Market briefing --- Lori
NYSE --- Deb (fast)
Lehman --- Margaret (slow)
>> stocks closed little changed today ahead of ben bernanke’s schedule appearance before the economic club of new york. markets closing little changed with the do down just five points, 11,274. the s&p off two, 1305, nasdaq up 7 know 5 points, 2314. this despite biggest drop in oil in more than seven months. deborah kostroun has more on today’s action or lack thereof.
>> really, we did see a lot of lack of action, but lori was mentioning oil and the fed really two of the big stories on the day, even though the dow and the s&p really kind of barely changed, bernanke giving a speech tonight in new york. a lot of people really kind of saying the market slowing down a bit, wondering what might be said tonight. but richard stineberg, president and chief investment officer at stineberg global asset management, really likely going to see he says kind of a tightrope speech, bernanke not coming out with big headlines, and a continuation of some of the thing we have been hearing, mainly because he says that bernanke not likely to want to paint himself into a corner. one of the thing we did see in today’s session, a lot of interest-rate sensitive stocks, those were some of the best performers last week slowing down here, and the home building index was one of the best individual performers last week, well, today, you can see the dropoff that we saw in today’s session. a lot of the home builders were up about 7.4% last week. we are really coming down in today’s session. in crude oil, falling by the most in seven months in today’s section. crude at 60.42 per barrel. saw that decline in crude oil. didn’t have an impact on stocks, take a look at the transports, because we were talking about the transports as well last week. hitting those record levels, but the transport once again really weave performing well as crude oil is lower. the airline some of the best individual standouts with those airlines with the transports being higher in today’s session. not only, many of the other transport stocks like some of your railroad stocks, those were obviously good performers last week, and once again, pretty good performers in today’s session. schering-plough the biggest gainer on the s&p. this the maker of vitorin them got raised to a neutral by bank of america, saying that vitorin continues to exceed expectations, the stock is less likely to fall, one of the things that’s helping out schehring-plough to be best ffer in the s&p. back to you.
>> executives at lehman brothers and goldman sachs saying revenue dropping as interest rates rates rise, but bear stearns bond market is growing. we have more on the story.
>> thank you, lori bear stearns and leeman brothers rose the housing boom from 2000 to 2005 as the top two underwriters of mortgage securities, last week their fortunes separated. bears’ new mortgage volume rose. industrywide, volume fell. so that means bear is grabbing market share. meanwhile, lehman chief financial officer, on wednesday said lehman’s volume of new mortgages fell 20% that means he willman has fewer mortgages to package into mortgage-backed securities. followman’s c.f.o. told last week’s earnings conference call he expects mortgage trading revenue to slow this year, but bear stearns said it would be up. shares of bear sterns are up almost 3%. back to you, lori.
>> before you leave what is bear doing right that the others haven’t caught up on?
>> the key here is in originations or what they call originations, is making new mortgages, bear goes out into the market and buys up new mortgages, they also have their own marge bank, they are making mortgages through a service called bear direct. the interesting thing is that they are also going a little bit down scale. these mortgages, a lot of them are what’s called the a market , is go that doesn’t qualify for a fannie mae or freddie mac guaranty because it it doesn’t have the right documentation or something like that. and so they are taking―they are using more risky mortgages, but that enables them to keep volume up.
>> ok. lehman also has exposure to this. what’s their strategy?
>> they are also in the old a market , doing a lot of the same kind of origination stuff that bear is doing and have a mortgage servicing company, their two mortgage subsidiaries house about 4,000 or 5,000 total of employee base, so it’s almost a quarter of the people at the firm. somehow, though, he willman didn’t pull it off this quarter, their volume was down. they couldn’t get as many new mortgages, and so their volume dropped 20%.
>> perhaps maybe concerns about the slow housing market ?
>> you’re hearing talk of a 20% drop in the housing market going forward this year, and that would impact both of these guys, investors are concerned about that and keeping an eye on that. for bear stearns, however, they really are the number one in this market right now they have a 12% market share in mortgage-backed securities.
>> and lehman comes in number two?
>> most likely. i actually don’t know the numbers off the top of my head.
>> thank you so much there is a lot more ahead today. the commercial construction industry is making a come back and could post its best year since 2001. analysts credit continuing job growth. one industry group is forecasting overall investments in commercial construction could reach 530 billion this year, that’s 10% more than last year. growing commercial market may help offset some of the slowdown we’ve seen in the residential market in recent months. ben bernanke makes his first speech to the economic club of new york as chairman of the federal reserve. what include clues if any, will he give regarding the future of the economy? we’ll ask our next guest, scott brown, senior economist, raymond james and associates, that next. >>
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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 economic club of new york. joining success scott brown, senior economist at raymond james & associates. he joins us from st. petersburg, florida.
>> good afternoon.
>> with the fed meeting a week away why does he want to speak at an event like this? is there something particular about this event, the prestige or something?
>> i think it had been schedule ared for a while. so i don’t think he’ll signal any major changes. it’s only a week until the policy meeting. and typically there’s a blackout period where the fed chairman doesn’t discuss the economy or monetary policy. there may be a little bit of color today about our commurnt economic conditions, but i don’t think he’ll tip his hand about what the fed will natural next week. the fed will raise rates again. the key question is what will they say about the outlook going forward.
>> doesn’t bernanke have to be careful not to make policy waves that could upset colleagues with the blackout period. how much of an issue is that?
>> that’s the case when you look at the title of the speech, it’s called the yield curve and monetary policy. it will be more about the yield curve i think and perhaps less about monetary policy. now, 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 have all of this foreign capital that’s flowing into the u.s. really pushing long-term interest rates down. and what the new york fed president said was that that’s really financial still you husband, the fed is really obliged to counter if they want to keep inflationary pressures in check. maybe tonight bernanke might sort of flesh out that argument or perhaps deliver a counter to it. we’ll have to see.
>> what would a counter sound like?
>> well, he could suggest, for example, that the very large trade deficit we’re running now is really putting downward pressure on global prices, and that’s keeping inflation low and helping to keep long-term interest rates down. it’s a variety of factors, not just the capital inflows, but they certainly are a major component of that.
>> i want to ask you this. lee man brother’s chief economist told bloomberg earlier today that if bernanke gives a blunt estimate of the economy, key come across more hawkish. what statements 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 a little about the impact of the slowing in the housing market , the continued job growth and maybe a little about expectations going forward, but, you know, we have seen fed officials speak before, they say it will depend on the economic data coming in. between next week’s meeting and the may 10 fed policy meeting there, will be two employment reports. those will be critical as to whether the fed goes again in may.
>> you told our producers you are looking for the same thing. those jobs reports, could they change the outlook?
>> certainly. if they slow down to a more sustainable pace, we’re seeing job growth beyond the fed’s comfort level. the unemployment rate, trending lower. it was up in february, but the trend is down. if we see some stability there, where job growth comes in around 140, 150,000 per month, that’s very comfortable for the fed, and it would suggest to me that there’s no real incentive for them to keep hitting the brakes. if, on the other hand, we get strong gains, well under 200,000, the fed would continue to tap the brake.
>> short of saying expect two more interest rate hikes what might surprise you?
>> again, i think if he sort of fleshes out this argument about the impact of foreign capital inflows and suggests that’s a bigger term worry for the fed, that might be something new.
>> and we actually do a little bit of time, so let’s pick up on the slowing housing market . federal reserve bank said the economy will growth, and we could cut into consumer spending is she on target?
>> it’s definitely a risk in the overall economic outlook that we could see a bigger correction in the housing market , so far, it seems to be pretty moderate. we’ll see a drob in home sales. remember, we’re coming from very, very strong levels. historically, it’s likely to settle at a pretty good level. you know, it’s not going to be enough to throw the economy into a recession, but likely enough to slow the economy down to a more sustainable pace in the second half of the year.
>> thank you for joining us.
>> my pleasure.
>> once again, scott brown, senior economist at raymond james & associates. much more coming up on bloomberg after the bell continues.
