Finotec News Archive - August 30 2007

U.S. Stocks Rebound on Profit Outlook

U.S. stocks rebounded from their steepest drop in three weeks after earnings prospects for technology companies improved and energy producers advanced with the price of oil.

Rodian Rahnayev
30 August 2007

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U.S. stocks rebounded from their steepest drop in three weeks after earnings prospects for technology companies improved and energy producers advanced with the price of oil.

Computer-related shares posted the biggest gain in seven weeks after Seagate Technology, the world's largest maker of hard-disk drives, boosted its profit and revenue forecast. Exxon Mobil Corp. led 31 of 32 energy companies in the S&P 500 higher after crude oil prices reached a two-week high.

Financial shares rallied as traders increased wagers that the Federal Reserve will reduce its benchmark lending rate by 0.5 percentage point at its next policy meeting in September. The S&P 500 dropped 2.4 percent yesterday on weaker consumer confidence and speculation tighter credit markets will hurt bank earnings.

``There are a lot of good opportunities in the market right now,'' said Joseph Keating, who helps manage about $3 billion as chief investment officer at First American Asset Management in Birmingham, Alabama. ``Investors need to be stepping up to the plate.'' All 10 industry groups in the S&P 500 advanced, with 473 of the index's members posting gains.

Fed funds futures contracts today showed traders see a 42 percent chance the Fed will lower its target for overnight bank lending to 4.75 percent from 5.25 percent at its next meeting on Sept. 18, up from 36 percent odds yesterday. Federal Reserve Chairman Ben S. Bernanke and the policy- setting open Market Committee are ``closely monitoring'' markets and are ready to ``act as needed,'' Bernanke wrote in an Aug. 27 letter sent to Senator Charles Schumer, a New York Democrat.

The Fed may eventually reduce its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group. ``They will start to ease in a measured way, 25 basis points every meeting,'' said Hyman, the top-rated economist on Wall Street by Institutional Investor for the past 27 years. ``The market should go up with a Fed easing.''

The release of the minutes from the FOMC’s August 7th meeting didn’t shed any new light on the central bank’s policy stance, as the meeting occurred just days before market volatility spiked and risk aversion started to reign on August 9th. However, the minutes did show that the FOMC was concerned enough about worsening financial conditions to say that they may need to take policy action. As a result, the FOMC’s policy decision on September 18th appears to be dependent mostly on how the financial markets perform until that time, leaving the door open to a potential rate cut.

In economic data yesterday, mortgage applications in the U.S. declined to a four-week low as the rate on one-year adjustable loans jumped by the most ever. The Mortgage Bankers Association's index of applications to buy a home or refinance a loan fell 4 percent last week to 615.2 from 641.1. The group's purchase and refinancing gauges each decreased for a second week.

In other markets, the yen fell the most in more than three years against the euro and declined versus the dollar on speculation a rebound in European and U.S. stocks will encourage investors to sell the currency to buy riskier assets abroad.

Pool Position 30.8.2007


















EUR/USD USD/JPY GBP/USD USD/CHF

Resistance
1.3735

1.3720

1.3690
117.20

116.75

116.20
2.0260

2.0220

2.0190
1.2120

1.2110

1.2040

Support
1.3600

1.3555

1.3450
115.85

115.00

114.55
2.0130

2.0050

1.9960
1.1985

1.1960

1.1935

Finotec Analysis Team
30 August 2007

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