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Daily Market Commentary for October 29, 2009
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GDP
Commerce Department reported Thursday that GDP rose
at an annual rate of 3.5 percent in the third quarter, this was the first time
in over a year that it grew, the last time was in 2008's second quarter. Stocks
rose on the announcement as investors got the confidence boost they needed.
Analysts say today's report proves the recession is over and the economy is in
recovery, but warn more problems still exist. Economists expected GDP to have
grown at a 3.2% annualized rate in the third quarter after shrinking at a rate
of 0.7% in the second quarter. Some are wondering if GDP will sustain it's
increase and believe that the rise was largely due to the government stimulus
programs such as the first time home buyer tax credit and the cash for clunkers
program. There are other signs that the economy is recovering, the Labor
Department reported that initial jobless claims fell in the week ending October
24, jobless claims came in at 530,000, down 1,000 from the previous week.
Procter & Gamble (PG) reported a 3% gain in the third-quarter, however the
company reported a 6% decline in net revenue, to $19.8 billion, shares
rose 4.6% this morning. Exxon Mobil (XOM) said its earnings fell to 98 cents per
share in the third quarter, compared to the $2.85 per share a year-ago, revenue
totaled $82.26 billion in the third quarter With shares falling 2% this morning.
The rise in stocks caused the dollar to weaken and bond prices fall, the yield
on the benchmark 10-year Treasury note rose to 3.48 from 3.40 Tuesday,
commodities like oil and gold rose.
Comments from U.S. Federal Reserve Board Governor Daniel Tarullo:
New capital, liquidity rules will help end too big to fail; considering
quantitative liquidity standards.
Treasury Secretary Timothy F. Geithner Written Testimony House Financial
Services Committee: Chairman Frank, Ranking Member Bachus, members of the
House Financial Services Committee, it is a pleasure to appear before you today
as we continue working towards comprehensive reform of our financial system. The
Chairman and the Committee have made important progress over the past several
weeks. Against strong opposition, you have acted swiftly to lay the foundation
for far-reaching reform that would better protect consumers from unfair and
fraudulent lending practices, regulate the derivatives market, improve investor
protection, reform credit rating agencies, and extend basic oversight to hedge
funds and other unregulated financial entities. Today, the Committee carries
that momentum forward, tackling an extremely difficult and important issue: how
to prevent excessive risk-taking by large financial firms and make sure that
when those firms fail during a future crisis, the government can contain damage
to the economy without imposing costs on taxpayers. Over the past few decades,
we have seen the significant growth of large, highly leveraged financial firms.
These firms benefited from the perception that the government could not afford
to let them fail, creating a classic moral hazard problem. During the recent
financial crisis, in order to preserve the stability of the financial system,
protect the savings of Americans and prevent greater economic fallout, the
government was forced to step in and stand behind almost all of these firms.
That cannot happen again. No financial system can operate efficiently if
financial institutions and investors assume that the government will protect
them from the consequences of failure. We cannot put taxpayers in the position
of paying for the losses of large private financial institutions. We must build
a system in which individual firms, no matter how large or important, can fail
without risking catastrophic damage to the economy. In June, the Administration
outlined a comprehensive set of proposals to achieve this goal. Since then,
after extensive work, the Chairman has drafted new legislation. We believe that
the test for any effective set of reforms is whether it has five key elements.
And we believe that the Chairman's bill meets that test.
Orderly Resolution of Failing Financial Institutions
First, the federal government must have the ability to resolve failing major
financial institutions in an orderly manner, with losses absorbed not by
taxpayers but by equity holders, unsecured creditors and, if necessary, other
large financial institutions. In all but the rarest of cases, bankruptcy will
remain the dominant tool for handling the failure of non-bank financial firms.
But as the collapse of Lehman Brothers showed, the Bankruptcy Code is not an
effective tool for resolving the failure of a global financial services firm in
times of severe economic stress. The Bankruptcy Code focuses almost exclusively
on maximizing the interests of a firm's creditors, with little or no concern for
spill-over effects on the financial system or the economy. It often moves too
slowly. And it contains too few mechanisms for the stabilization of critical
operations of a failed firm. Recognizing this, Congress established a separate
resolution regime for banks and thrifts, allowing the Federal Deposit Insurance
Corporation (FDIC) to accomplish orderly failures of depository institutions. We
need to adapt this effective and proven mechanism to address the significant
risks associated with the failure of large financial institutions. Under the
proposed special resolution authority, a failing firm would be placed into an
FDIC-managed receivership. The purpose of the receivership would be to unwind,
dismantle, sell, or liquidate the firm in an orderly way that protects the
financial system at lowest cost to taxpayers. Shareholders and other providers
of regulatory capital of the failing firm would be forced to absorb losses, and
managers responsible for the failure would be replaced. Such an approach allows
the government to reduce the risk that failure would result in panic by
creditors and shareholders of other firms and helps maximize recovery of the
value of the firm's assets. Use of the proposed resolution authority would only
be permissible if a financial firm is in default or in danger of imminent
default; if the failure of the firm would have serious adverse effects on
financial stability; and if use of the proposed regime would avoid or mitigate
those adverse effects. We need strong checks and balances and any action would
require agreement by the FDIC, the Federal Reserve, and the Treasury, in
consultation with the President.
No Open-Bank Assistance to Failing Financial Institutions
The second element of effective reform is making sure that any individual
firm that puts itself in a position where it cannot survive without special
assistance from the government must face the consequences of failure. The
proposed resolution authority would not authorize the government to provide
open-bank assistance to any failing firm. In other words, it would not permit
the government to put money into a failing firm unless that firm is in
government receivership and on the path to being unwound, sold or liquidated.
The authority would facilitate the orderly demise of a failing firm, not ensure
its survival, and would strengthen market discipline and reduce moral hazard
risks.
Protecting Taxpayers from Losses
The third element of effective reform is making sure that taxpayers are not
on the hook for any losses that might result from the failure and subsequent
resolution of a large financial firm. The government should have the authority
to recoup any such losses by assessing a fee on large financial firms. These
assessments should be stretched out over time, as necessary, to avoid adding to
the pressure induced by the crisis. Such an ex-post funding mechanism has
several advantages over an ex-ante fund. Most notably, it would generate less
moral hazard because a standing fund would create expectations that the
government would step in to protect shareholders and creditors from losses. In
essence, a standing fund would be viewed as a form of insurance for those
stakeholders.
Limiting the Federal Reserve's and the FDIC's Emergency Authorities
The fourth element of effective reform is limiting the emergency authorities
of the FDIC and the Federal Reserve so that they are subject to appropriate
checks and balances and can be used only to protect the financial system as a
whole. These authorities should only allow for temporary support, with an
appropriate fee, that is designed to enable healthy institutions to continue
operating and to prevent the disruption of credit flows during a severe economic
downturn. Specifically, the Federal Reserve's ability to extend credit to
failing non-bank firms under section 13(3) of the Federal Reserve Act should be
eliminated. Going forward, the Federal Reserve should be able to use 13(3) only
to provide liquidity to solvent firms during periods of severe stress in the
financial markets or US economy. Use of the Federal Reserve's 13(3) authority
should require prior written consent of the Treasury. With these reforms, the
Federal Reserve would preserve its valuable central bank authority to act as the
lender of last resort for a financial system in crisis, but would no longer be
able to come to the rescue of failing firms such as Bear Stearns or AIG. The
FDIC should only be able to provide liquidity or guarantees to solvent non-bank
financial firms with strong checks and balances. Any such use must be authorized
by the Treasury and two-thirds of the boards of the Fed and the FDIC. In
addition, any use must be recouped with assessments on the largest non-bank
firms.
Stronger Constraints on Size and Leverage
The fifth element of effective reform is giving the federal government
stronger supervisory and regulatory authority over major financial firms, and
making sure that key financial markets and market infrastructure have buffers
strong enough to absorb losses associated with periods of financial stress.
Regulators must be empowered with explicit authority to force major financial
firms to reduce their size or restrict the scope of their activities when
necessary to limit risk to the system. This is an important tool to deal with
the risks posed by the largest, most interconnected financial firms. Regulators
must be able to impose tougher requirements – most crucially, stronger capital
rules and more stringent liquidity standards which would reduce the probability
that major financial firms experience financial distress, either through capital
depletion or a run by creditors. This would provide strong incentive for these
firms to shrink, simplify, and reduce their leverage. In addition, major firms
must be subject to a prompt corrective action (PCA) regime and be required to
prepare and regularly update what some have called "living wills," which are
plans for their rapid resolution in the event of distress. These plans would
leave us better prepared to deal with a firm's failure, and provide another
incentive for firms to simplify their organizational structures and improve
their risk management. To build-up shock absorbers system-wide, all firms must
face higher prudential requirements. And we are negotiating a new international
accord to establish a level playing field for capital requirements. This accord
will raise capital requirements, improve the quality of capital, establish
strong liquidity requirements that reduce reliance on unstable short-term
funding, raise capital charges on more risky activities and help make regulation
less pro-cyclical, so that they will more likely dampen rather that amplify
future instability. We must also improve supervision and regulation of
derivatives markets and critical payment, clearing, and settlement systems;
increase transparency throughout the financial system; and align incentives to
improve securitization markets. This should be done at home and abroad.
Finally, we must close loopholes and reduce possibilities for gaming the system.
Monitoring threats to financial stability will fall to the proposed Financial
Services Oversight Council. The Council would have the duty and authority to
identify any financial firms whose size, leverage, complexity, and
interconnectedness pose a systemic threat and require those firms to submit to a
system of heightened supervision and regulation. The Federal Reserve would
oversee individual major financial firms so that there is clear, inescapable,
single-point accountability. The Fed already supervises all major U.S.
commercial banking organizations on a firm-wide basis and all major investment
banks as well.
Conclusion
The current rules in place for our financial system are inadequate and
outdated. We have all experienced what happens when, during a crisis, the
government is left with limited tools and limited choices. That is the searing
lesson of last fall. In today's markets, capital moves at speeds unimaginable
when our current regulatory framework was created. And today's economy requires
that Congress bring that framework into the 21st century, granting the
government carefully constrained power to contain damage to the economy while
managing the failure of large, complex financial institutions. The bill before
the Committee does that. It represents a comprehensive, coordinated answer to
the moral hazard problem posed by our largest, most interconnected financial
institutions. It produces strong, accountable supervision of all our major
financial firms and imposes costs not on the taxpayer but with the risk-takers,
where they belong. It deters excessive risk taking and forces firms to better
protect themselves against failure. It creates a strong, resilient,
well-regulated financial system that can better absorb failure when it happens.
And it establishes a resolution regime allowing the government, when the
financial system is at risk, to unwind and break up a failing financial firm
without imposing costs on taxpayers. What this bill does not do is provide a
government guarantee for troubled financial firms. It does not create a fixed
list of systemically important financial firms. It does not create a permanent
TARP-like authority. It does not give the government broad discretion to step in
and rescue insolvent firms. And it does not give comfort to investors,
creditors, counterparties, or management that the government will be there to
absorb losses from risky business strategies. With this bill we are looking
forward, not backwards. We are looking to provide future Administrations with
better options than existed last year. This is still an extremely sensitive
moment for the financial system. Investors across the country and around the
world are closely watching each step we take. And it is important for them to
understand that the bill we are debating today is about giving the government
better tools to deal with future crises, while we work to repair the damage
caused by this crisis. Mr. Chairman, the American people are counting on us to
get this right and to get this done. You have made enormous progress already and
we look forward to working with you so that we can put in place comprehensive
reforms that will restore confidence in our financial system at home and abroad.
Thank you.
Economic data released today:
GDP [Gross Domestic Product] Price Index:
U.S. GDP rose 3.5% rate in 3Q compared to consensus of an increase by 3.2%;
Real Final Sales rose 2.5% in 3Q; CE Price Index rose 2.8% rate in 3Q; Core PCE
Price Index rose 1.4% rate in 3Q; Domestic Purchases Price Index rose 1.6% rate
in 3Q; Chain-Weighted Price Index rose 0.8% rate in 3Q.
Initial Jobless Claims:
U.S. Jobless Claims in week of October 24 fell 1K to 530K compared to
survey of a decrease by 6K; U.S. Continuing Claims for week of October 17 fell
148K to 5,797,000; U.S. Jobless Claims Unrevised for week of October 17 at 531K.
At the NYSE closing bell on the New York Stock Exchange, here is how the major
world indices and major U.S. stock indices ended the trading session on the
world markets as well as the emerging markets including the stock market closing
bell price:
DOW (Dow
Jones Industrial Average) triple digit gain 193.39 points, EOD 9,956.08
NYSE (New York Stock
Exchange) triple digit gain 189.62, EOD 6,955.31
National Association of Securities Dealers Automated Quotations (NASDAQ)
gain 39.02 points, EOD 2,098.63
S&P 500 (SPX) gain 23.42 points, EOD 1,066.05
BEL 20 (BEL20) gain 68.49 points, EOD 2,440.45
CAC 40 (CAC40) gain 50.24 points, EOD 3,714.02
FTSE100 (UKX100) gain 57.3 points, EOD 5,137.72
NIKKEI 225 (NIK/O) shed 183.95, EOD 9,891.10
New York Stock Exchange (NYSE) stock market indicators for the trading session
today:
Advanced stock prices 2,512 declined stock prices 823, unchanged stock
prices 105, stock prices hitting new highs 19 and stock prices hitting new lows
39. NYSE quotes for volatile stocks and market trends, as well as stock quotes,
stock prices and stock symbols of Day Trading Stock Picks on the New York Stock
Exchange stock market for Day Trading online and active Day Trading for those
who are or would like to be Day Trading for a living: LNC gain 3.02, HOD 25.88,
LOD 23.65, EOD 25.27; FLS gain 3.62, HOD 103.63, LOD 94.12, EOD 103.05; CME gain
5.75, HOD 315.88, LOD 292.96, EOD 313.77; AVB gain 0.40, HOD 71.23, LOD 66.90,
EOD 70.18; FAS gain 7.87, HOD 77.48, LOD 71.59, EOD 77.35; EDC gain 16.12, HOD
137.57, LOD 126.77, EOD 136.14; CBG shed 0.16, HOD 11.49, LOD 10.73, EOD 11.30;
MWW shed 0.60, HOD 16.59, LOD 14.82, EOD 15.89; AEM shed 4.44, HOD 58.77, LOD
56.01, EOD 57.18; POT gain 2.88, HOD 97.69, LOD 95.00, EOD 96.82; ESI shed 0.66,
HOD 95.43, LOD 90.20, EOD 92.46; CRR gain 9.83, HOD 62.19, LOD 54.99, EOD 60.89.
National Association of Securities Dealers Automated Quotations (NASDAQ)
stock market indicators for the trading session today:
Advanced stock prices 1,928, declined stock prices 2,328, unchanged
stock prices 91, stock prices hitting new highs 17 and stock prices hitting
new lows 48. NASDAQ quotes, volatile stocks and market trends, as well as stock
quotes, stock prices and stock symbols of Day Trading Stock Picks on the NASDAQ
stock market for Day Trading online and active Day Trading for those who are or
would like to be Day Trading for a living: AAPL gain 3.95, HOD 196.81, LOD
192.14, EOD 196.35; FSLR shed 25.11, HOD 129.23, LOD 122.75, EOD 126.47; AMZN
gain 0.93, HOD 124.30, LOD 120.12, EOD 122.57; BIDU shed 3.43, HOD 400.88, LOD
389.11, EOD 393.40; WYNN gain 2.42, HOD 57.19, LOD 54.52, EOD 56.29; IDCC gain
1.94, HOD 20.83, LOD 19.40, EOD 20.51; SYMC gain 2.01, HOD 17.83, LOD 16.92, EOD
17.74; ITRI gain 4.18, HOD 62.02, LOD 57.20, EOD 61.79; TSPT shed 5.57, HOD
6.62, LOD 5.51, EOD 5.90; CERN gain 1.13, HOD 82.40, LOD 75.75, EOD 77.99.
Market trends on the American Stock Exchange (AMEX) and stock market indicators
for the trading session today:
Advanced stock prices 340, declined stock prices 183, unchanged stock
prices 38, stock prices hitting new highs 6 and stock prices hitting new lows
3.
Chicago Board of Trade Futures Market for the day, at time of this posting:
E-mini S&P 500 (ES) Dec 09: EOD 1059.50; Change 21.00
E-mini NASDAQ-100 (NQ) Dec 09: EOD 1,706.25; Change 26.25
E-mini DOW $5 (YM) Dec 09: EOD 9,886; Change 175
E-mini S&P MidCap 400 (MF) Dec 09: EOD 674.70; Change 11.70
Nikkei 225 (Yen) Dec 09: EOD 10,040; Change 160
World Currencies for the Forex Market, for Forex Trading by active Forex
Traders, at time of this posting:
Euro 0.6743 U.S. Dollars 1.4830
Japanese Yen 91.4500 to U.S. Dollars 0.0109
British Pound 0.6050 to U.S. Dollars 1.6529
Canadian Dollar 1.0665 to U.S. Dollars 0.9376
Swiss Franc 1.0188 to U.S. Dollars 0.9815
COMMODITY MARKETS:
Energy Sector - Nymex:
Light Crude (December 09) gain $2.41, EOD $79.87 per barrel ($US per barrel)
Heating Oil (December 09) gain $0.06, EOD $2.08 a gallon ($US per
gallon)
Natural Gas (December 09) no change, EOD $5.06 per million BTU ($US per mmbtu.)
Unleaded Gas (November 09) gain $0.03, EOD $2.02 a gallon ($US per
gallon)
Metals Markets - Comex:
Gold (December 09) gain $16.60, EOD $1,047.10 ($US per Troy ounce)
Silver (December 09) gain $0.42, EOD $16.66 ($US per Troy ounce)
Platinum (January 09) gain $31.30, EOD $1,338.20 ($US per Troy ounce)
Copper (December 09) gain $0.10, EOD $3.03 ($US per pound)
Livestock and Meat Markets - Chicago Mercantile Exchange (cents per lb.):
Lean Hogs (December 09) gain $1.25, EOD $57.20
Pork Bellies (February 10) gain $1.80, EOD $90.80
Live Cattle (December 09) shed $0.65, EOD $86.28
Feeder Cattle (November 09) shed $0.90, EOD $95.03
Other Commodities - Chicago Board of Trade (cents per bushel):
Corn (December 09) gain $10.50, EOD $379.75
Soybeans (November 09) gain $16.50, EOD $987.00
BOND MARKET:
2 year EOD 100 1/32, change -2/32, Yield 0.97, Yield change 0.04
5 year EOD 99 22/32, change -8/32, Yield 2.43, Yield change 0.10
10 year EOD 101 3/32, change -20/32, Yield 3.48, Yield change 0.07
30 year EOD 102 25/32, change -1 6/32, Yield 4.33, change 0.07
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Top of the page | |
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Total for Year |
Last Week |
$130,685.00 |
$8,382.00 |
|
| |
Total for Year |
Last Week |
$32,847.50 |
$2,557.50 |
|
| |
Total for Year |
Last Week |
$123,550.00 |
$12,650.00 |
|
| |
Total for Year |
Last Week |
$106,480.00 |
$2,610.00 |
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Total for Year |
Last Week |
$0.00 |
$0.00 |
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News & Commentary
Daily Market Commentary for March 12, 2010
Stocks Trading Room Performance for March 12, 2010
Futures Trading Room Performance for March 12, 2010
Forex Trading Room Performance for March 12, 2010
Daily Swing Trades Performance for March 12, 2010
Daily Market Commentary for March 11, 2010
Stocks Trading Room Performance for March 11, 2010
Futures Trading Room Performance for March 11, 2010
Forex Trading Room Performance for March 11, 2010
Daily Swing Trades Performance for March 11, 2010
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