MARKET BEAT: August 28, 2007

EARLY TRADE

Reawakened global credit woes, some “Anchor Bankers” sinking the financials, and easily brandished economic reports are establishing a second and less modest session of profit taking. As of 10:50 ET the Naz’100 () and S&P500 “SPYder” () are down 1.04% 1.10% on conditions still suited for hedge hogs and others looking for something other than a perpetual bull market.

From presaged premarket weakness, conditions on Tuesday have continued to deteriorate in the first half of trade. ‘Da futchahs kicked things off with somewhat menacing downgrades of influential credit-riddled and investment banking stocks Citigroup (), Lehman Bros () and Bear Stearns () over at Merrill (). The company reduced its ratings on the group from “Buy to Neutral.” Not surprisingly, the financial sector (), today’s fingered, as well Merrill’s own guilty by association performance are showing losses of 1.90% to 4.09% and spearheading early attempts at somewhat less-likely profit taking.

Not helping matters and related, shares of State Street () are off 2.94% at 62. Overnight The Times of Britain reported the world’s largest institutional money is exposed to $22B in credit-related paper. Additionally, some of Tuesday’s overseas and “tail wagging the dog” weakness was precipitated by a report out of the Financial Times. The periodical stated the global money center bank Barclays () is at risk to the tune of “several hundred million” greenbacks due to, you guessed it, credit-related ventures not going so swimmingly well these days. Intraday, while the company has refuted the report, investors stateside continue to say otherwise, with the ADR off 1.60 at 47.34.

A couple of government reports have also helped promote, spook and prod along Tuesday’s profit-taking. Housing news has turned in a second day of discouraging results. The Shiller Home Price Index dropped by 3.2% for the second-quarter. The data represents the largest year-over-year drop since its inception back in 1987.

Separately, a release on consumer confidence matched estimates but continued to weaken to its worst levels for 2007, down 6.9 points to 105. A still soft housing market and falling stock prices prior to the survey are chief factors weighing in according to pollsters. And according to other industry pros, with housing having been the primary source for funding, but not paying for cool purchases like HDTV’s and the likes: the Fed now has slightly more ammo for helping games played on both Wall & Main Streets while still looking like ‘da man.  

GROWTH & MOVERS COVERAGE

EARNINGS CALENDAR

Select reports scheduled after the market close:

REPORT CALENDAR

Economic releases on tap:

INDICES & MARKET MOOD

Exiting the lunchtime hour, prices in the major averages remain somewhat steeped in red. Realistically though, the action is best described by a bit of necessary technical cleansing after a very handsome percentage climb. Maybe the market is due for a bit more. According to some reports, an afternoon release of the FOMC Minutes may prompt further weakness or could be embraced as the best thing since the invention of sliced bread.

Personally, what policymakers’ collective thoughts were prior to the credit fiasco seem to be even less important than usual. That’s just me though. However, any which way you slice it, prices are currently much closer to affording a stronger entry sans a bit of the wishful-hopeful bull seen roaming late last week. The observation for this corner is the recent lows (8/16) in the market are thought severe enough to hold. At the same time, those levels are also far enough away as to not fall in love with any stabs at current support plays which are marked by moving averages and Fibonacci retracements. Ultimately any attempts at pullback entries could fail miserably. More to the point, if one isn’t careful, there are plenty of other reasons to fall into the trap of wishful thinking and a potentially punishing reality. 

Chris Tyler
Staff Writer & Options Strategist
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