Stocks Surge on Rate Cut Hopes

Discussion in 'Trading' started by S2007S, Oct 1, 2007.

  1. S2007S


    Now I see why were up again, on more rate cut "HOPES"

    Too funny, the federal reserve has to cut rates to keep one thing going, this ultimate bull rally. Everyone should be ready for another .25 Rate cut at the next meeting.

    Stocks Surge on Rate Cut Hopes
    Monday October 1, 1:21 pm ET
    By Joe Bel Bruno, AP Business Writer
    Wall Street Surges After Manufacturing Report Raises Prospects for Another Interest Rate Cut

    NEW YORK (AP) -- Wall Street shot higher Monday, sending the Dow Jones industrial average above 14,000 for the first time in 2 1/2 months as investors moved back into stocks at the start of the fourth quarter.

    While the beginning of the new quarter was an incentive for institutional investors to buy, the market was also encouraged that the worst might be over from the summer's credit and stock market turmoil. And new economic data might nudge the Federal Reserve toward another interest rate cut at its Oct. 30-31 meeting.

    Investors bought financial shares on the belief that the industry has generally weathered the recent credit market upheaval. Both Citigroup and Switzerland's UBS AG issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.

    The market grew more optimism that the Fed might lower rates to boost the economy after a report showed that manufacturing grew in September at the slowest pace in six months. The Institute for Supply Management said its index of manufacturing activity registered at 52.0 in September, below forecasts for a reading of at least 52.5.

    "People are getting more confident there is going to be an October rate cut," said John C. Forelli, portfolio manager for Independence Investment. "To some degree, it looks like Citi kitchen-sinked the quarter, and that from here going forward will be calmer. That's underpinning the financials."

    Enthusiasm about acquisition activity picked up after Nokia unveiled an $8.1 billion offer to buy navigation-software maker Navteq Corp. The deal was seen as a signal that corporations are feeling comfortable in making big moves despite recent market turbulence.

    In early afternoon trading, the Dow rose 148.59, or 1.07 percent, to 14,044.22. The blue-chip surpassed its closing record of 14,000.41 set in mid-July, rising as high as 14,056.09.

    Broader market indexes also rose sharply. The Standard & Poor's 500 index rose 15.25, or 1.00 percent, to 1,542.00; and the Nasdaq composite index rose 29.22, or 1.08 percent, to 2,730.72.

    The Dow finished a turbulent third quarter with a 3.6 percent gain, after the Federal Reserve eased investor concerns over the credit and housing markets by lowering key interest rates half a percentage point.

    Bonds moved higher, with the yield on the benchmark 10-year Treasury note falling to 4.56 percent from 4.59 percent late Friday. Fixed-income investors were also encouraged about the prospects of another interest rate cut.

    The dollar was mixed against other major currencies, while gold prices were higher.

    A barrel of light, sweet crude fell $1.57 to $80.89 on the New York Mercantile Exchange. This extended last week's decline amid concerns that oil market fundamentals do not support recent high prices.

    Arthur Hogan, chief market analyst at Jefferies & Co., said the biggest tipping point of the day was financial stocks. For the first time, Citi -- considered a barometer for the banking industry -- is giving some real number about the extent of its damage, he said.

    "If they are giving us worst-case scenario, then market participants are feeling that most of the stuff we've worried about since July will remain contained," he said. "That's the celebration the market is putting on right now, and the take away is that the black hole of not knowing finally has some numbers around it."

    Financial services stocks rose after Citi Chief Executive Charles Prince said "we expect to return to a more normal earnings environment" during the fourth quarter. The nation's largest financial company said third-quarter profit will fall 60 percent after writing down more than $3 billion from underperforming mortgages and loans tied to corporate buyouts.

    Citi rose $1.07, or 2.3 percent, to $47.74. Easing jitters about subprime mortgages also lifted Countrywide Financial Corp. 87 cents, or 4.6 percent, to $19.88, among others.

    Rival UBS reported it would take a pretax loss of up to $690 million in the third quarter, and will cut 1,500 jobs from the bank's work force of 80,000 by year end. Shares of UBS rose $1.76, or 3.3 percent, to $55.01.

    Credit Suisse Group followed the UBS statement with its own, saying that it expects to report a third-quarter profit of about $860 million despite stormy conditions. Shares of the bank rose $1.44 to $67.77.

    Homebuilding stocks -- another group that has been hard hit in recent weeks -- turned around after several big players in the sector were upgraded by Citigroup. The report said large-cap builders with stronger balance sheets should benefit in the coming quarters.

    Lennar Corp. rose 57 cents, or 2.5 percent, to $23.22; D.R. Horton Inc. added 42 cents, or 3.3 percent, to $13.23; and Pulte Homes Inc. was up 50 cents, or 3.7 percent, at $14.11.

    Nokia fell 6 cents to $37.86 after it announced it planned to buy Navteq, whose shares fell $1.45 to $76.52. The stocks of acquiring companies tend to fall after takeover announcements amid concerns that a deal might burden the purchaser with debt. The deal is the first announced during the fourth quarter. During the third quarter, there was $992.1 billion worth of deals during the third quarter -- down 43 percent from the second quarter, according to data tracker Dealogic.

    Drugstore operator Walgreen Co. fell $6.99, or 15 percent, to $40.25 after it reported fourth-quarter profit dropped 4 percent due to lower reimbursements on generic drugs. However, rival CVS Caremark Corp. reaffirmed its guidance. CVS shares fell $1.80, or 4.5 percent, to $37.83.

    The Russell 2000 index of smaller companies was up 14.69, or 1.82 percent, at 820.14.

    Advancing issues led decliners by a 3 to 1 basis on the New York Stock Exchange, where volume hit 638 million shares.

    Overseas, Britain's FTSE 100 rose 0.61 percent, Germany's DAX index rose 0.77 percent, and France's CAC-40 added 1.01 percent. In Asia, Japan's Nikkei stock average closed up 0.36 percent, while the market was closed in Hong Kong for a holiday.
  2. Wow really?? If they cut rates im a buyer.
  3. they still have room for another 19 cuts 25 bp each

    After that Hello Japan!
  4. Just a suckers rally :p
  5. The market is adjusting to the new Fed, I thought Greenspan was easy, but Bernanke is a friggin money whore. LOL He's never met a helicopter he didn't like.

    He might cut 50 bp on Halloween, trick or treat!!!!!!!!!!
  6. Funny thing is, last time they cut rates we were making lower lows, now were making higher highs, so what gives?
  7. lots of investors buying for the long haul
  8. They cut today in secret.
  9. If each 50 basis points is equal to 1000 points in the dow why dont we just cut to zero and put the dow at 20000.
  10. just a liquidity rally. the more the market goes up the bigger the drop.

    its only a matter of time before increasing liquidity doesn't work anymore. to keep the markets moving more and more liquidity is needed.

    you know things are bad when bad news becomes good news.
    #10     Oct 1, 2007