Morning Coffee with TradingMarkets

  • December 27, 2007
  • David Penn

Good Morning!

Pakistan’s former prime minister and opposition leader Benazir Bhutto killed at campaign rally…Stocks Stall Day After Xmas…Target Sales Outlook Disappoints…Housing Affordability Creeps Higher…Sallie Mae to Sell $2.5 Bn in Stock, Convertibles…Lewis Adds to Bear Stearns Stake, Davis Advisors Add to Stake in MBIA…Amazon’s Record Shopping Season…AT&T Buys Cisco Routers…Hong Kong Markets Up, Tokyo Down, Europe Up…The dollar down sharply against the Euro, Pound…Futures fall after Benazir Bhutto killed in Pakistan.

Is this how 2007 ends, not with a bang but a whimper? Fireworks to the upside in the days leading up to the Christmas holiday have settled down as the final trading days of the year approach. The headlines continue to emphasize the ripple effects of both the subprime mortgage mess and weaker-than-hoped-for consumer spending this winter shopping season. But more and more investors are peering around the corner into 2008 in an attempt to get a jump start on investment themes for the coming year. Will bonds continue their bull run, or will commodities regain traction and resume their march higher?

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TradingMarkets 5 Business Stories You Need to Know

Amazon Posts Record Holiday Season – Reuters

Amid the pouting over less-than-expected spending by consumers this holiday season, shares of Amazon.com lept 2% on word the company recorded its biggest holiday season ever in 2008. At the peak in mid-December, shoppers were ordering items to the tune of 62.5 items every second.

Goldman: Citibank May Cut Dividend by 40% – Bloomberg

Citigroup’s efforts to preserve capital may require sharp cut in dividend and more extensive write-offs than expected, says Goldman Sachs. As much as $18.7 billion in collateralized debt obligations may be written off. Shares of Citigroup are down 45% in 2008.

Home Prices Move Lower for 10th Consecutive Month – New York Times

The housing slump is the gift that keeps giving for patient homebuyers, as the price of houses continues to decline. Home price declines are spreading to more and more regions of the country. Prices in Seattle, Charlotte and Portland–which seemed immune to declines–join in the slide.

Pessimism Grows Toward Fate of Big Banks – Wall Street Journal

Humility and lowered profitability are predicted for the country’s biggest banks in 2008. Subprime woes and the resulting credit crunch seen as drivers returning banks to a “simpler time” according to many analysts. The bigger the bank, goes the consensus, the slower the recovery.

Davis Select Advisors Add to MBIA Stake – Wall Street Journal

Arizona-based fund ups investment in bond insurer to 5.1%. Shares of MBIA soared on the news, which also boosted other companies in the industry. Vote of confidence seen as key to help insurer maintain AAA credit rating.

» For more stories as they happen, go to our Breaking News section.

TradingMarkets 7 Stocks You Need to Know for Today

Here are 7 stocks for traders for today from TradingMarkets.com:

» For a list of today’s highest PowerRating stocks, click here.

TradingMarkets 5 Top PowerRatings Stocks for Today

Company
 Symbol PowerRatings
Synaptics SYNA 8
Sigma Designs SIGM 8
Neurocrine Biosciences NBIX 8
Anworth Mortgage Asset ANH 8
Altus Pharmaceuticals ALTU 8

» View More Stocks

TradingMarkets Tracking the Wizards

Jim Rogers’ China Syndrome – Fortune

Market wizard who called the commodities boom years ago, increasingly believes that China is the best bet in town for investors. “This is the China century,” says the former investment partner of George Soros, who owns both the Chinese currency and commodities–but not Chinese real estate.

Lewis Boosts Bear Stearns Stake – Again – Bloomberg

For the second time this month, billionaire investor Joseph Lewis commits capital to the nation’s fifth largest securities firm, raising stake in Bear Stearns to 9.6%. Additional investment makes Lewis Bear Stearn’s largest shareholder.

Hedge Fund Managers Turn to 2008 – FINAlternatives

Big gains on short selling of subprime mortgages increasingly seen as “last year’s trade”–though bottom in housing not seen until 2010. Growing hedge fund interest in MLPs, or master limited partnerships, an under-recognized group with natural resources exposure that are non-correlated with equity markets.

» View Portfolios of Prominent Investors

TradingMarkets Playbook

The markets have moved sideways in the final trading days of the year, with strength continuing to be more pronounced in the smaller cap stocks of the Russell 2000 than in the larger stocks of the Dow and S&P 500. While bargains are not especially numerous, it is worth noting that sideways trading after a strong move often results in more movement in the previous direction. This means that absent a wave of unexpected selling, the markets should look to move higher as 2007 ends and 2008 begins. The relative absence of market-moving news will also probably be seen as a positive by traders. Nearest resistance for the larger cap stocks remains the December highs. At the same time, with the smaller caps having already bested their December highs, some consolidation–or even a mild correction–would not be a tremendous surprise.

David Penn is Senior Editor at TradingMarkets.com.

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