Market Commentary for October 16, 2007


As oil prices continue to soar, the markets appear to turn and fall even lower. The Bears controlled the trading session today with day traders reaping profits on short selling during the negative market trend. Trading volume was heavy amidst the sell off with nice trading ranges creating a nice trading atmosphere for day traders. Investors on the other hand, merely look the other way as stock prices tumbled lower.

At the closing bell, here is how the major indices ended the session: the DOW (Dow Jones Industrial Average) posted a loss of 71.86 points on the day to end the session at 13,912.8094 the NYSE (New York Stock Exchange) posted a loss of 90.89 points to end the session at 10,125.40; the NASDAQ posted a loss of 16.14 points for a close at 2,763.91; the S&P 500 moved lower by 10.18 points to end at 1,538.53 and the RUSSELL 2000 moved lower by 6.01 points to close at 823.35. The FTSE All-World Index ex-US (top Large/Mid Cap aggregate from over 2,700 stocks from the FTSE Global Equity Index Series (GEIS) which covers 90% of the world’s investable market capitalization) posted a loss of 2.57 points to close at 272.40 and the FTSE RAFI 1000 posted a loss of 47.87 points to close at 6,321.36.

U.S. Treasury Secretary Henry Paulson offered a sobering view Tuesday of the pressure the housing market was having across the country, saying the decline stood "as the most significant current risk to our economy." Paulson even acknowledged that problems in credit, mortgage, and housing markets were much more severe than anticipated. "The ongoing housing correction is not ending as quickly as it might have appeared late last year," he said in a speech to Georgetown University Law Center, according to prepared remarks. "And it now looks like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet." Housing prices have flattened or fallen in many parts of the country, as homeowners with adjustable rate prime and sub-prime mortgages have found it increasingly hard to make their monthly payments. The market's problems have impacted everyone from low-income homeowners to huge Wall Street banks. Paulson and his senior aides have found themselves on the front lines of the effort to both stabilize jittery credit markets and help borrowers prevent foreclosure, a difficult tight rope walk as they try to prevent "bailing out" risky investments. Months ago, Paulson and other Treasury officials sought to downplay the mortgage market's problems and its possible contagion. Tuesday, Paulson said problems were likely to persist. "The problem today is not limited to sub-prime mortgages as the number of homeowners having trouble making payments on prime mortgages is also increasing," he said. Paulson said the housing correction was having a "real impact on our economy" citing how annual housing starts have fallen off more than 40% since early 2006. "It looked like housing construction had reached a bottom in the first half of this year but, starts have declined again since June and data on permit applications and inventories of unsold homes suggest further declines lie ahead," he said. The Bush administration has historically favored market discipline as a major motivating force but, Paulson said Tuesday that an enhanced regulatory role was likely necessary to prevent problems from reoccurring. He said policy makers "need to make some changes in our laws and rules in order to prevent some of the excesses and abuses of the last few years from happening again." Specifically, Paulson said the current regulatory structure, where state regulators oversee certain market players while federal regulators oversee others, is "complex and fragmented." He said the "patchwork structure should be streamlined and modernized." Congressional Democrats are considering several proposals that would address this issue. Paulson also said policy makers should consider developing a uniform national licensing and monitoring system for mortgage brokers. "Some of the conduct and practices that I have learned about are shameful," Paulson said. "It is no secret that, while not the norm, some fraudulent activity on behalf of mortgage brokers occurred." Paulson appeared skeptical of legislative efforts that would ban certain mortgage practices, such as prepayment penalties, saying that in some cases such fees could make sense for a borrower and improve credit. He did say though, that there were cases when these products were marketed inappropriately. "It makes a great deal of sense to recognize that certain products are right for some borrowers and not for others," Paulson said. Democrats are also considering legislation that would enhance liability on Wall Street investors and other secondary market players that finance questionable loan practices. While stopping short of condemning such proposals, Paulson said increasing assignee liability "is not the answer to the problem." "It would potentially paralyze securitization," Paulson said. Paulson's statements on the matter differ somewhat from Federal Reserve Chairman Ben Bernanke, who said last month that in some limited cases, assignee liability could be beneficial. He warned, though, that the federal government could create a "moral hazard" if it tried to play too large a role in trying to clean up existing problems. "When investors are relieved of the costs of bad decisions, they are more likely to repeat their mistakes," he said. "I have no interest in bailing out lenders or property speculators. Still, we must recognize the very real harm to families affected by the housing downturn." Paulson called on a more effective effort from the mortgage and loan servicing industries to reach out to borrowers with potentially problematic loans and try and rework borrowers into more affordable products. "The current process is not working well," he said. "This is not about finger pointing; it is about putting an aggressive plan together and moving forward."

August Net Foreign Disposal of Long-Term U.S. Securities came in at $85.5 Billion; Net Foreign Sales Of U.S. Equities came in at $40.6 Billion in August; Net Foreign Sales Of U.S. Corp Bonds came in at $1.2 Billion in August; Net Foreign Buys Of U.S. Agency Debt came in at $9.6 Billion in August; Net Foreign Sales Of U.S. Treasury Notes, Bonds came in at $2.6 Billion in August and Net Foreign Capital Outflow to U.S. came in at $163.0 Billion in August.

U.S. September Capacity Utilization was unchanged at 82.1% compared to consensus at 82.1%; U.S. September Industrial Production rose by 0.1% compared to consensus at an increase by 0.1%; U.S. August Capacity Use was revised to 82.1% from 82.2% and U.S. August Industrial Production was revised to unchanged from an increase by 0.2%.

U.S. NAHB October Housing Index came in at 18 versus reading of 20 in September.

Redbook: National chain store sales rose 0.1% in the first week of October versus the September, according to Redbook Research's latest indicator of national retail sales released Tuesday. The rise in the index was better than the expected 0.2% decline. The Johnson Redbook Index also showed seasonally adjusted sales in the one-week period rose 2.6% compared with the same period a year earlier comparable to a targeted 2.3% gain. Redbook said that on an unadjusted basis, sales in the week ended October 13 were higher by 2.6% from the same week in 2006. "Sales received a boost at the beginning of the week as consumers took advantage of Columbus Day promotions. Apparel sales also have been stimulated by Columbus Day promotional pricing as stores sought to shift goods ahead of the holiday season," Redbook's report said. It also said Halloween sales were "generally on track."

Commodities Markets
The trend was mostly higher across the board today for the Energy Sector: Light crude moved higher today by $1.48 to close at another new record high of $87.61 a barrel; Heating Oil closed higher by $0.03 at $2.36 a gallon; Natural Gas moved lower today by $0.06 to close at $8.28 per million BTU and Unleaded Gas moved higher today by $0.02 to close at $2.17 a gallon.

Metals Market ended the session lower across the board today: Gold moved lower today by $0.20 to close at $762.00 an ounce; Silver moved lower by $0.20 to close at $13.66 per ounce; Platinum moved lower today by $1.00 to close at $1,422.40 an ounce and Copper closed lower by $0.05 at $3.64 per pound.

On the Livestock and Meat Markets, the trend was lower across the board today: Lean Hogs ended the day lower by $0.60 to close at $57.73; Pork Bellies ended the day lower by $0.18 at $85.08; Live Cattle ended the day lower by $0.58 at $97.40 and Feeder Cattle ended the day lower by $0.78 at $113.08.

Other Commodities: Corn moved lower today by $1.50 to close at $360.50 and Soybeans moved sharply lower today by $9.00 to end the session at $996.75.

Bonds were mostly higher across the board again today: 2 year bond moved higher by 6/32 today to close at 99 24/32; 5 year bond moved higher by 9/32 to close at 99 19/32 today; 10 year bond moved higher by 8/32 today to close at 100 25/32 and the 30 year bond closed higher by 4/32 at 101 15/32 for the day.

The e-mini Dow ended the session today at 14,003 with a loss of 94 points on the trading session. The total Dow Exchange Volume for the day came in at 182,829 which are comprised of Electronic, Open Auction and Cash Exchange. Traders should review workshops available at the CBOT (Chicago Board of Trade) Educational in-person seminars schedules available on CBOT (Chicago Board of Trade) website.

The end of day results for the CBOT (Chicago Board of Trade) which is comprised of the total Exchange Volume for Futures and Options (EVFO) including Electronic, Open Auction and Cash Exchange ended the day at 2,848,244; Open Interest for Futures moved higher by 13,184 points to close at 9,484,759; the Open Interest for Options moved higher by 35,395 points to close at 8,504,621 and the Cleared Only closed higher by 392 points at 9,116 for a total Open Interest on the day of 17,998,496 with a total Change on the day with a gain of 48,971 points.

On the NYSE today, advancers came in at 918; decliners totaled 2,358; unchanged came in at 100; new highs came in at 118 and new lows came in at 93. Gainers and losers for the day as well as active day trading stocks on the NYSE: Robbins & Myers Incorporated (RBN) soared higher today by 18.09% to tack on 11.05 points with a high on the session of $73.93, a low of $65.00 for a closing price at the bell of $72.14; The India Fund Incorporated (IFN) provided nice day trading action with a high on the day of $59.21, a low of $54.10 for a loss on the day of 5.00 points with a final trading price of $54.20; ICICI Bank Limited (IBN) was active on the trading session with a high of $58.75, a low of $50.66 for a loss on the day of 3.65 points with a final trading price of $52.43; PetroChina Company Limited (PTR) was active on the day once again with a high of $234.65, a low of $226.60 with a loss on the day of 6.24 points for a closing price of $230.20; State Street Corporation (STT) moved higher on the day by 5.75 points with a high on the day of $74.97, a low of $69.03 with a closing price of $74.68; POSCO (PKX) plummeted on the day by 15.61 points with a high of $174.90, a low of $161.56 for a closing price at the bell of $165.39 and China Petroleum & Chemical Corporation (SNP) fell by 11.64 points with a high on the day of $158.00, a low of $152.00 with a closing price of $153.93.

On the NASDAQ today, advanced totaled 1,061; decliners totaled 1,915; unchanged came in at 129; new highs came in at 65 and new lows came in at 107. Gainers and losers for the day as well as, active day trading stocks on the NASDAQ: LM Ericsson Telephone Company (ERIC) moved sharply lower on the session by 9.48 points for a loss of 23.16% for a final trading price at $31.45; Yucheng Technologies Limited (YTEC) bolted higher by 26.21% to tack on 3.63 points with a high of $17.05, a low of $13.58 for a final trading price at the high of the day, $17.05; Lululemon Athletica Incorporated (LULU) soared higher on the session by 15.32% for a gain of 6.30 points with a high of $50.81, a low of $44.00 with a closing price of $47.43 and Baidu.com Incorporated (BIDU) was active again on the session with a high of $319.20, a low of $302.46 with a loss of 1.45 points at the close for a final trading price of $313.50.

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