Stock Market Basics

[MTnews]

Daily Market Commentary for May 16 2008 Millennium-Traders.Com

Traders day traders are focusing on not making more trades but trying to make the best of the trades they can make. An increase of quiet trading action over the lunchtime period indicates that those playing these markets are doing so with caution avoiding the normal slow trading periods. (read more)

At the closing bell on the Stock Exchange here is how the major world indices major U.S. indices ended the session on the U.S. Markets:
DOW (Dow J Industrial Average) loss of 5.86 points on the day to end the session at 12986.80
NYSE (New York Stock Exchange) gain of 49.49 points to end the session at 9603.01
NASDAQ loss of 4.88 points for a close at 2528.85
S&P 500 gain of 1.78 points for a close at 1425.35
FTSE All-World ex-U.S. gain of 0.45 points to close at 257.29
FTSE RAFI 1000 closed at 5731.19
BEL 20 gain of 12.74 points to close at 3811.73
CAC 40 gain of 20.31 points to close at 5077.82
FTSE100 gain of 29.3 points to close at 6281.1
NIKKEI 225 loss of 32.2 points to close at 14219.50

News on the New York Stock Exchange (NYSE) today: advanced stocks 1654; declined stocks 1489; unchanged stocks 118; stocks hitting new highs 150; stocks hitting new lows 26. Daily Trading Range end of day trading results for volatile stocks on the NYSE traded by active Day Traders today: Rio Tinto plc (NYSE: RTP) gained 8.43 points on the trading day high on the trading day $557.55 low on the trading day $543.18 for a closing price at $554.83; Mosaic Company (NYSE: MOS) gained 0.73 points on the trading day high on the trading day $132.16 low on the trading day $127.69 for a closing price at $129.66; BMC Software Incorporated (NYSE: BMC) gained 2.22 points on the trading day high on the trading day $39.37 low on the trading day $37.02 for a closing price at $38.65; Kohl's Corporation (NYSE: KSS) shed 1.22 points on the trading day high on the trading day $49.60 low on the trading day $47.95 for a closing price at $49.27; Maguire Properties Incorporated (NYSE: MPG) shed 1.35 points on the trading day high on the trading day $16.56 low on the trading day $13.94 for a closing price at $15.20; Giant Interactive Group Incorporated (NYSE: GA) shed 0.69 points on the trading day high on the trading day $15.76 low on the trading day $14.97 for a closing price at $15.60; Apache Corporation (NYSE: APA) gained 7.33 points on the trading day high on the trading day $143.49 low on the trading day $138.22 for a closing price at $143.49; Mastercard Incorporated (NYSE: MA) shed 3.37 points on the trading day high on the trading day $288.80 low on the trading day $280.60 for a closing price at $283.40; Uniao de Bancos Brasileiros S.A. (Unibanco) (NYSE: UBB) gained 3.00 points on the trading day high on the trading day $155.22 low on the trading day $150.68 for a closing price at $152.04; InterContinental Exchange Incorporated (NYSE: ICE) shed 4.49 points on the trading day high on the trading day $160.39 low on the trading day $153.26 for a closing price at $154.51; Wimm-Bill-Dann Foods OJSC (NYSE: WBD) gained 6.98 points on the trading day high on the trading day $137.32 low on the trading day $125.86 for a closing price at $134.98; Mechel Open Joint Stock Company (NYSE: MTL) gained 11.58 points on the trading day high on the trading day $171.90 low on the trading day $158.66 for a closing price at $168.99; Cantel Medical Corporation (NYSE: CMN) shed 0.35 points on the trading day high on the trading day $11.80 low on the trading day $9.41 for a closing price at $9.72; Freeport-McMoRan Copper & Gold Incorporated (NYSE: FCX) gained 4.75 points on the trading day high on the trading day $124.50 low on the trading day $120.04 for a closing price at $124.18; Petroleo Brasileiro (NYSE: PBR) gained 2.38 points on the trading day high on the trading day $70.65 low on the trading day $68.98 for a closing price at $70.65; CME Group Incorporated (NYSE: CME) gained 3.75 points on the trading day high on the trading day $480.84 low on the trading day $473.93 for a closing price at $478.00; Fluor Corporation (NYSE: FLR) shed 0.27 points on the trading day high on the trading day $193.83 low on the trading day $188.95 for a closing price at $191.37; Potash Corporation of Saskatchewan Incorporated (NYSE: POT) gained 2.85 points on the trading day high on the trading day $207.94 low on the trading day $204.34 for a closing price at $207.00; Telephone & Data Systems Incorporated (NYSE: TDS) gained 5.04 points on the trading day high on the trading day $54.00 low on the trading day $47.62 for a closing price at $52.85.

News on the NASDAQ today: advanced stocks 1218 declined stocks 1655; unchanged stocks 146; stocks hitting new highs 60; stocks hitting new lows 67. Trading range end of day trading results for volatile NASDAQ stocks traded by active Day Traders today: Trico Marine Services Incorporated (TRMA) shed 2.43 points on the trading day high on the trading day $33.94 low on the trading day $32.26 for a closing price at $33.01; Zoltek Companies Incorporated (ZOLT) gained 4.47 points on the trading day high on the trading day $32.07 low on the trading day $26.97 for a closing price at $30.98; Intuitive Surgical Incorporated (ISRG) gained 6.77 points on the trading day high on the trading day $304.28 low on the trading day $292.30 for a closing price at $299.75; Stericycle Incorporated (SRCL) gained 4.00 points on the trading day high on the trading day $56.81 low on the trading day $54.19 for a closing price at $56.68; Esmark Incorporated (ESMK) shed 1.77 points on the trading day high on the trading day $16.48 low on the trading day $14.60 for a closing price at $14.63; First Solar Incorporated (NasdaqGS: FSLR) gained 4.36 points on the trading day high on the trading day $313.43 low on the trading day $306.21 for a closing price at $311.14; DryShips Incorporated (NasdaqGS: DRYS) gained 4.24 points on the trading day high on the trading day $112.00 low on the trading day $108.03 for a closing price at $110.74.

News on the American Stock Exchange (AMEX) today: advanced stocks 716; declined stocks 463; unchanged stocks 95; stocks hitting new highs 58; stocks hitting new lows 22.

University of Michigan Mid-May Sentiment came in at 59.5 as compared to April reading at 62.6; University of Michigan Mid-May Current Index came in at 71.7 as compared to April reading at 77.0; University of Michigan Mid-May Expectations came in at 51.7 as compared to April reading at 53.3; University of Michigan 12-Mo Inflation Forecast increased by 5.2% as compared to April reading of an increase by 4.8%; University of Michigan 5-Yr Inflation Forecast increased by 3.3% as compared to April reading of an increase by 3.2%;

University of Michigan Mid-May Sentiment lowest since June 1980.

U.S. April Housing Starts increased 8.2% to 1.032M compared to consensus of a drop by 1.4%; Building Permits increased 4.9% to rate of 978000 in April; March Housing Starts Revised to a decrease by 13.8% a decrease by 11.9%.

Remarks by Secretary Henry M. Paulson Jr. on the U.S. Economy Housing Capital Markets before the Washington Post 200 Lunch Washington - Over the last forty years Washington has transformed into a diverse corporate center. Congratulations to the Post for recognizing this through their annual list of 200. I am pleased to join you represent the "old" Washington the less than ten percent of the region's workers who work for the federal government. While the Post 200 companies may be headquartered here your operations span the nation the world so I will provide an update on the housing credit markets the U.S. economy look forward to learning your views of the same.

Housing Markets
The housing correction began in 2006 most forecasters expect a prolonged period of adjustment. Four points sum up my current view of the progress of that correction our efforts to minimize its spillover into the rest of the economy. First our focus since last summer - to help homeowners avoid preventable foreclosures is the right focus it has been successful. We encouraged the creation of the HOPE NOW Alliance of mortgage lenders servicers counselors to streamline efforts to help struggling borrowers. The Alliance reports that since July the industry has helped 1.4 million homeowners with loan workouts that allowed them to stay in their homes. The rate of workouts has now increased to about 2 million per year. In addition we've taken administrative steps to exp access to FHA programs enabled almost 200000 borrowers to refinance into affordable FHA mortgages since August. These are significant numbers a significant achievement particularly when you consider that 2 million is also the estimated number of homes that will go into foreclosure this year. Second there is no silver bullet to undo the lax underwriting practices of recent years. Because of these past excesses foreclosures will remain elevated even if we avoid every single preventable foreclosure. Third we know the correction has further to go so we should not be surprised at headlines that note rising foreclosures falling home prices. But the correction is progressing. We are working through the excess inventory the inventory of new single-family homes for sale is down 18 percent its 2006 peak. As of April single-family housing starts are down to a 692000 annual rate off 62 percent their January 2006 peak. We didn't get here quickly. There were years of excesses. this won't be resolved quickly. Fourth our work is not complete. Housing is the biggest risk to our economy; we are constantly monitoring the situation examining approaches to address the problem. We are particularly focused on monitoring continuously improving the execution of the HOPE NOW Alliance efforts working with Congress to complete work that is crucial to mortgage financing – creating a world-class regulator for Fannie Mae Freddie Mac the Federal Home Loan Banks modernizing the programs of the FHA so it can assist more homeowners without imposing additional burden on taxpayers. The mission of Fannie Freddie the two largest public companies on the Post 200 list is more critical now than ever. Together they touch 80 percent of current mortgage originations a regulator on par with other financial regulators will bring confidence to all mortgage market participants. I will elaborate on these points start by putting the American housing market the size of the problem in perspective. Although I am going to talk numbers statistics I know that beneath these numbers are many who are struggling their situation is both real difficult. As of the end of 2007 there were 55 million mortgages outsting 92 percent were being paid on time every month. About 6 percent had missed one or more payments the remaining 2 percent about 1 million were in the foreclosure process. There were 1.5 million foreclosures started in all of 2007. Between 2001 2005 a time of solid U.S. economic growth high home price appreciation about 650000 foreclosure starts occurred likely due to financial setbacks unforeseen life events. In this correction we see additional foreclosures because some people bought more home than they could ever hope to afford. Many of these people are becoming renters again. Foreclosures are also up due to an increased number of speculators who bought homes on the assumption that housing prices would endlessly appreciate. As housing prices decline some homeowners find they have negative equity in their homes. Negative equity is not a trigger for foreclosure it doesn't alter your monthly payment. When you are in your home for the long run to raise a family be part of a community prices will fluctuate throughout the years. Homeowners who can afford their payment should honor their obligations we know that the vast majority do. If someone can't afford their home must move it is painful. If someone walks away a mortgage they can afford it is irresponsible. In both these cases however there is little government or industry should do to prevent foreclosure. We are focused on those homeowners who both want to stay in their home with a little flexibility can afford to do so. We encouraged the formation of HOPE NOW in order to avoid a market failure. As mortgages have been securitized those securities spread around the world this complexity reduced the ability of investors to quickly respond to help struggling homeowners who both wanted to keep their homes were financially able to do so. The Alliance has worked to overcome legal technical accounting complexities to speed up simplify the refinancing modification process so that more people can be helped.

Avoiding Preventable Foreclosures
HOPE NOW has made enormous progress. I have met with Alliance members am pleased that they are focused on continuously learning their experience adapting their practices improving execution across the industry. Subprime adjustable rate mortgages account for about 40 percent of all foreclosures we have focused much of our efforts on preventing foreclosures here when possible. Our objective is not to imize modifications; it is to minimize foreclosures for those who could afford the starter rate. Because lower interest rates have significantly reduced the reset problem because industry has acted to fast-track eligible borrowers we are achieving our objective. Of the more than 400000 subprime mortgage resets originally scheduled for the first quarter of 2008 only 553 loans that were current at reset have entered foreclosure. We will continue tracking that number closely to monitor progress. Of course homeowners have responsibility as well. HOPE NOW members send over 200000 letters a month to at-risk homeowners. While the response rate has increased less than 3 percent to 20 percent that still means that 80 percent of at-risk borrowers do not respond to offers of assistance. We can't help those who aren't willing to help themselves we must continue to urge struggling borrowers that if they haven't already they need to reach out for help. We will continue to look for additional tools to reach help homeowners to make existing programs work more smoothly.

Mortgage Finance
As you all know the availability of mortgage finance has been an enormous challenge in recent months. Subprime loan originations are virtually non-existent today. The Administration has stepped up to that challenge by making FHA mortgages available to a broader group of borrowers. FHA originations are on pace to more than double in FY 2008. this is occurring without significantly increasing taxpayer risk. The new FHASecure program has refinanced over 200000 borrowers into affordable mortgages in the past eight months HUD is examining means of exping access further. We are also working with Congress to complete work on FHA modernization legislation proposed by President Bush last year which would increase the number of affordable FHA mortgages without imposing new costs on taxpayers. This legislation would reach another 250000 potential FHA borrowers. Fannie Mae Freddie Mac are guaranteeing a greater share of mortgages than ever before. It's never been more critical that markets have confidence in how these companies are overseen regulated. Given their size complexity important role we need to ensure that they have a regulatory structure on par with other financial institutions. I believe there is a renewed commitment in the Congress to completing meaningful GSE reform legislation. The House has passed a bill that makes good progress towards this goal I am pleased to see the Senate Banking Committee working hard to reach agreement on its version. The time has come to get this done.

Capital Markets
The excesses in the mortgage market were just one of numerous examples of excesses in the broader capital markets as investors reached for yield. This translated into undue leverage in financial instruments institutions which was not adequately recognized by market participants regulators in increased complexity of financial products. It will also take time for markets to work through these excesses. That being said we are seeing signs of progress as capital credit markets stabilize. The markets are considerably calmer now than they were in March. The de-leveraging re-pricing of risk continue as does the capital-raising that is so essential for our financial institutions to continue to support the broader economy. Market liquidity investor confidence are gradually improving not across the board but in several sectors including corporate bonds leveraged loans high yield debt. Credit default swap or CDS spreads on major bank brokerage firm Fannie Mae Freddie Mac debt have declined appreciably since March. Broader CDS indexes of investment grade high yield bonds have fallen as well while spreads generally are still elevated significant parts of the market including securitized credit interbank lending are not functioning as normal the trends indicate on-going improvement. Likewise we are seeing issuance gradually grow in certain credit sectors. We meet often with market participants investors to underst the remaining obstacles. They routinely report that time is the critical factor it simply takes time to reassess re-price risk regain confidence. We should not expect to work through this process quickly we should expect some bumps in the road ahead. But in my judgment we are closer to the end of the market turmoil than the beginning. Looking forward I expect that financial markets will be driven less by the recent turmoil more by broader economic conditions specifically by the recovery of the housing sector.

President's Working Group Recommendations
Our highest priority these past several months has been to address the short term issues arising market turmoil so as to reduce its impact on the rest of the economy. At the same time the President's Working Group on Financial Markets the PWG reviewed the causes of the recent turmoil has made recommendations to address them. Our review found that the turmoil was fueled by an abundant supply of easy credit a decline in mortgage other credit lending stards increasingly complex opaque financial instruments structures excessive leverage in our financial system investor credit ratings agency issues. The PWG presented specific near-term steps to address underlying weaknesses steps that should be implemented by regulators investors financial institutions credit ratings agencies. Among these we identified improvements to be made in every step of the mortgage originate-to-distribute model including stronger oversight of mortgage origination national licensing stards for mortgage brokers more disclosure ratings agencies improved due diligence by investors safeguards in mortgage securitization. We also outlined specific steps that credit rating agencies should take to provide information investors need to make more fully-informed decisions about risk. This will require reforming structured credit product rating processes implementing changes suggested by the SEC review of conflict of interest issues. Regulators must also review how they encourage the use of ratings in rules guidance. In recent years credit default swaps over-the-counter (OTC) derivatives have become integral for hedging credit default risk. Due to innovation dem we have seen tremendous expansion in the scale diversity impact of these instruments markets. As trading volumes have surged so has price volatility but market infrastructure has not sufficiently evolved to support this expansion. We need a functional well-designed industry cooperative that can meet the needs of the OTC derivatives markets in the years ahead. Such an industry cooperative must capture all significant processing events accommodate all major asset classes product types over the entire lifecycle of trades. It must be operationally reliable scalable enhance counterparty risk management through netting collateral agreements by promoting portfolio reconciliation accurate valuation of trades. We are working to implement these PWG recommendations will report on our progress later this year. Another issue that has been raised in recent weeks is investment bank access to the Federal Reserve's liquidity facilities. The Federal Reserve has made these available for a temporary period. Policymakers are considering the difficult issues associated with this extension of credit to non-banks.
Blueprint for a Modernized Financial Regulatory Structure
We are also focused on the long-term. In March we released a Blueprint for financial regulatory reform to frame the needed discussion that should lead to modernizing our regulatory structure to keep pace with our financial system. The ultimate beneficiaries improved financial market regulation are America's workers families businesses – both small large. Our current regulatory system has largely evolved early 20th century financial models; it's a system that has been patched together over time in response to the issues of the day. Regulators have adapted to keep pace with innovation but they do so within a rigid structure that can not readily adapt as the financial services industry evolves. The Blueprint included several immediate steps that we are already working to implement. One is a new executive order to clarify the PWG mission increase the PWG membership to include additional financial regulators. Through this we will formalize current coordination communication. This will support the PWG's efforts to enhance financial market integrity promote consumer investor protection. Second we recommended creating a federal Mortgage Origination Commission. The MOC would establish minimum conduct competency stards for mortgage originators require information to evaluate each state's mortgage compliance stards for improved transparency in the securitization process. This Commission coupled with the Federal Reserve's strong regulatory proposal regarding the Home Ownership Equity Protection Act (HOEPA) rules should go a long way in preventing recent issues recurring. Third we recommended that the Federal Reserve the SEC enter into a formalized information-sharing agreement. I am pleased to see this process underway. Fourth we recommended the creation of an office of insurance oversight housed at the Department of Treasury legislation has been introduced that is consistent with our recommendation. Beyond these steps the Blueprint's recommendations are intended to provoke thoughtful discussion that will ultimately lead to change. we must begin that discussion now because these changes are important to the long-term strength effectiveness of our capital markets.

U.S. Economy Stimulus Package
Although we are still working through housing capital markets issues expect to be doing so for some time we also expect to see a faster pace of economic growth before the end of the year. This is in part because the Administration Congress worked together worked quickly to pass the Economic Stimulus Act of 2008 a robust broad-based temporary package that will put money into our economy this year when it's needed. By the middle of July about 130 million households will have received nearly $100 billion. These payments along with the incentives for business investment included in the Act will provide a boost to our economy in the coming months add over 500000 jobs this year that wouldn't have been created otherwise. This fiscal stimulus will provide support to the economy as we weather the housing correction capital markets turmoil higher energy food prices. Unemployment remains low increased exports are partially offsetting other less positive factors. Overall I believe we are on the right path to resolving market disruptions building a stronger financial system. We are working through this period our long term prospects remain strong. One thing is very clear to me whatever our current difficulties I wouldn't bet against the U.S. worker or the U.S. economy.

Conclusion
America's workers have benefited six years of strong economic growth. We know that now they are also feeling the current strain. The President his entire economic team are vigilant. We are working to help Americans get through today's difficulties. while we do this I remind all of us that our economy is structurally sound with long-term fundamentals that compare favorably to any other place in the world.

Commodities Markets
Energy Sector: Light Crude (NYM) gained $2.17 on the day to close at $126.29 a barrel ($US per bbl.); Heating Oil (NYM) gained $0.08 on the day to close at $3.71 a gallon ($US per gal.); Natural Gas (NYM) shed $0.30 on the day to close at $11.26 per million BTU ($US per mmbtu.); Unleaded Gas (NYM) gained $0.06 on the day to close at $3.22 a gallon ($US per gal.).

Metals Markets: Gold (CMX) gained $19.90 to close at $899.91 ($US per Troy oz.); Silver (CMX) gained $0.28 to close at $16.96 ($US per Troy oz.); Platinum (NYM) gained $55.10 on the day to close at $2132.00 ($US per Troy oz.) Copper (CMX) gained $0.09 to close at $3.83 ($US per lb.).

Livestock Meat Markets (cents per lb.): Lean Hogs (CME) shed 0.80 to close at 76.25; Pork Bellies (CME) shed 2.95 to close at 77.67; Live Cattle (CME) shed 0.40 to close at 99.10; Feeder Cattle (CME) shed 0.20 to close at 113.08.

Other Commodities (cents per bu.): Corn (CBT) shed 8.00 to close the session at 591.00 Soybeans (CBT) gained 30.50 to close session at 1378.00.

At the close of the week performance results for our Moderators:

Stocks Trading Room:
Jeannie - $4595
Barry - $8602
Marty - $4865
Sam - $2147

Futures Trading Room:
JT - $5597.50

Forex Trading Room:
JT - $13050

Daily Swing Trades:
Barry - $7640

Weekly Swing Trades:
Jeannie - $-2200

Bond action for the day: 2 year bond closed with no change at 99 12/32 with a Yield of 2.44 Yield Change +-0.01; 5 year bond closed with no change at 100 1/32 with a Yield of 3.11 Yield Change 0.00; 10 year bond shed 2/32 to close at 100 5/32 with a Yield of 3.85 Yield Change +0.01; the 30 year bond shed 5/32 to close at 96 19/32 on the day with a Yield of 4.58 Yield Change +0.01.

The e-mini Dow $5 ended the commodity session today at 12985 with a loss of 11 points on the trading session. Futures Traders should review workshops available at the CBOT (Chicago Board of Trade). Educational in-person seminars schedules available on the CBOT (Chicago Board of Trade) website.

Monitor scheduled economic data every market morning by viewing the Daily Market Report Millennium-Traders free access to visitors on our website.

Subscribe to our free Weekly MarketNews for a review of the past weeks trading action plus view upcoming economic data for the week ahead.

Review archives of the News & Commentary plus our FREE Monthly Trading Lesson posted on our website.

Thanks for reading
Millennium-Traders.Com