This Week in Stocks: 8/25 - 8/31/07

[fedgolfer]

fret not.... my tech stocks started deep red and are already at new highs. Markets will follow as buyers waiting for confirmation of support step up.

 

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AP
Bush to Outline Aid to Mortgage Holders
Friday August 31, 3:43 am ET

By Deb Riechmann, Associated Press Writer Bush on Friday Outlining Proposals to Help Homeowners With Risky Mortgages From Losing Homes

WASHINGTON (AP) -- Offering federal help for strapped mortgage holders, President Bush is proposing to aid hundreds of thousands of borrowers hard hit by the housing slump.

The president on Friday was to talk about several initiatives and reforms to help homeowners with risky mortgages keep their homes, a senior administration official said Thursday. Bush also was to discuss efforts to prevent these kinds of problems from arising in the future.

The official said Bush will direct Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson to work on an initiative to help troubled mortgage holders get services and products they need to keep them from defaulting on their loans. The official spoke on condition of anonymity to discuss details of the initiatives ahead of the presidential event.

Bush also planned to:
-- Urge Congress to pass Federal Housing Administration overhaul legislation that would give the FHA more flexibility in assisting mortgage holders with subprime mortgages.
-- Pledge to work with Congress to reform the tax code to help troubled borrowers rework their loans.
-- Call for rigorously enforcing predatory lending laws and strengthening lending practices.

Foreclosure and late payments have spiked, especially for so-called subprime borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or to keep up with their monthly mortgage payments. Some overstretched homeowners can't afford to refinance or even sell their home.

Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next. Steep penalties for prepaying mortgages have added to some homeowners' headaches.

The economy enjoyed a strong revival in the spring although growing troubles in housing and credit markets have darkened prospects considerably since then. The Commerce Department reported on Thursday that the gross domestic product grew at an annual rate of 4 percent in the second quarter -- the strongest showing in more than a year.
But that growth could be the best showing for some time as the economy continues to be battered by the worst housing slump in 16 years and a widening credit crisis that has sent financial markets on a roller-coaster ride in recent weeks.

 

[Show-me]

Futures are through the roof, dollar down, EZ rallying, PCE data, and Ben is speaking today. 3......2......1......

Good luck everyone! It is shaping up to be a nice day.

 

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Bernanke is set to speak about monetary policy and housing. Investors will be looking for clues as to whether the Fed plans to cut the target for its key short-term interest rate soon.
Traders are hoping for a rate cut, which could give investors a boost of confidence and help restore calm to the markets. But there are concerns the Fed will keep its focus on containing inflation and not bail out investors.
Upbeat sentiment was fueled by news that President Bush will outline a plan aimed at resolving problems in the subprime mortgage sector, which has been the source of turmoil in the financial markets.
At 11 a.m. ET, the President will discuss proposals for helping troubled mortgage holders keep their homes as well as reforms for preventing a similar crisis from breaking out in the future.

http://money.cnn.com/2007/08/31/markets/stockswatch/index.htm

 

[weatherweenie]

For those wondering, the Fedspeak ia scheduled to start at 10am ET according to the article linked below.

Bernanke is set to speak about monetary policy and housing. Investors will be looking for clues as to whether the Fed plans to cut the target for its key short-term interest rate soon.
Traders are hoping for a rate cut, which could give investors a boost of confidence and help restore calm to the markets. But there are concerns the Fed will keep its focus on containing inflation and not bail out investors.
Upbeat sentiment was fueled by news that President Bush will outline a plan aimed at resolving problems in the subprime mortgage sector, which has been the source of turmoil in the financial markets.
At 11 a.m. ET, the President will discuss proposals for helping troubled mortgage holders keep their homes as well as reforms for preventing a similar crisis from breaking out in the future.

http://money.cnn.com/2007/08/31/markets/stockswatch/index.htm

 

[James48843]

Word on the street is Larry Craig IS going to resign today.

The phone recordings pretty much have cut any support he had.

 

[Birchtree]

He could cross over and become a Clinton supporter. He was just being inquisitive. BWDIK.

 

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[James48843]

Tom was smart. I should have pulled the trigger and locked in the gains.

 

[350zCommTech]

CNBC's dumb ass comment of the day, "We ended near the highs of the day!" - Bob Passani.

??? The Dow ended up 119. It was up as mush as 185.

 

[saturneptune]

CNBC's dumb ass comment of the day, "We ended near the highs of the day!" - Bob Passani.

??? The Dow ended up 119. It was up as mush as 185.

I have watched most of the CNBC programs at times in the past. Advice given on this board and the expertise of members far exceeds those babbling heads.

 

[Show-me]

The late sell off could very well have been the trades bailing out before a long weekend. Overall the day positive, but not as strong as I expected after the President and Uncle Ben's comments.

The pressure on the Fed is there or the President would not have said a word about the FHA helping out. Both reiterated that the speculators and investors were not a concern of theirs. Home owners loosing their home make a bigger splash on the news than a hedge fund going under and it is a election year, coming up.

IMO, Ben is posturing for a rate cut. The question is when and how much?

The Pres. does not want this to become a tax payers burden prior to a election year so I feel the only logical solution is to lower the Fed Funds Rate before the loans reset. Kind of a damage control. They can not allow the subprime to reset and make things worse. Both political parties and the Fed. would look like the idiots they are if this would happen.

Basically, IMO, they absolutely must lower the rate before the end of the year. It would create to much bad press going into a "actual" election year and threaten, at the very least, the psychological mood of the market.

 

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Weekly Wrap

Last Update: 31-Aug-07 16:45 ET

Despite getting off to a rocky start, the blue chip averages managed to regroup to finish the week with only modest losses. The Nasdaq, meanwhile, actualy ended the week higher thanks to leadership from the technology sector.

U.S. stocks slipped early in the week as signs of persisting problems in the nation's housing market continued to weigh on the outlook for the economy and investor sentiment.

The latest data from the National Association of Realtors showed the pace of existing home sales fell in July to an annual rate of 5.75 million. That was just above analysts' expectations, but marked the fifth straight month of declines and the slowest rate in nearly five years.

In another sign that troubles in the housing market continue to weigh on the financial markets, home improvement retailer Home Depot (HD) agreed to lower the price to sell its supply division to a group of investors by $1.8 billion.

The stock market found little to help ease its concerns in the minutes from the August 7 FOMC meeting, but that ws to be expected given the Fed's emphasis at the time on its concerns about inflation pressures. That viewpoint was noted to have changed with the cut in the discount rate on August 17; nonetheless, participants used the FOMC Minutes as a silly excuse to ramp up their selling interest on Tuesday. The Conference Board's report that consumer confidence slipped in August added to the downbeat mood on Tuesday, which saw the Dow Jones Industrial Average plunge 280 points.

The stock market came bounding back on Wednesday, however, as participants looked for bargains, recognizing the previous session's sharp drop was an over-reaction. Despite a positive read on second quarter GDP, some gains were given back on Thursday on fears of spreading credit problems.

Second quarter GDP was revised higher to a 4.0% annual rate of growth from a previously reported 3.4% rate. That hardly reflects an economic crisis. However, recent credit problems suggest that the third quarter growth could be much slower.

Meanwhile, investors found reassurance on Friday from comments from President Bush, who laid out a plan that is aimed at helping sub-prime borrowers avoid foreclosure and help mitigate the impact of the meltdown in the sub-prime market on the overall economy.

Federal Reserve Chairman Bernanke, speaking in Jackson Hole, Wyoming, also said the central bank was ready to act as needed should troubles in the mortgage and credit markets escalate, although he didn't provide any clear-cut signal that a rate cut is imminent. The market took some comfort in Bernanke's remarks anyway, holding the bulk of the gains that had been registered on Friday prior to his speech.

The core personal consumption expenditure (PCE) deflator rose 0.1% in July, less than the 0.2% that was expected. That was a low inflation reading and followed a 0.2% reading in June that was preceded by four 0.1% monthly increases. The favorable trend in inflation leaves the year-over-year increase at just 1.9%, which is a level many think leaves the door open for a cut in the fed funds rate in light of the credit market situation.

In other economic news, the Commerce Department reported July factory orders rose 3.7%. That was above the consensus estimate of 3.0% and followed an upward revision to the prior month from 0.6% to 1.0%. Also, the Chicago PMI index, a survey of manufacturing conditions in that area, rose slightly to 53.8 in August from 53.4 in July. Although both reports were encouraging, they took a back seat Friday to Bernanke's speech and the subprime proposal from President Bush.

--Richard Jahnke, Briefing.com

http://www.briefing.com/GeneralCont...or&ArticleId=NS20070831164515AfterHoursReport

 

[Show-me]

This was excellent news in itself.

The core personal consumption expenditure (PCE) deflator rose 0.1% in July, less than the 0.2% that was expected. That was a low inflation reading and followed a 0.2% reading in June that was preceded by four 0.1% monthly increases. The favorable trend in inflation leaves the year-over-year increase at just 1.9%, which is a level many think leaves the door open for a cut in the fed funds rate in light of the credit market situation.

In other economic news, the Commerce Department reported July factory orders rose 3.7%. That was above the consensus estimate of 3.0% and followed an upward revision to the prior month from 0.6% to 1.0%. Also, the Chicago PMI index, a survey of manufacturing conditions in that area, rose slightly to 53.8 in August from 53.4 in July. Although both reports were encouraging, they took a back seat Friday to Bernanke's speech and the subprime proposal from President Bush.

http://www.briefing.com/GeneralCont...or&ArticleId=NS20070831164515AfterHoursReport

 

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Core PCE Brings Good News

Last Update: 31-Aug-07 08:42 ET

The July core personal consumption expenditure (PCE) deflator rose 0.1%. That was less than the expected 0.2%. It is a low inflation reading and follows a 0.2% reading in June that was preceded by four 0.1% monthly increases. This favorable trend in inflation leaves the year-over-year increase at just 1.9%.

The total PCE deflator (including energy and food costs) was also up just 0.1% and the year-over-year increase stands at just 2.1%.
The favorable readings on the Fed's favorite inflation indicator could boost rate cut expectations. Of course, the Fed said in its recent FOMC minutes that it was not convinced the recent favorable inflation trends would continue. Regardless of the policy conclusions, a low inflation number is always good news for the financial markets.
Personal income in July was up 0.5% and personal spending was up 0.4%. Both were a bit stronger than expected, but this data won't have much market impact.
--Dick Green, Briefing.com

 

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Happy Labor Day! Be safe!