| High anxiety: Wall Street waits for Fed to make move on rate cut
In the 20 years Mike Marcotullio has worked on Wall Street, he's seen historic market reversals that pushed weaker men to the brink of despair. Like Jan. 23, when the Dow whipsawed 625 points in one day, fueling drama on the trading floor that ranked up there with the fallout from the crisis in the Long Term Capital Management hedge fund in 1998 and the technology bust of 2000 and 2001. "There has been a lot of fear, panic and insecurity in the markets and the U.S. economy based on the housing decline," said Marcotullio, senior principal in American Capital Partners, an investment bank in New York City. This week, the stock market has been buoyed by hopes Federal Reserve Board Chairman Ben Bernanke will announce a one-half percentage point decrease in the Fed's key rate today, and until he does, stocks will still be subject to wild swings, fueled by concern the unfolding housing crisis could lead to more write-downs in the financial sector and tip the country into recession.
Financial Blogs Bear Witness to Misery
While most U.S. investors enjoyed a day off for Martin Luther King Day on Jan. 21, financial bloggers watched the markets tank in Asia and Europe, and braced for big damage when the U.S. stock market reopened for business the next day. Bespoke Investment Group's Think B.I.G. listed the drops in each of the 30 Dow stocks in pre-market trading on Jan. 22—and it wasn't pretty. To illustrate how bad it is for traders, Trader Mike posted a video of a young distraught fellow losing gobs of money. (Warning: The video contains abundant profanity.) Long or Short Capital's tips for "how to end it" might cheer him up—or maybe not. Over at 24/7 Wall St., Jon Ogg asserted that the Federal Reserve is "far behind the curve," and asked if the Fed would attempt to limit the damage by cutting rates before its scheduled meeting on Jan.
QQQQ to Nasdaq Composite: See Ya
EVERYONE KNOWS IT'S A MARKET of stocks, not a stock market. But that old saw even holds for traders of index funds, notably those based on the Nasdaq Composite Index and the Nasdaq-100. So far in 2007, the Nasdaq Composite's total return is up 19.09%, while the Nasdaq-100 -- the basis for the popular QQQQ exchange-traded fund, is up 27.74%. The outperformance of the QQQQ is so significant that it has persuaded most options traders and investors to consider less-diversified investment strategies, Credit Suisse derivatives strategists Ed Tom and Glenn DeSouza said in a recent trading advisory. The ETF (now officially called PowerShares QQQ Trust due to a licensing marketing agreement) consists of only the top 100 Nasdaq nonfinancial stocks. The Nasdaq Composite (IXIC) consists of all the listed Nasdaq stocks, which now totals about 3,000 companies.
Two investment banks buy minority stakes in KC’s BATS Trading
Investment bankers Deutsche Bank AG and J.P. Morgan Chase & Co. each bought undisclosed minority stakes in Kansas City's BATS Trading, the nation's third-largest equity securities trading center. The investors and BATS declined to give details of the transactions. However, none of the now 10 investment and brokerage firms among BATS' owners holds a significantly larger share than the others, said Randy Williams, a BATS vice president. The transactions represent the largest investments by Deutsche Bank and Morgan in electronic alternatives to traditional brick-and-mortar trading exchange since the two firms joined other investors in the April 2006 launch of the ISE Stock Exchange. BATS, an acronym for Better Alternative Trading System, is an electronic marketplace opened two years ago in the Briarcliff Village shopping center in the Northland to provide the brokerage community with lower-cost transactions than traditional stock markets offered.
Wall St set to start higher
US STOCK index futures pointed to a higher market open as investors bet the Federal Reserve would cut interest rates. Shares of several big US banks, including Citigroup and Bank of America, rose in European trading. "The anticipation of a rate cut is putting in a floor under the financial stocks and moving many of them higher in Europe as rate cuts generally help the financial sector of the market," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. Fed funds futures are pricing in a quarter point cut in the benchmark rate to 4.5 per cent. Markets were rattled on Tuesday, however, after the Wall Street Journal's Fed watcher wrote a cut was not a "sure thing." "Any surprises could quickly move things off centre," Mr Mendelsohn said.
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