Wednesday, March 28, 2007

Morning Market Comment

The market is bracing itself for Ben Bernanke's appearance at 10:30 before the Joint Economic Committee. Bernanke's been on the high wire and it will be interesting to see the balance he strikes between talk of saving the housing market or a need to be vigilant on the inflation front, or if he emphasizes one vs the other. The 30 year bond yield has been climbing, especially since the Fed rate decision/murky statement. The 30 year has fallen in the face of weak economic data in recent days as the chorus grows for Fed rate cuts to shore up housing.

The point being - a dovish Fed has not been well received by the bond market and that further strong hints or lowered short term rates by the Fed could interestingly enough push yields up on the securities that... bingo - impact mortgages. One side note: the yield curve has un-inverted itself in recent days as long rates have gone up and that sure doesn't mean risk of recession is gone - it seems to me that it means disorder and uncertainty abound as the Fed faces inflation and a weakening economy. Such fun!

Bernanke won't be getting much support from the markets today which are in a dither over everything from an FBI probe of Beazer Homes to Middle East tensions. Even today's durable goods orders data looks feeble: U.S. Feb. durable goods orders rise 2.5%.

Beazer Homes (BZH) down 11% on word of the FBI probe. Full Charlotte Observer Story. What other names? National City (NCC) mentioned in that Charlotte story as a key lender and that's worrisome; a name like NCC out of the blue is flash in the frying pan. That to me is called 'spreading contagion'. Other names? That's something everyone will be digging into. Home builder stocks across the board weak and a very sullied looking group this morning.

Wachovia is telling clients NOT to bottom fish BZH shares, seeing significant downside.

Crude oil, energy continues on the rise. We'll see how things shake out at 10:30 when the inventory data come through.

At the very least for the stock market, 1409/1410 area is what I am eyeing for support; that area was a resistance area for a brief time as the market rebounded.

GM is reported to be out of the running for Chrysler.

Does Cadbury's chief have a taste for more than a Hershey bar? Of course, such a deal would be difficult given the company's stock ownership structure which dates back to the wishes of founder Milton Hershey. Interestingly, Hershey's implied volatility is just 17.

Potential buyers still eyeing Palm: source.

The Journal reports IndyMac's (NDE) chairman and a director bought $1 mln worth of the mortgage company's stock.

Yahoo will soon be rolling out unlimited email storage.

Pete Stolcer's has a full list of movers this morning.

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