Mar 22, 2008

International Markets - Good mood fizzles away in US Market

Good mood fizzles away in US Market - 20 Mar 2008

Just a day after US Market posted its strongest gains in five years time, US Market was back in its pessimistic mood today, Wednesday, 19 March, 2008. A strong sell-off in commodities was perhaps the main reason behind todays loss. All the three indices gave up more than half of yesterdays gains. All the ten sectors ended in the red today.

The day started with some good news in bits and pieces, mainly related to Freddie Mac and Fannie Mae. The Office of Federal Housing Enterprise Oversight is allowing the two government sponsored enterprises to purchase more home loans. It is expected that the initiative will provide up to $200 billion in immediate liquidity to the mortgage-backed security market. This gave market a moderate boost in the pre lunch hours.

But in the final couple of hours of trading, weakness in commodity market took much of the steam out of the market. Gold, crude oil and other metals witnessed drastic slide in prices as dollar strengthened a bit after yesterdays rate cut by Federal Reserve.

The Dow Jones industrial Average ended the day with a loss of 293 points at 12,099. The Nasdaq Composite Index, finished lower by 58 points at 2,209. S&P 500 finished lower by 32 points at 1,298.

Twenty-nine out of thirty Dow stocks ended in the red green today. Chevron and Exxon Mobil led the team of Dow decliners. Coco Cola was the sole Dow winner today.

Yesterday, the Federal Open Market Committee (FOMC) announced it is cutting the fed funds rate and discount rates by 75 basis points. That left the fed funds rate at 2.25% and the discount rate at 2.50%. Markets immediate response was negative, although the indices still held strong gains.

Among other major stories of the day, Morgan Stanley came out with earnings report topping expectations. The stock closed 7% higher today.

Precious metals closed considerably down today. Prices fell after Federal Reserve decided to cut overnight lending rate by 75 bps to 2.25% yesterday. It was golds largest one day decline in almost two years. After hovering above $1,000 mark since the past few days, Comex Gold for April delivery fell $59 (5.9%) to close at $945.3 ounce on the New York Mercantile Exchange. Last Monday, prices skyrocketed to a high of $1,034/ounce. But since yesterday, after Feds interest rate cut decision was out, prices started tumbling.

Crude prices fell the most in almost seven months today after prices slipped by almost $5/barrel today. The daily drop in price was perhaps the most in seventeen years. Prices fell today after the Federal Reserve decided to cut overnight lending rates by 75 bps to bring it down to 2.25% to strengthen the economy as against traders expectation of 100 bps. Dollar strengthened today after yesterdays rate cut. Prices also softened after Energy Department reported rise in crude inventories and drop in crude demand for last week.

Crude-oil futures for light sweet crude for April delivery today closed at $104.48/barrel (lower by $4.94/barrel or 4.5%) on the New York Mercantile Exchange. Prices earlier dropped to $102.95. Crude prices are 85% higher on a yearly basis. The April contract expired today.

Volume on the New York Stock Exchange topped 5.3 billion, with declining stocks edging ahead of those advancing more than 2 to 1. On the Nasdaq, 2.3 billion shares traded hands, and declining issues topped those advancing, also by a more than 2-to-1 ratio.

Tomorrow, FedEx along with a few others will post its latest earnings result before the opening bell. Other than that, Weekly Jobless Claims are due prior to tomorrow's start. February's Leading Indicators and March's Philadelphia Fed Survey are both scheduled for release following opening bell. In addition, tomorrow is a quadruple witching date, which means contracts for index futures, index options, stock options, and single stock futures expire tomorrow.