每日市场点评 --- February 19, 2008

All three major indices closed the day in red after gaining more than 1% earlier. There is little economic news scheduled to be released today. The only news that managed to move the market higher mid-day is the US Homebuilder Confidence Index, which came at 20 compared with a previous reading of 19. However, since the number is still well below a neutral reading of 50, it is too early to call a bottom in the home building industry.

Most headline news of the day concentrated in two sectors: financials and commodities. Start with financials. It is really a mixed picture here. Credit Suisse, the second largest bank in Switzerland, shocked investors today by announcing the bank was going to take $2.85 billion of write-downs on asset-backed securities after pricing errors made by a group of traders. The announcement came less than a month after the rogue trader Jerome Kerviel in Societe Generale caused the worst trading loss in banking history. Investors start to wonder whether other banks have similar issues in risk management. And this is really a question that may never be completely answered. Barcleys, on the other hand, provided investors with some relief after it indicated today that it has no further substantial losses and its shares rose almost 10% in today’s trading. The financial sector is increasingly divided into two groups these days: the first group are the ones that still have substantial exposures related to the sub-prime assets and the second group are the opposite. In my opinion, the first group is going to underperform the second through time.

Now turn to commodities. Oil again grabbed most attention after closing above $100 per barrel for the first time in history. Even more amazingly, it all happened in a relatively short period that no one seemed to pay attention to. It is very likely that we are going to get used to three-digit oil price in the next few months. However, it is not just oil that moved higher for the day. Nearly all commodities from energy to agriculture to precious metals to industrial metals moved higher. The CRB index jumped by almost 3% for the day and closed at another historical high. Now it is really up to the Fed to tell us how inflation is going to moderate given higher prices seen almost everywhere. In fact, we may have some clues tomorrow after the CPI report (8:30am) and the Fed’s latest forecast for the economy (2pm). Indeed, it will be a busy Wednesday.