PortfolioCrafter - Market Commentary 3/22/07
March 22nd, 2007 / 6:54 pm / by portfoliocrafter
Stocks closed mixed and little changed as investors consolidated strong gains from the previous session, when the Federal Reserve left interest rates unchanged but opened the door for possible rate cuts later this year. The tepid action came a day after markets rallied on hopes the Fed will cut rates and stave off a housing-led hard-landing for the economy. However, concern about the sub-prime mortgage market resurfaced as banking regulators were grilled about the issue in the Senate.
Today, the Dow closed up 13.62 or 0.11% to 12,461.14, the broader S&P 500 closed down 0.50 or 0.03% to 1,434.54, and the Nasdaq closed down 4.18 or 0.17% to 2,451.74.
Market breadth was positive. On the New York Stock Exchange, winners edged out losers on volume of 1.6 billion shares. On the Nasdaq, advancers beat decliners by a slim margin on volume of 1.9 billion shares.
The Fed decision to hold key interest rate steady at 5.25% seemed to hint the bank was more likely to cut rates than raise them in the near term. Today, investors displayed more caution and are likely to continue to do so. However, choppiness is likely to continue for another 2-3 weeks.
The market has been rocked amid concerns that a meltdown in the sub-prime mortgage market will restrict financial liquidity, worsen the downturn in the housing market and further slow economic growth.
The jobless claims report showed a surprise decline. The claims unexpectedly fell 4,000 last week to its lowest in six weeks. A separate report, the index of leading economic indicators, declined 0.5% in February after sliding 0.3% in the previous month. Tomorrow, investors will be focused on February’s report on existing home sales.
Shares of Motorola closed down $1.24 or 6% to $17.50, after warning that it will post a first-quarter loss and that full-year sales will miss forecasts, owing to weak sales of mobile devices. It also cut its revenue view to a range of $9.2 billion to $9.3 billion, from its January estimate of $10.4 billion to $10.6 billion.
Stock of homebuilder KB Home fell 0.3% after reporting that first-quarter profit dropped 84% and cautioned that problems in sub-prime mortgages and imposition of stricter lending standards may put more stress on a wobbly market. Its first-quarter net income fell to $27.5 million, from $173.3 million earned in the year-earlier first quarter.
Stock of News Corp closed down $0.05 to $24.75, and that of GE closed up $0.33 to $35.81, after stating that they are creating an online video site that will seek to compete with YouTube. These two companies own Fox television and movie studios, and NBC Universal.
U.S. light crude oil for May delivery jumped $2.08 to $61.69 a barrel, a gain of more than 3%, on the New York Mercantile Exchange.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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