每日市场点评 --- February 12, 2008

Most indices closed higher for the day although the selling pressure during the final hour of trading pushed Nasdaq briefly into negative territory. Just like the past two days, there is little economic news to drive the market action. The biggest news of the day was Warren Buffett offering three bond insurers (MBIA, Ambac Financial and FGIC) reinsurance of their municipal bond holding. The news gave the broad market and especially the financial sector an early boost. However, as Buffett’s offer doesn’t cover the most troubled CDO portfolios that were tied to sub-prime mortgage and the municipal guaranty business is one of the last few profitable businesses to the bond insurers that can be used to offset losses in other areas, it looks like those bond insurers are in losing positions if they accept the deal (in fact, one of the three has already rejected the offer). Financials gave up some of the earlier gains in the afternoon and actually most major brokerages ended the day in red.

Sector rotation was still ongoing. After providing leadership in the past two sessions, tech was one of the most noticeable laggards of the day. Commodity was traded mixed after a pull back in the CRB commodity index, which hit another historical high yesterday. The US dollar was mixed against major currencies while gold price dropped by almost 2%. The euro gained after the German investor confidence unexpected jumped in February.

It is worth noting that although the rate that banks charge each other has dropped significantly in the past two months( e.g. the 3-month US LIBOR is just slightly over the Fed fund rate now), the investment grade corporate bond rate doesn’t ease much since the Fed started to cut interest rates in the second half of last year. The corporate junk bond rate is actually higher by almost 200bps during the same period. In other words, the borrowing condition is still quite tough for many businesses.