Market briefing --- Lori
NYSE --- Deb (fast)
Lehman --- Margaret (slow)
>> stocks closed little change today ahead of ben bernanke’s speech tonight before the economic club of new york. as you can see, markets closing little changed today. the s&p 500 off two 1305, nasdaq up 7.5 points. this despite the biggest drop in oil in more than seven months. well, deborah kostroun with a little more on today’s action, or lack thereof.
>> really, we did see a lot of lack of action, but oil and the fed really kind of the big two stories on the day, even though the dow and s&p 500 really barely changed. a lot of people saying the market real clind of slowing dune little bit. kind of wondering what might be said tonight. but richard stein berg of stein berg global asset management saying that really likely going to be a tight rope speech. it could be kind of a continuation of some of the things that we have been hearing. mainly because he thinks bernanke won’t likely want to paint himself into a corner. remember the bloomberg home building index, it was one of the best individual performers last week. well today, you can kind of see the dropoff we saw on today’s session. a lot of those home birleds were up about 7.4% last week. real klein of coming down in today’s session. crude oil, falling by the most in seven months in today’s session. crude oil, really saw that decline. however, didn’t have much of an impact on stocks. we were talking about transports as well last week. hitting those record levels. but the transport once again, really performing well as crude oil was lower. in fact, the airline, some of the best individual standouts with those airline, with the transports being higher in today’s session, not only that, many of the other transport stocks, those were obviously good performers last week and once again, pretty good performers in today’s session. schering-plough, that was the biggest gainer in the s&p 500 on the day. this, of course, the maker of cholesterol drugs. they actually got raised to a neutral by bank of america. bank of america is saying vitorin continues to exceed their expectations. and the stock isless likely to fall. back to you in the studio, lori.
>> executives at lehman brothers and coldman sacks says revenue is dropping as interest rates rise, but bear sterns is growing. bev more now on the story.
>> bear sterns and lehman brothers rose the housing boom as the top two underwriters of mortgage-backed securities but last week their fortunes die verged. bear’s new mortgage volume rose. industry wide, volumes fell so. that means bear is grabbing market share. meanwhile, christopher o’mera said volume of new mortgages fell 20%. that means they have they have fewer mortgages to package. investors on last week’s earnings conference call, he expects mortgage trading revenue to snow this year. but bear sterns molinaro said it would be up. shiferse bear sterns over the past week are up almost 3%. and shares of lehman are up a little over 2%. back to you, lori.
>> margaret, before you leave. what is bear doing right that the others perhaps haven’t caught up on?
>> another keer here is in originations, whoor they call originations, which is making new mortgages. and bear goes out into the market and buys up new mortgages. they also have their own mortgage bank, and they are making mortgages through service called bear direct. the interesting something they are also going a little bit down scale. these mortgage a lot of threm in what’s called the alta market , which is something that doesn’t qualify far fannie mae or a freddie mac guarantee, usually because it doesn’t have the right documentation or something like that. and so they’re taking -- they’re using a little bit more risky mortgage bus that enables them to keep their volume up.
>> lehman also has exposure to this. what’s their strategy.
>> they’re also in the alt-a market thimplee doing the stuff that bear sterns is doing and they also have a mortgage servicing companyful and their two mortgage subsidiaries house about 4,000 or 5,000 total of their employee base. so it’s almost a quarter of the people at the firm. somehow, though, lehman didn’t pull it off this quarter and their volume was down. they couldn’t get as many mu mortgages and they dropped 20%. you’re hearing talk of a 20% job going forward this yeemple that would impact these guys going forward. for bear sterns, however, they are really number win.
>> and lehman comes in number two?
>> most likely. i don’t know those numbers off the top of my head.
>> appreciate the report. the commercial construction industry is making a comeback. analysts credit continuing job growth and lore vacancy rates for office groups. one forecast is that construction could reach $350 billion this year. that’s 10% more than last year. a growing commercial market may offset some of the slowdown we’ve mean? the residential narcotic recent months. ben bernanke makes his first speech to the economic club in new york as chairman of the federal reserve. what clues if any will he give regarding the future of our economy. we’ll ask our next guest. he’s scott brown, raymond james and associates.
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Listen Interview: Senior Economist of Raymond James and Associates
>> well, as you just heard, tonight fed chairman ben bernanke will address the economics club in new york. scott brown joins us now from st. peters burg, florida. welcome.
>> let me first ask you with the fed meet meting only week away, why does bernanke want to speak to this group tonight?
>> i think it had already been scheduled for a while. typically there’s a blackout period where they don’t discuss monetary policy there may be a little bit of color today about current economic conditions. but i don’t think he’s going to tip his hand about what the fed is going to signal next week. we all know the fed is going to raise rates again. the key question is what are they going to say about the outlook going forward.
>> doesn’t bernanke also have to be careful not to make policy waves ahead of the blackout period. how much of an issue is that. >> it’s called the yield curve and monetary policy i think it’s going to be more about the yield curve and perhaps a lit bit less about monetary poll sim one of the interesting things we had a week and a half ago was the new york fed president talking about the yield curve and the fact that you’ve got all this foreign capital flowing into the u.s., really pushing long-term interest rates down. and what the new york fed president said that was really financial stimulus which the fed is really obliged to count fer they want to keep inflationary pressures in check. maybe, i think, tonight, bernanke might sort of flush out that argument or perhaps deliver a counter to it. we’ll have to see.
>> what would a counter sound like?
>> he could suggest, for example, that the very large trade receive dit we’re running now is really putting downward pressure on global prices, and that’s keeping inflation low and that’s helping to keep long-term interest rates down. i think it’s really a variety of factors. the capital in-flows are certainly a major part of that.
>> one economist said he could come across a lot more hawkish. what indictment stamentes would you look for? i know you said not to expect any interest rate clues. but is there any way to read between the lines?
>> again, i think it’s pretty doubtful. i think he may talk about the impact of the slowing and the housing mark. continued job growth. maybe a little bit about expectations going forward. you know, we’ve seen fed officials develop for and they always tell us it depends on the economic data. between next week’s meeting and the may 10 policy meeting, there will be two employment reports. and i think that will be critical in determining whether the fed goes ahead in may.
>> i know you told our producers you’re looking for a rate hike. could the job reports change the outlook?
>> certainfully they slow down a more sustainable pace. we’re seeing job growth beyond the fed’s comfort level. the unemployment rate trend is down. if we see some stability there where job growth comes in around 140,000, 150,000 per month, that’s very comfortable for the fed. it would suggest there’s no real incentive to keep hitting the break. if we were to get strong games, • gains. capital inflows is a bigger worry for the feds. that might be something new.
>> the slowing housing market , it was said earlier today, the economy will enjoy solid growth, however, the slowing housing market could cut into consumer spending. is she on target?
>> so far it seems to be pretty moderate. but remember we’re coming from very, very strong levels. historically, you know , it’s likely to settle at a pretty good level. it’s not going to be enough to throw the economy into a recession, it could be enough to slow the market down to ausesuss saneable pace the second half of the year.
>> scott brown is a senior economist of raymond james and associates. much more coming up when we continue.
