Major indices at their highs for the day. Helping today: Initial jobless claims roughly in line with expectations. Bush/Congress tackles mortgage issues. SIVs less a problem?
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Are bonds about to lose their flight-to-quality premium? The Fed, the executive branch, the legislative branch, and now even the Bank of England (which cut its key rate a quarter point to 5.5 percent) are working to resolve credit problems. The 10-year is looking toppy here.
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Futures up a bit on the strong ADP report. This is a clear sign that the market wants a decent jobs report, even if it might slightly reduce the chance of an aggressive Fed rate cut. As noted yesterday, financials analysts are now cutting 2008 estimates.
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Why are financials weak again? Because the Street has come to realize that estimates for 2008 are too high. They have already attacked earnings for the fourth quarter (S&P Financial Sector estimates for Q4 are down 20% compared to the same period last year); now they are attacking 2008.
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Futures lower this morning on pressure from the financials. The UBS headline for the bank analyst report this morning tells the story: lower earnings ahead. They are adjusting their 2008 earnings expectations for many banks and brokers.
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We are still waiting for the NYSE to announce the winner of the bid for Van der Moolen's specialist business. Van der Moolen announced a couple weeks ago that they were exiting the business; I have reported Lehman is the winner, but there has been no official announcement.
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Financials again underperformed today, despite Treasury Secretary Paulson's press conference highlighting his efforts to help homeowners whose ARMs are resetting at higher rates. One likely cause of the continuing selloff in financials is tax loss selling. Keefe Bruyette Woods highlighted this in a note today to investors.
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Treasury Secretary Paulson has been floating a plan to help people whose Adjustable Rate Mortgages (ARMs) are resetting at higher rates. The Street, for the most part, supports the plan, but does it really change the fundamentals of the housing industry?
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Dow up 40 points, S&P up 4 points since Treasury Secretary Paulson has been on talking about efforts to help homeowners who are facing mortgage resets. Nothing new here; but the image of Paulson talking about problems are helping the markets.
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One of the biggest problems the Street has is that no one knows how to value assets that are plummeting: in particular mortgage backed securities and their derivatives, and (to a lesser extent) land in markets that are experiencing severe downturns.
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A CNBC reporter since 1990, Pisani reports on Wall Street and the stock market from the floor of the New York Stock Exchange. Follow him on Twitter @BobPisani.