PortfolioCrafter - Market Commentary 12/11/07
December 11th, 2007 / 9:44 pm / by portfoliocrafter
It was a tough day for the market. The Dow declined 294.26 points to close at 13,432.77. Also, the Nasdaq fell 66 points to close at 2,652.35. The S&P declined 38.31 points to close at 1,477.65. The fall on the market was caused probably due to disappointments about the expected quarter percent rate cut. Some investors were hoping that the Fed would actually cut rates by 50 basis points. The discount rate, which is the rate at which banks can borrow from the Fed, was also dropped by a quarter-point to 4.75 percent.
After the market closed, Treasury prices soared. The two-year note was up 15/32 in price, pushing the yield down to 2.92 percent. The Fed was very careful to remove from its statement that the risk of an inflation was roughly balanced, although Fed did declare it in the previous meeting on October 31st. There is still a discussion about prices potentially increasing. Now, the Fed has decreased rates at three straight meetings this year.
In other new, General Electric reported that 2008 earnings should increase at least 10 percent to $2.42 per share, which was not as positive as expected. GE was expected to earn $2.49 per share in 2008 earnings.
Also, Citigroup reported today that Vikram Pandit would take over the job of chief executive, replacing CEO Charles Prince. Nevertheless, Citigroup shares still declined as did many other banks. Among other banks that decreased due to today’s negative news about the economy were JP Morgan Chase, Merrill Lynch, Morgan Stanley and Lehman Brothers.
Among winners today were shares of AT&T, after it announced that it would increase its quarterly dividend and that it would buy back 400 million shares of its stock. Shares for AT&T increased 4.1 percent.
On the other hand, Freddie Mac’s chief executive reported that the company will probably lose another $5.5 billion to $7.5 billion over the next few years due to housing market crisis. Also, H&R Block announced that it expects to report losses this quarter due to the impact from its mortgage unit.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
