A Week of Wild Rides on Wall Street

08/13/2007 12:00 am EST


Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

Bernie Schaeffer, chairman and chief investment officer of Schaeffer's Investment Research, says the running of the bulls had to fight off the bears last week, and he gives us a 'round-up' of the week's events.

Stock prices fluctuated wildly on Friday, as three injections of liquidity by the Federal Reserve followed examples set by other central banks. The Fed injected a total of $38 billion into the market. Earlier in the day, the European Central Bank added another $83.6 billion (after adding $130 billion last Thursday), and the Bank of Japan added $8.5 billion on Friday. The US Federal Reserve added $24 billion on Thursday, and Canada's central bank added $1.55 billion. In addition, the Fed fund futures now price in an inter-meeting rate cut within the next week, according to Merrill Lynch analyst Joseph Shatz.

After a topsy-turvy late afternoon, the Dow Jones Industrial Average (DJIA - 13,239.7) finished the day in negative territory. Nearly half (14 of the 16) of the Dow components finished the day in positive territory, led by IBM (NYSE: IBM). The decliners were led lower by General Motors (NYSE: GM), which slipped 2.9% on the day. When the dust from the week settled, the Dow actually added 0.4%, but could not overtake its 20-week moving average.

The S&P 500 Index (SPX - 1,453.64) added 0.04% (0.55 point) on the day and actually finished the week in positive territory as well. The SPX continues to look up at its 20-week moving average, which could provide a bit of resistance. The tech-rich NASDAQ Composite (COMP-2,544.9) slipped 11.6 points on the day, and also managed to scratch out a positive week.

The mortgage-related scare du jour came from Countrywide Financial (NYSE: CFC), which started the morning markedly lower. CFC warned that "unprecedented" poor conditions in the secondary-mortgage market are causing it to retain a greater proportion of mortgage loans than it sells.

Yet another subprime casualty surfaced this morning, as NovaStar Financial (NYSE: NFI) reported a wider second-quarter loss than a year ago. For the quarter, NFI lost $5.84 per share compared to $3.97 per share a year ago. The current results were hit by pretax impairments of $116.9 million on mortgage securities, credit loss provisions, and other items.

Crude futures limited today's losses, but still closed lower for the day and the week. Gold futures rallied on Friday, as traders flocked back to the metal's safe-haven properties in the face of worsening credit-market troubles. Other metals finished mixed, with silver and platinum gaining and palladium and copper dropping."

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