.2 points to close at 13,745.50

On the NYSE today, advancers came in at 622; decliners totaled 2,572; unchanged came in at 73; new highs came in at 19 and new lows came in at 35. Momentum stocks traded by active Day Traders on the NYSE today: Las Vegas Sands Corporation (LVS) gained 7.45 points with a high on the day of $93.85, a low of $84.76 for a closing price at $88.90; Goldman Sachs Group Incorporated (GS) shed 10.94 points with a high on the day of $197.31, a low of $189.61 for a closing price at $189.86; NYSE Euronext, Incorporated (NYX) shed 11.70 points with a high on the day of $79.00, a low of $71.03 for a closing price at $71.03; Whirlpool Corp (WHR) gained 8.41 points with a high on the day of $94.19, a low of $84.55 for a closing price at $90.00; Martin Marietta Materials Incorporated (MLM) shed 12.10 points with a high on the day of $112.91, a low of $104.07 for a closing price at $106.02; Petroleo Brasileiro (PBR) shed 7.42 points with a high on the day of $111.06, a low of $105.60 for a closing price at $106.47; Principal Financial Group Incorporated (PFG) shed 6.71 points with a high on the day of $54.97, a low of $51.01 for a closing price at $53.10; CME Group, Incorporated (CME) shed 30.20 points with a high on the day of $624.51, a low of $588.77 for a closing price at $588.80; Siemens AG (SI) shed 8.20 points with a high on the day of $128.11, a low of $123.93 for a closing price at $125.57; Fluor Corporation (FLR) shed 10.86 points with a high on the day of $121.06, a low of $112.11 for a closing price at $112.40; Monsanto Corporation (MON) shed 6.70 points with a high on the day of $114.55, a low of $107.49 for a closing price at $107.57; InterContinental Exchange, Incorporated (ICE) shed 11.60 points with a high on the day of $137.34, a low of $124.53 for a closing price at $124.65; Mosaic Corporation (MOS) shed 5.76 points with a high on the day of $100.90, a low of $92.11 for a closing price at $92.69; CF Industries Holdings, Incorporated (CF) shed 7.40 points with a high on the day of $112.38, a low of $102.50 for a closing price at $103.72; Potash Corp. of Saskatchewan, Incorporated (POT) shed 5.14 points with a high on the day of $147.10, a low of $138.80 for a closing price at $139.86; Flotek Industries Incorporated (FTK) shed 3.44 points with a high on the day of $21.54, a low of $18.11 for a closing price at $18.11.

On the NASDAQ today, advanced totaled 629; decliners totaled 2,315; unchanged came in at 114; new highs came in at 16 and new lows came in at 99. Momentum stocks traded by active Day Traders on the NASDAQ today: Garmin Limited (GRMN) shed 5.88 points with a high on the day of $66.23, a low of $61.89 for a closing price at $63.78; Research In Motion Limited (RIMM) shed 4.87 points with a high on the day of $93.38, a low of $88.03 for a closing price at $88.30; SiRF Technology Holdings Incorporated (SIRF) shed 8.91 points with a high on the day of $8.50, a low of $6.97 for a closing price at $7.36; Sigma Designs Incorporated (SIGM) shed 6.43 points with a high on the day of $48.36, a low of $43.04 for a closing price at $43.16; VCA Antech Incorporated (WOOF) shed 7.37 points with a high on the day of $32.99, a low of $31.40 for a closing price at $32.13; Illumina Incorporated (ILMN) gained 6.61 points with a high on the day of $71.80, a low of $68.21 for a closing price at $71.50; Cbeyond, Incorporated (CBEY) shed 4.58 points with a high on the day of $32.92, a low of $28.59 for a closing price at $28.76; Incorporated (BIDU) shed 18.79 points with a high on the day of $267.97, a low of $250.92 for a closing price at $253.49; Wynn Resorts Limited (WYNN) gained 7.89 points with a high on the day of $123.00, a low of $112.66 for a closing price at $119.36; First Solar, Incorporated (FSLR) shed 14.90 points with a high on the day of $191.50, a low of $177.64 for a closing price at $178.00; Google Incorporated (GOOG) gained 11.37 points with a high on the day of $509.00, a low of $488.52 for a closing price at $506.80.

Redbook data released today: U.S. Retail Sales for first 4 weeks of January fell 0.4% versus December.

U.S. Institute for Supply Management (ISM) January Non-Manufacturing Composite Index came in at 44.6; U.S. ISM January Non-Manufacturing New Orders Index came in at 43.5 versus December reading at 53.9; U.S. ISM January Non-Manufacturing Prices Index came in at 70.7 versus December reading at 71.5; U.S. ISM January Non-Manufacturing Employment Index came in at 43.9 versus December reading at 51.8; U.S. ISM January Non-Manufacturing Business Index was expected to come in at 52.5; U.S. ISM January Non-Manufacturing Business Index came in at 41.9 versus December reading at 54.4.

Opening Statement by Secretary Henry M. Paulson, Jr. on the President’s Fiscal Year 2009 Budget before the United States Senate Committee on Finance: Washington, DC--Chairman Baucus, Senator Grassley, Members of the Committee: I am pleased to be here to discuss the President's budget for fiscal year 2009. As Treasury Secretary, my highest priority is a strong U.S. economy that will benefit our workers, our families and our businesses. Through a measured approach that balances our nation's needs with our nation's resources, the President's budget supports that priority. This is especially important now as, after years of unsustainable home price appreciation, the U.S. economy undergoes a significant and necessary housing correction. This correction, combined with high energy prices and capital market turmoil, caused economic growth to slow rather markedly at the end of 2007. The U.S. economy is diverse and resilient, and our long-term fundamentals are healthy. I believe our economy will continue to grow, although at a slower pace than we have seen in recent years. Yet, the risks are clearly to the downside and President Bush knows that economic security is of the utmost importance to the American people. In recent weeks, the potential benefits of quick action to support our economy became clear, and the potential costs of doing nothing too great. So, we are gratified that Congress is advancing a growth package to support our economy as we weather the housing correction. We believe that a growth package must be enacted quickly; it must be robust, temporary, and broad-based, and it must get money into our economy quickly. The Senate has begun to consider its version of this bill, and I am hopeful that it will complete consideration soon. If we keep moving along a fast track, and Congress sends the President a bill that meets our shared principles, rebate payments can start in May and be completed this summer. Together, the payments to individuals and the investment incentives for business will help create more than half a million jobs by the end of this year. In addition to an economic growth plan to help us weather this housing correction, the Administration will continue to focus on aggressive action to try to provide alternative options to foreclosures. That includes encouraging the HOPE NOW alliance's outreach to struggling homeowners. Congress can do its part by finalizing the FHA modernization and GSE regulatory reform bills and by passing legislation that will allow states to issue tax-exempt bonds for innovative refinancing programs. We continue to monitor capital markets closely and to advocate strong market discipline and robust risk management. Working through the current stress is our first concern. Through the President's Working Group on Financial Markets, we are also reviewing underlying policy issues because it is just as important to get the long-term policy right. While we are in a difficult transition period as markets reassess and re-price risk, I have great confidence in our markets. They have recovered from similar stressful periods in the past, and they will again. The Administration will also continue to press for long-term economic policies that are in our country's best interest – a pro-growth tax system, entitlement reform and a balanced budget. To that end, the President's budget makes the 2001 and 2003 tax relief permanent, and keeps the federal budget on track for a surplus in 2012. In the future, as in the past, our long-term economic growth will also be enhanced by supporting international trade, by opening world markets to U.S. goods and services and by keeping our markets open. Congress can help create jobs and economic opportunity by passing the pending Free Trade Agreements with Colombia, Panama and South Korea. I appreciate the cooperative and bipartisan spirit that has brought the Congress and the Administration together to support our economy, and look forward to that spirit continuing as we work through this period. Thank you.

Secretary Robert K. Steel Remarks on Housing before the American Securitization Forum: Las Vegas - Thank you for that kind introduction. And to all of you gathered here this morning, thank you for welcoming me. It is my pleasure to represent the Treasury Department today at this prestigious conference. This year's fourth annual American Securitization Forum (ASF) conference has brought together some of the nation's best minds from our housing, finance, legal and accounting communities. Your program is excellent and this is an especially important time for experts like yourselves to come together and discuss these issues. Since its creation in 2001, ASF has served an important role by building consensus and coordinating advocacy efforts among key participants in the securitization market, including issuers, investors, financial intermediaries, rating agencies, legal and accounting firms, trustees, servicers, and guarantors. The efforts of this organization and each of the member firms you represent are more important now than ever. We commend ASF for the strong leadership you have recently shown in working to address current challenges in the housing and mortgage markets. The Treasury Department has the benefit of a close working relationship with ASF. Much progress has been made by our collaboration and we look forward to seeing the measurements of your success. You are fortunate to have the strong leadership of George Miller and Tom Deutsch. Both George and Tom have impressive credentials and spent distinguished careers in the securitization market – George served at the Bond Market Association for 11 years prior to joining ASF and Tom worked for respected firms as a specialist in residential mortgage-backed securitization and credit card securitization. Their leadership was demonstrated in December when the ASF announced very important new industry guidelines creating an efficient process for identifying borrowers who qualify for refinancing or loan modifications. But there is much more work to do. I am pleased to be here today with all of you to discuss what more must be done to build off that progress to help homeowners in distress and allow your industry to thrive. Let me begin my remarks today by providing a bit of perspective about your industry – the securitization market. Then, I will share my thoughts on current conditions in the housing market and the broader economy, and finally will describe our approach to these challenges, the progress we are making and the necessary next steps. After my remarks, if you have the time, it would be my pleasure to take a few questions.
Innovation and Securitization: As you all know firsthand, our capital markets have changed dramatically in recent years. The pace of financial innovation has gathered momentum, and technology and globalization have rapidly changed the nature of financial markets. It is my view that the rate of change in your industry will continue to accelerate. Globalization and technological developments have led to innovations in financial products and forever changed our economy and the capital markets. As a result, some have suggested the world has flattened. At the very least, today's world has unquestionably become more compressed. And I believe this compression will increase with the passage of time. Having spent 30 years in the financial services industry prior to joining Treasury, I witnessed considerable innovation in capital markets. When I began my career in the securities industry, technology was an infrequently-discussed skill or asset, thought of only as a processing tool. The capital markets were characterized by a nationalistic perspective and innovative vehicles, such as derivatives, were just beginning to appear. Compare that with today when the skilled technologist is a key actor in the industry, markets are global--operating 24/7 without boundaries, and innovation is a skill required for success. But it was not until the late 1990s that this change in the industry accelerated to a mesmerizing pace. In my final five years in the financial services industry I saw as much innovation as I saw in my first 25 years. The securitization market is an example of how this incredible pace of innovation has changed financial markets. Secretary Paulson and I have been very clear – we believe that the benefits of securitization are significant. It enables investors to improve their risk management, achieve better risk adjusted returns and access more liquidity. While being an advocate for the benefits of your industry, it is also important for me to be straight forward. We must be honest and admit some degree of malfeasance. It is clear that in some instances market participants acted inappropriately. Secretary Paulson has indicated that certain adjustments to the mortgage process, such as licensing standards for mortgage originators, would help in weeding out the bad actors. Common sense licensing standards would take into account prior fraudulent or criminal activity, and should require initial and ongoing education. Recent market fluctuation has also caused some to question more broadly the effectiveness of certain characteristics of the mortgage market process. This questioning, which is fair and appropriate, has specifically targeted rating agencies, securitization and mortgage origination. Policymakers and market participants both must commit to a continual assessment of financial innovation and its implications. Secretary Paulson has taken responsibility, by way of the President's Working Group, to evaluate these issues. The President's Working Group on Financial Markets was formed by President Reagan to study and issue recommendations regarding the market events of October 19, 1987. Since then, the non-partisan Working Group - chaired by the Secretary of the Treasury and composed of the chairmen of three independent financial regulators (the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission) - has continued to convene under an overarching mission of maintaining investor confidence and enhancing the integrity, efficiency, orderliness and competitiveness of U.S. financial markets. Secretary Paulson is leading the President's Working Group to evaluate broad, long-term lessons-learned from current challenges, and where appropriate make recommendations. Securitization can remain a strong market in the future, but market participants must accept some degree of responsibility and commit to lessons-learned.
Housing Market Challenges: As I have just described, challenges in the markets are having significant consequences. What began as a credit issue last summer, raised questions about market liquidity in the autumn, and today is causing uncertainty about the economy. The flow of liquidity that fueled a boom in borrowing and leverage across asset classes – from mortgages to leveraged buyouts – has now been reduced. Short-term funding markets were stressed and inter-bank funding spreads rose to unprecedented levels. Mortgage origination and other asset securitization dropped markedly, adding to the challenges in the housing sector. Given the interconnectedness of our capital markets, other stresses emerged as financial institutions grappled with valuing assets and balance sheets came under pressure. Of course, housing has been at the center of all these challenges. Housing corrections take time and we are currently experiencing a period of adjustment in the housing sector of our economy. After years of unsustainable home price appreciation and relaxed lending practices, a housing correction was inevitable and necessary. Our economy is resilient and fundamentally strong, but the housing correction, credit market turmoil, and high oil prices are weighing on growth this year and short-term risks are to the downside. We at Treasury expect that our economy will continue to grow over the coming year, but at a slower rate than we have enjoyed for the past few years. However, there is the risk of a downturn. And to address this short-term challenge, President Bush announced a bipartisan agreement with House of Representatives on a growth package to bolster the economy this year. The proposal will provide about $150 billion of tax relief for the economy, leading to the creation of over half a million additional jobs by the end of this year. The Administration and the American people await action in the Senate to produce a targeted package to send to the President. By passing this economic growth agreement quickly, we can protect the strength of our economy as we weather the housing downturn and other challenges. The housing downturn, of course, is about more than just economic statistics – it is also about the firsthand strain that families and homeowners will experience. Too many American homeowners face the frightening prospect of losing their home in foreclosure – and a significant number of other families already have. Foreclosures also impose negative externalities on neighboring homes and communities. Many homeowners who are paying their mortgages on time face lower property values due to foreclosures in their neighborhood. This places hardships on neighboring homes and undermines the financial stability of broader communities and the families who live there. The latest available data (from the third quarter of last year) indicate that 2007 was on track for a foreclosure starts rate of 2.7 percent. To give that number a bit of perspective we should recognize that many homes end up in foreclosure every year, even when housing markets are strong. Between 2001 and 2005, for example, the U.S. annual rate of foreclosure starts averaged approximately 1.7 percent, meaning more than 650,000 homeowners began the foreclosure process each year. This baseline rate of foreclosure can result from events such as job loss, credit problems, changes in family circumstances, or other sources of economic instability. Recently, some have made comparisons between the rate of foreclosure starts and the rate of modifications. There is no question we want and expect the rate of modifications to increase. However, we must not ignore refinancings. Every time a homeowner refinances into a long-term sustainable mortgage that is a win for both the homeowner and the original investor. We expect the foreclosure rate to remain elevated this year and next. A rising foreclosure rate during a period of housing price depreciation is not surprising. Yet, largely because of relaxed underwriting standards in recent years – particularly in the subprime market – and because of resetting mortgages, the number of homeowners facing hardship will be higher than during other recent housing downturns. In total, approximately 1.8 million subprime mortgages are expected to reset over the next two years, but not all will end in foreclosure. Many homeowners will be able to afford their new payments without trouble or will be able to qualify for refinanced, fixed-rate mortgages on their own. In fact, of the 2/28 subprime ARMs originated in 2005, 88 percent had not defaulted as of late last year. Others, however, have stretched far beyond their means, and unfortunately, foreclosure may be unavoidable. In fact, many loans enter into foreclosure before ever reaching the reset date. A third group of homeowners facing resets fall somewhere in the middle. The challenge is to identify the homeowners in this middle group, who with a focused and timely response can stay in their homes.
The Policy Response: After working closely with ASF and other members of the industry, Secretary Paulson has determined that the best response is based upon a three point plan: (1) to better identify, reach and connect with servicers and counselors at-risk homeowners who can be helped, (2) to assist in developing additional products for homeowners, and (3) to increase the speed and efficiency of moving these at-risk borrowers into affordable solutions. Whenever facing a challenging public policy issue, such as this one, the first step is full understanding. While we are continuing to learn, our response to date represents months of listening to leading academics, servicers, mortgage counselors, lenders, homeowners, consumer advocates and investors to understand the causes of foreclosure and the best ways to help people keep their homes. On August 31, President Bush announced an aggressive, comprehensive plan to help at-risk homeowners remain in their primary residences. The President charged Secretaries Jackson and Paulson to lead this effort. As the Treasury Department and the Department of Housing and Urban Development (HUD) met with a variety of mortgage market participants and non-profit credit counselors in the late summer and early fall of 2007, it became clear that while many market participants were working diligently on their own trying to reach and help homeowners, it was inadequate given the scale and pace of pending resets. On October 10, HOPE NOW was formed as an alliance among counselors, servicers, investors, and other mortgage market participants to maximize outreach efforts to at-risk homeowners and help them remain in their homes. The Alliance grew and today servicers participating in HOPE NOW comprise over 94 percent of the subprime mortgage loan market. Since its formation, ASF has been a true leader in HOPE NOW, ensuring that securitization market participants - especially investors - were helping craft solutions that would help homeowners without undermining the flow of capital. On December 6, President Bush announced a new private-sector framework to streamline the process for modifying and refinancing subprime mortgages for eligible homeowners. These new industry guidelines, issued by your organization, created an efficient process for identifying borrowers who qualify for refinancing or for loan modifications. This, in turn, would free up resources and allow mortgage servicers to focus on those borrowers who require more in-depth analysis. It is now up to the industry, including the people in this room today, to help put this plan into action.

Commodities Markets: The trend was mostly lower across the board today for the Energy Sector: Light crude moved lower today by $1.61 to close at $88.41 a barrel; Heating Oil moved lower today by $0.04 to close at $2.45 a gallon; Natural Gas moved higher today by $0.08 to close at $7.95 per million BTU and Unleaded Gas moved lower today by $0.05 to close at $2.26 a gallon.

Metals Markets: ended the session lower across the board today: Gold moved sharply lower today by $19.10 to close at $890.30 a Troy ounce; Silver moved lower today by $0.44 to close at $16.35 per Troy ounce; Platinum moved sharply lower today by $12.10 to close at $1,781.00 per Troy ounce and Copper moved lower by $0.09 today to close at $3.21 per pound.

On the Livestock and Meat Markets, the trend was mostly higher across the board today: Lean Hogs ended the day lower by $1.05 to close at $66.15; Pork Bellies ended the day higher by $0.10 to close at $93.00; Live Cattle ended the day higher by $0.70 at $94.63 and Feeder Cattle ended the day higher by $0.76 at $105.50.

Other Commodities: Corn ended the day lower by $1.25 at $510.25 and Soybeans moved lower today by $3.00 to end the session at $1,323.00.

Bonds were higher across the board today: 2 year bond moved higher by 9/32 to close at 100 12/32; 5 year bond moved higher by 21/32 to close at 101 3/32 today; 10 year bond moved higher by 21/32 to close at 105 18/32 and the 30 year bond moved higher by 1 1/32 to close at 111 6/32 on the day.

The e-mini Dow ended the session today at 12,309 with a loss of 303 points on the trading session. The total Dow Exchange Volume for the day came in at 119,082 which are comprised of Electronic, Open Auction and Cash Exchange. Traders should review workshops available at the CBOT (Chicago Board of Trade) Educational in-person seminars schedules available on CBOT (Chicago Board of Trade) website.

The end of day results for the CBOT (Chicago Board of Trade) which is comprised of the total Exchange Volume for Futures and Options (EVFO) including Electronic, Open Auction and Cash Exchange ended the day at 2,901,438; Open Interest for Futures moved lower by 228,299 points to close at 10,383,285; the Open Interest for Options moved higher by 72,589 points to close at 9,572,187 and the Cleared Only closed lower by 1,007 points to close at 21,032 for a total Open Interest on the day of 19,976,504 for a total Change on the day with a loss of 156,717 points.

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