每日市场点评 --- May 20, 2008

The market continued its slump from yesterday afternoon with the Dow finishing the session down by 200 points. From yesterday’s intra-day high, the Dow has already given up 350 points in two days. We got some mixed inflation news. The headline PPI came tamer than expected at 0.2%. Economists called for a rise of 0.4%. The core PPI, however, climbed more than expected, which brought the year-over-year increase to 3.0%. Another record high in crude price didn’t help matters either.

Energies and utilities were among the few sectors that ended in the green territory. Financials were noticeably weak following Oppenheimer analysts comments about potential $170 billion more write-downs in major institutions. We should note however that financial institutions worldwide have already written off more than $360 billion assets since the sub-prime crisis started 10 months ago, which means that even by a rather pessimistic view(such as the one from Oppenheimer) the financial crisis is two-thirds over. Of course, the upcoming recovery won’t be a smoothly one. But the rigorous efforts taken by the Fed have greatly alleviated the tension in the capital market during the past two months. For instance, the TED, which is the spread between 3-month treasuries and 3-month LIBOR, reached 78 bps today - the lowest level since last August, indicating banks are more willing to lend to each other. Back in March, the spread was at a level of more than 200 bps.

The US dollar was lower against major currencies while commodities rallied across the board. Treasuries had a typical flight-to-quality day as money moved out of equity market. The VIX index, which is usually used as a fear indicator, jumped 3% and closed at 17.58. But at this level, it is still near a 10-month low, indicating continuing complacency in the market.