每日市場點評 --- January 25, 2008

All three major indices closed the day lower by more than 1% despite gaining as much as 1.2% earlier. However, they still managed to register the first weekly gain in 2008, quite an achievement considering the panic selling earlier in the week and their counterparties in Europe having just experienced the seventh straight weekly loss. Microsoft’s positive earning reports gave stocks, especially techs, an early boost but were not enough to counter the broad selling in financials and retailers, the two leading groups during the reversal. One key thing to pay attention during a reversal in bear market is how long the leadership groups can hold and this will more or less determine how long the rally can continue. Should the financials fall further, the market may revisit their lows in the next few weeks. Commodities continue to do relatively well with gold hitting another record high. More important, gold is not only hitting new high in US dollar term, but in Yen and EUR as well. It seems that inflation is a legitimate worry among some investors.

Turning to next week, the biggest news is of course the Fed interest rate decision on Wednesday. The Fed was under pressure these days after Scociete Generale reported to have lost $7.2 billion by a rogue trader. It appears that European authorities learned the fraud as early as last Sunday and it is quite possible that the Fed was being notified soon after. Although Fed’s spokesperson immediately denied that they knew about the matter before the 75bps emergency rate cut last Tuesday, the timing was simply too coincident. It seems that the Fed is losing more and more credibility recently and this is certainly not good news for the market moving ahead. Currently the market has priced in more than 50% chance of a 50bps cut with the balance pointing to a 25bps cut. However, I do think it is quite likely that the Fed is going to cut just 25bps based on recent inflation trend. And if this is indeed the case, the market will use it as an excuse for the next round of selling. Other than the Fed interest rate decision, we are also going to get several important economic news, including New Home Sales on Monday, Durable Goods Orders on Tuesday, ADP Employment report and Advanced Fourth Quarter GDP on Wednesday, Chicago PMI on Thursday, Non-farm payrolls and ISM Index on Friday. Any of the news above can be a market mover. On the earning’s front, we are going to get reports from 3M and Yahoo on Tuesday, Boeing and Amazon.com on Wednesday and Google on Thursday. Indeed it will be another busy week.