每日市场点评 --- February 27, 2008

The market closed the day flat after gaining 3% in the past three days. It was quite an achievement considering that most economic news of the day was once again negative. Start with the Durable Orders. The number came in at -5.3% vs. -4% consensus. Traditionally the Durable Orders data are quite volatile from month to month as it is heavily influenced by orders for aircraft, which certainly doesn’t have a linear relationship. The core number, which excludes the volatile transportation order, dropped 1.6%, more or less in line with expectation. However, bookings for both computers and for communications gear dropped 12% and this didn’t bode well for the tech sector in general. In a separate report, the new home sales fell by 2.8% in January to 588K units, which was below consensus of 600K. The median price of a new home, meanwhile, dropped 4.3% from the previous month to $216K, the lowest median price since September 2004. Also, the current unsold homes represented a 9.9 months’ supply, the highest in more than 26 years and this will add additional pressure to the housing market in the months ahead.

However, the market simply shrugged off the negative economic news and instead focused on the first of the two-day testimony by Bernanke. The Fed Chairman didn’t disappoint the market and re-emphasized that short-term growth risk was bigger than inflation. In other words, it is pretty a safe bet now that the Fed is going to lower the interest rate by another 50 bps at its March 18th meeting. Bernanke seemed quite confident that energy price would drop in the months ahead and but he did mention that if it turns out to be otherwise, then the Fed policy has to be adjusted accordingly. Well, I wish the Fed Chairman good luck in this daunting task of predicting short-term energy price movement.

While Mr. Bernanke was delivering his testimony, the market shot up midday following news that the US regulators removed limits on the combined $1.25 trillion mortgage portfolios of Fannie Mae and Freddie Mac. On the surface, the news appeared to be positive to both mortgage market and the two government-chartered companies. However, since the reserve capital requirement remained unchanged, meaning both companies have to raise additional capital if they want to purchase more loans, the share prices for Fannie and Freddie dropped back to where they started by the closing bell. Tomorrow we are going to get the revised fourth quarter GDP data and due to positive trade balance adjustments, it is widely expected to be revised higher.