PortfolioCrafter - Market Commentary 7/31/06
Tuesday, July 31st, 2007
News of trouble from a mortgage lender pulled the plug on the stock market’s attempted recovery. Concerns about credit markets and bad-
home loans resurfaced with news that American Home Mortgage Investment Corp. might liquidate its assets after failing to meet margin calls. Sub-prime mortgage market worries and record-high oil prices sent stocks tumbling with the Dow industrials falling nearly 150 points.
Today, the Dow Jones industrial average closed down 146.32 or 1.10% to 13,211.99, the broader S&P 500 closed down 18.64 or 1.26% to 1,455.
27, and the tech-fueled Nasdaq Composite index closed down 37.01 or 1.
43% to 2,546.27. For the month, the Dow shed 1.5%, the S&P lost 3.2% while the Nasdaq dropped 2.2%.
Market breadth was negative. Losers beat winners by 9 to 7 on volume of 2.20 billion shares on the New York Stock Exchange. Decliners topped losers by 18 to 11 on volume of 2.77 billion shares on the Nasdaq.
News that American Home Mortgage could no longer fund loans and was considering liquidating its assets sent the markets South. While its own stock lost 89%, this renewed worries about the scope of the recent sub-prime mortgage mess and fanned credit market worries which helped sink stocks last week.
However, encouraging economic news included a tame inflation reading in the June personal spending and income report. Additionally, consumer confidence climbed to its highest level in nearly six years. However, construction spending declined in June, and a report that revealed Midwest business activity grew at a slower-than-expected pace in July.
Shares of GM closed down $0.21 to $32.40, after posting its first profitable quarter in over two years. Its second-quarter earnings were much better than expected as it returned to the black after more than two years of losses. It reported income from continuing operations of $78 million in the quarter, excluding items, its first profit in that key unit since the end of 2004.
Shares of Triac closed down $0.07 to $14.31, after billionaire investor Nelson Peltz said that he would be ready to offer $37 to $41 a share for Wendy’s International which closed up $1.34 to $35.03. He also stated that if Wendy’s did not agree to a confidentiality agreement that he proposed by the end of the day Wednesday, then he would consider other alternatives.
Stock of GlaxoSmithKline closed up $1.65 or 3% to $51.08, after a FDA advisory panel recommended that Glaxo’s best-selling diabetes drug, Avandia, remain on the market despite an analysis showing links to increased risk of heart attack. The FDA panel was convened to discuss the potential risks of Avandia, one of Glaxo’s top sellers with $3 billion in 2006 sales.
Oil prices finished at an all-time, also pressuring stocks. Oil prices finished at an all-time high, climbing $1.38 to $78.21 a barrel on the New York Mercantile Exchange.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
