Tuesday, September 18, 2007

Morning Market Buzz 9/18/07

Finally, Federal Reserve policy makers are meeting. At about 2:15 the press release will be given to a gaggle of reporters located at the U.S. Treasury press room and the world will know what Bernanke and Company have decided to do.

The effective fed funds rate has been averaging 4.96% in recent weeks. 25 bps and it would seem the market will take a spanking. 50 bps cut would likely lead to happier Wall Street campers. But is this all about what makes Wall Street happy? In 1998, the Fed responded to the Russian default crisis with a modest 25 bps cut, but then after the market crumbled 6% in the next few trading sessions, the Fed hastily eased more aggressively. But this isn't 1998, and Alan Greenspan is now peddling his book. Don't forget, the moment the announcement is given this afternoon, attention will immediately shift to the October 31st Fed meeting. So the statement will be examined with an electron microscope for clues on what the Fed is planning going forward. The stock market's insatiable appetite for lower rates will instantly renew this incessant speculation over what Bernanke does next. Gag me with a spoon.

The outcome, to the say the least, is going to be interesting.

Jim Rogers, a guy who knows how to make money has something to say about the Fed: Jim Rogers Says Fed Rate Cuts Will Push Economy Into Recession.

As the Fed weighs systemic risks like the freeze up of the asset backed commercial paper market, there's also main street to worry about: August foreclosures zoom.

Northern Rock shares managed to rebound in London: UPDATE: Northern Rock Rallies After UK Govt Guarantees Deposits. This has turned out to be a potentially career ending situation for Mervyn King: Northern Rock crisis threatens Governor of the Bank of England's ....
Meantime, an ECB governor defends the recent cash injections to banks:ECB's Noyer says bank cash injections no bailout.

Ahead of the 2:15 announcement, all of the following is really just noise ahead of the Fed announcement, though much of the developments are positive for the stock market:

The often volatile August Producer Price index showed inflation at the wholesale level fell a whopping 1.4% August due to a decline in energy prices. The core, which factors out food and energy, was up .2% in August which was either double what was expected, or right in line -- depending upon which economist survey you looked at beforehand.

Lehman Brothers (LEH ) beat estimates with 3rd quarter earnings per share of $1.54 vs. consensus of $1.47. Revenue posted at $4.3 bln, in line with estimates. The firm made more money from equities fees and investment banking, which helped to offset what it called "substantial valuation reductions" on certain investments in the quarter (mortgage related).

Best Buy (BBY) numbers were also stronger than expected: Best Buy posts higher profit, raises year outlook.

Wall Street's bulls are happy this morning with the economic data and the latest batch of earnings. Treasurys remain flat, gold higher and crude oil is off the highs but still above $80. There's talk that if the rise above $80 lasts, it may spur some sort of OPEC action: OPEC to discuss further output hike if $80 oil lasts.

Among earnings out later in the week -- Fedex (FDX). That should be an interesting one from the perspective of how the U.S. economy is doing and what's going on with its overseas markets. This morning JP Morgan lowered FY08 earnings estimates to $7.03 from $7.25, expecting that FDX management will lower guidance when earnings are released Thursday. Still, JP Morgan is not expecting a large downside move in the stock after earnings are released.

Is it the Dreamliner, or a Nightmareliner? Fired engineer calls 787's plastic fuselage unsafe.

Slowly fading to black: UPDATE 1-Accredited Home posts big loss; survival in doubt .

If you've read this blog for a while, you know how I feel about homebuilders and thair fate. Beazer (BZH) looks among the worst: Banks drastically cut Beazer's loan limit.

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