每日市場點評 --- March 13, 2008

There are more than a dozen reasons that could drive the market down by more than 300 points. But in the end, one report saved that from happening and all three major indices ended the day in green. What a remarkable day and it should not be easily forgotten by bulls and bears alike. Before the stock market open in the US, there was simply no good news to cheer about. Even worse, we got some overwhelmingly bearish news.

Start with the troubled hedge fund Carlyle Capital. Although the story that Carlyle failed to meet more than $400 million of margin calls on mortgage-backed collateral was revealed earlier last week, it was still a shock to the financial industry when the fund failed to reach an agreement with its creditors that may prevent it from being liquidated. With more than $16 billion mortgage-backed securities at stake, there was no doubt that a fire-sale of its assets would add further pressure to the already fragile mortgage security market. Also, investors were concerned that the issue at Carlyle may well be just a tip of the iceberg and more hedge funds employing similar strategy and level of leverage may explode. Indeed, the news sent the dollar to a record low against the Euro and a 13-year low against the Yen overnight. Not surprisingly, the overseas equity markets were doing terrible. The Nikkei 225 Average lost more than 3% and closed at the lowest level since Aug 2005. In Hong Kong, the Hang Seng Index lost almost 5%. And stock exchanges in many European countries were down by 2 – 3% before the US market open and the futures in US indicated more than 1% lower open in S&P500 index. Meanwhile, gold climbed above the $1000 mark for the first time in history and oil was above $110 per barrel.

The economic news in the US this morning didn’t help things either. The closely watched weekly initial claims came at 353K, unchanged from the previous week’s figure and matching expectation. But the continuing claims continued to move higher and reached 2.835 million, the highest since September 2005. Separately, the monthly retail sales missed expectation by a wide margin. The overall sales dropped 0.6% following a gain of 0.4% in January while economists expected a gain of 0.2%. Excluding the volatile auto sales, consumers still reduced their spending by 0.2% while economist forecasted a gain of 0.2%. There was little light in the housing market either. The California-based RealtyTrac, a seller of foreclosure data, reported today that US home foreclosure filings jumped 60% in February and more than 223K properties were in some stage of default, which was certainly not good news to those that had hoped a housing bottom is near the corner.

The market opened sharply lower as a result. At its worst, Dow was down over 230 points and financials were down by as much as 4% and slightly breached its lows reached earlier this week. It looked as if the market were going to be in free fall then something interesting happened. The market started to move higher after S&P reported that the sub-prime related write-downs may be half done. The agency estimated that total write-downs could reach $285 billion compared to the current level of $150 billion. Although there was still more pain to go through, investors seemed to be relieved that at least the number was not as high as some other institutions had suggested (for example, UBS expected more than $600 billion in write-downs). At the end of the day, all 10 major sectors were closed in green. The market breath was also positive with more advance volume than decline volume on both NYSE and Nasdaq. Despite today’s rather remarkable reversal, the market still faces quite a few headwinds. The CRB index closed at another all time high while the dollar index was at new low. Tomorrow we are going to get the latest CPI data and from today’s import price report, we may see some worse-than-expected reading in CPI. Indeed, there is no easy time in this market.