PortfolioCrafter - Market Commentary 8/23/07
August 23rd, 2007 / 10:33 pm / by portfoliocrafter
Stocks closed slightly lower as traders weighed the likelihood of a Federal Reserve interest-rate cut against enthusiasm for Bank of America’s move to rescue distressed mortgage lender Countrywide Financial Corp. The Nasdaq slipped and the broader market struggled after comments by the CEO Countrywide Financial revived investor worries about the ongoing turmoil in the credit and mortgage markets.
Today, the Dow Jones industrial average closed down 0.25 or unchanged to 13,235.88, the broader S&P 500 closed down 1.57 or 0.11% to 1,462.50, and the tech-fueled Nasdaq Composite closed down 11.10 or 0.43% to 2,541.70.
Market breadth was mixed and volume was moderate. On the New York Stock Exchange, winners and losers were roughly even on volume of 1.4 billion shares. On the Nasdaq, decliners beat advancers 9 to 5 on volume of 1.65 billion shares.
The recent volatility indicates that it’s not realistic to expect that the stock market will be able to sustain any one direction for too long now due to the problems in the sub-prime and broader credit markets. There has been news that the Federal Reserve injected $17.5 billion in temporary reserves into the banking system.
In economic news, the Congressional Budget Office said that the U.S. budget deficit will shrink more than expected this year, due to the strong economy. The number of Americans filing new claims for unemployment fell last week by a smaller-than-expected 2,000 to 322,000.
Shares of Countrywide Financial closed up$0.20 to $22.02, on news that Bank of America has agreed to invest $2 billion in the company. This will help the largest U.S. mortgage lender shore up its finances as it struggles with a liquidity crunch. BOA has bought non-voting preferred stock that yields 7.25% and can be converted into Countrywide common stock at $18 per share, 17.5%t below the shares’ Wednesday closing price.
Stock of Home Depot closed down $0.75 or 2% to $34.02, on news that it is in negotiations with buyers - Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice – about restructuring deal terms including lowering the $10.3 billion sale price of HD Supply.
Shares of Children’s Place Retail Stores closed down $5.59 or 17% to $27.43, after posting a preliminary net second-quarter loss that almost doubled from a year ago, cutting its 2007 outlook and saying that its full financial filings could be delayed. The company also said its licensing deal with Walt Disney could be in trouble.
U.S. light crude oil for October delivery rose 57 cents to settle at $69.83 a barrel on the New York Mercantile Exchange.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
