Painting by John Darling Haynes.I'll post the market close a little later. I'm not surprised by the move today. There appears to be a conflating of two things that caused the reversal.
- Thing 1: So many of the interest rate sensitive stocks had already anticipated the rate cut.
- Thing 2: The downgrade of FGIC today by Fitch caused a tremor to go through the financials.
" Bear in mind that an item of news usually causes but ONE considerable movement of prices. If the movement takes place before the news comes out, as a result of rumors and expectations, then it is not likely to be repeated after the announcement is made; but if the movement of prices has not preceded, then the news contributes to the general strength or weakness of the situation and a movement of prices may follow. " (p. 28).I think that we can say that we had a considerable movement in prices before this news, and a considerable movement of the number 2 variety afterwards. I love this little book.
Here are a couple of intraday charts on the XLB and the XLF:
2 comments:
Add this to Thing No. 2:
"Wednesday, January 30, 2008
S&P: Half Trillion in Mortgage Debt Ratings Cut (or may be cut)
From Bloomberg: S&P Lowers or May Cut Ratings on $534 Billion of Mortgage Debt (hat tip Tank, RayOnTheFarm)
Standard & Poor's lowered or may cut ratings on $534 billion of residential mortgage securities and collateralized debt obligations.
According to the Fed Flow of Funds report, household have $10.4 trillion in mortgage debt. S&P's announcement today alone is for about 5% of that debt.
Posted by CalculatedRisk at 2:01 PM Comments (3) Labels: Rating Agencies"
Care to guess the market direction tomorrow? :-)
Glenn
PS: Keep up the great work Leisa
Thanks Glenn....I'm pleased to say that I wrote about FGIC and the entire group last March. You can view it here: http://tinyurl.com/2l6pvm
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