Large cap financials also moved lower, though most big names like Bank of America and even Wells Fargo - the largest subprime lender - slipped less than 50-cents. The pressure was still enough to send the Dow lower by 29, or a quarter percent. The Nasdaq slipped only 1 point, but to the credit of the bulls the major indexes managed to end well above the lows of the day.
Not for nothing, but the index used to create swaps based on 20 triple-B bonds made up of subprime mortgages slumped today to its lowest point ever. This is from the Markit ABX indexes which I've talked about before. It now costs more than $700k to protect $10 mln worth of the bonds against default. Not quite GM crisis risk premium, but getting there. GM was but one company - this is gauging an entire industry... scary stuff...
Ultimately this raises the cost of capital for subprime lenders making it a vicious circle that gets them deeper into the hole. No doubt more subprimers will pre-announce but Wall Street's overall reaction was mild apart from taking the subprime stocks out to the back of the barn and shooting them.
10 yr treasury nudged higher today following decent demand at the 30 yr bond auction.
On to other matters...
BMC Software tonight posted earnings above expectations but lowered guidance. The stock scampered lower by 7%.
Crude oil has bounded above $60 tonight. There's evidence by way of the shippers again that OPEC has indeed been curtailaing production with tanker volume down by 200,000 bbl/day in January from December. Colder weather is also forecast to say around for much of the rest of the month according to the Climate Prediction Center. I remain long there after getting stopped out of a short position earlier in the day. We came close to the 10 day moving avg but just didn't make it.
Gold rebounded to $665 and I may be jumping back in. I probably should have jumped back in before the close late this afternoon, but was just too busy with too many other things. EuroFX is back up to $1.3060. The message was loud and clear today... Euro rate increase next month. G7 meets this weekend. I would be surrpised if they say much of anything about the Yen, even though the Europeans are unhappy about the Yen's weakness. There's is still deflation in Japan - can't see how anyone can argue against that and how the Japanese gov't can be prodded into lifting rates.