Morning Watch, Feb. 25
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February 25, 2008
Stocks are set to open mixed Monday morning, as investors react to mostly positive stock news and await a report on existing home sales. Approximately one hour before the opening bell on Wall Street, stock index futures indicated that both the Dow Jones Industrial Average ($INDU) and the NASDAQ Composite Index ($COMPQ) would open the trading session with modest losses.
Ambac Financial (ABK) is set to extend recent gains. Shares jumped 16 percent late last week on talk the troubled bond insurer could receive much needed financial relief. The news sparked a rally in the major averages and the Dow closed up 96 points on Friday. Then, over the weekend, the Wall Street Journal reported that Ambac is close to an agreement with big banks to restructure debt and raise up to $3 billion of capital. ABK is up another 30 cents to $11.01 Monday morning.
Meanwhile, Take Two Interactive (TTWO) surged nearly 50 percent after Electronic Arts (ERTS) unveiled plans to acquire the company in a $2 billion deal. Genentech (DNA) is higher after the FDA granted fast track approval for the company’s Avastin drug for patients with metastatic breast cancer. However, Lowe’s (LOW) is indicated modestly lower after the home improvement retailer posted better-than-expected fourth quarter profits, but guided estimates lower for the first quarter.
Economic news and Fed speak might affect trading later in the day. Federal Reserve Governors Randall Kroszner and Frederic Mishkin deliver speeches today. A report on existing home sales is due out at 10:00 a.m. Eastern time. Economists expect the report to show a decline in January, to annual rate of 4.80 million homes from 4.89 million the month before.
Bonds are seeing losses ahead of the home sales report. The benchmark ten-year Treasury bond is down 8/32nd and its yield edged back up to 3.82 percent. The buck is mixed, however; now up to 107.65 on the yen and down to 1.483 on the euro. Crude oil gained 60 cents to $98.95 a barrel and gold added $2.00 to $950.00 an ounce.
For the stock market, indications are for mixed trading at the open. While the Ambac bailout and the Take Two merger are positives, the disappointing earnings outlook from Lowe’s is keeping a lid on early gains. In addition, trading is likely to be somewhat cautious at the open and ahead of the existing home sales data due out thirty minutes into the trading session.
Frederic Ruffy
Senior Writer
Optionetics.com ~ Your Options Education Site
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