Oh good lordy
Investors who had been able for months to largely shrug off discomfort
about subprime mortgage problems and a more difficult environment for corporate
borrowing finally decided it was time to sell after the Commerce Department
issued another disappointing home sales report.
Feeding the plunge were
concerns that higher corporate borrowing costs will curb the rapid pace of
takeovers that had driven stocks higher this year. Investors also feared the
sluggish environment for home sales and continued defaults in subprime loans
would spur debt defaults and weigh on corporate earnings.
While stocks
plummeted, investors poured money into the safe haven of the bond market. The
soaring price of Treasurys pulled yields lower, and the rate on the 10-year note
plunged to 4.79 percent from late Wednesday’s 4.90 percent.
“Worries that
have been out there for the past couple of years are coming to a head right
now,” said investment strategist Edward Yardeni, president of Yardeni Research
Inc. “It’s show time.”
Thursday’s trading was the latest and most extreme in
a series of frenetic sessions over the past month - many also accompanied by
triple-digit swings in the Dow - as investors sold on worries about the subprime
fallout or bought on optimism that there wouldn’t be any widespread problems
caused by mortgage failures. Many analysts have described the back-and-forth
trading as overwrought and based more on gut emotion than careful consideration
of market and economic fundamentals.
That was the feeling again Thursday.
“The rally in bonds at this point looks a little bit overdone,” said Tom
Higgins, chief economist at Payden & Rygel Investment Management in Los
Angeles. “If you’re going to park money temporarily then cash I think is the way
to be but I think that we’re going to form a bottom. I think people are going to
be legging it back into the market.”
July 26th, 2007
in
Uncategorized |
