MARKET TALK: Fixed Income Markets 'Pretty Extreme,' Bear CFO

August 08, 2007, 1:17 a.m. EDT 5 Min Read

Edited by Paul Vigna Of DOW JONES NEWSWIRES (call: 201-938-5172; e-mail: paul.vigna@dowjones.com) MARKET TALK can be found using N/DJMT

2:36 (Dow Jones) "These times are pretty significant for fixed income markets," says Bear Stearns (BSC) CFO Sam Molinaro. "The last eight weeks have beenpretty extreme," he says, adding it was the worst he had seen in the past 22years. (ASH)

2:34 (Dow Jones) US stocks sliding again as Bear Stearns officials try toconvince investors that everything's, well, if not okay, at least manageable.DJIA down 91, Nasdaq Comp down 29, S&P 500 down 18. On the Dow, Amex, Exxon,Alcoa, AIG, JPMorgan all down more than $1; IBM, up only about 45c, the index'sbiggest gainer. Financials - no surprise here - the day's worst sector; energyalso much weaker. Consumer staples only rising sector. (PJV)

2:30 (Dow Jones) Dollar down against its major rivals, with the euro near asession high versus the US currency. Lately, euro at $1.3788, up from $1.3699late Thursday and flirting with a session high of $1.3794, according to EBS.Dollar at Y118.60, down from Y119.24 late Thursday. The euro is at Y163.51 from Y163.33, while the U.K. pound is at $2.0433 from $2.0366. The dollar is at CHF1.1932, compared with CHF1.2042 late Thursday. "I think next week, we'relikely to see risk appetite return to the market, particularly after the Fedstatement," says Greg Anderson, currency strategist at ABN Amro in Chicago. (WLW)

2:27 (Dow Jones) Bear Stearns (BSC) is "maintaining dialogue" with the ratingsagencies, Sam Molinaro, Bear Stearns CFO and executive vice president, says in aconference call. "They've expressed concerns...their concerns are what theyare...we are in a cyclically difficult environment." The cost of protectingBSC's bonds rose sharply today after S&P revised its outlook on the firm tonegative from stable. (ASH)

2:19 (Dow Jones) Brazilian share prices extend losses in mid-afternoon tradingas Wall Street prices continue to decline on subprime mortgage worries. Thebenchmark Ibovespa index down 1.9% at 53681. US stocks had nearly pulled even,but are now falling back again. DJIA down 81, S&P 500 down 15. (TEM)

2:15 (Dow Jones) Bear Stearns (BSC) liquidity and capital is "solid," BSCofficials say in a conference call. At the end of day on Aug. 2, the "liquiditypool was $11.4B in cash." (ASH)

2:10 (Dow Jones) In mid-afternoon trading, US Treasurys remain at their lowyield levels for the day. The 10-year Treasury is up 8/32 to yield 4.72% and the2-year note is up 4/32 to yield 4.50%. The drive lower started by a somewhatweaker than expected employment report, says Raymond Remy, head of fixed incomefor Daiwa Securities America, but Treasurys are also taking their cues fromlower equities and S&P revising outlook for Bear Stearns to negative fromstable. The market is "really focused on what's happening with equities and BearStearns in particular," Remy says. (DAR)

2:06 (Dow Jones) Bear Stearns (BSC) shares have rebounded following ashellacking earlier today when S&P slapped a negative outlook on the firm. Downas much as $9 earlier, BSC is now actually up 0.4%, while rival Lehman Brothers(LEH) is down 3.4%. "Contrary to rumors in the marketplace, our franchise isprofitable and healthy, and our balance sheet is strong and liquid," BSC says ina statement responding to S&P. The rating agency said its concerns about LEH andother rivals are not as great as about BSC. BSC holding conference call rightnow with investors about the issue. (JED)

2:03 (Dow Jones) California Water Services (CWT) fared better in the 2Q thanexpected, and shares now appear undervalued, Brean Murray says in upgradingshares to buy from hold. Sets $46 price target. The company's revenue benefittedfrom healthy demand due to drought conditions, which should continue through2007. Firm raises 2007 EPS forecast by 7c to $1.50, says CWT will benefit fromCalifornia Public Utilities Commission's new rate-case plan, which "will speedup the lag in cost recovery." CWT up 7.2% at $39.42. (BDP)

1:54 (Dow Jones) Stock index futures down sharply as short-covering bounce isperceived as a selling opportunity. Data showing softer-than-anticipated Julyjobs growth and service sector activity, along with the ongoing subprime saga,considered key pressuring factors. Sept Russell is the day's worst performingindex contract, recently down almost 1.5%. Trader/analyst Harry Michas sayshe'll keep selling rallies until Sept Russell moves above 779.10. Recentlytrading at 777.00, down 11.4. Sept S&P's near session lows, recently at 1466.70,down 15. Sept Nasdaq recently down 0.8% at 1964.00. Sept DJIA last at 13444,down 83 or 0.6%. (HLP)

1:47 (Dow Jones) In an email to employees, Chrysler's CEO says the newlyindependent auto maker will be "more open to new partnerships and alliances, andwill be able to move faster to leverage these opportunities to accelerate ourgrowth." CEO Tom LaSorda says the auto maker, which completed its transitionfrom DaimlerChrysler (DCX) to private equity firm Cerberus, will bring a "laser-like" focus to its business and not have to worry about "financial marketpressures to generate short-term results." One thing Chrysler needs is a betterpresence in emerging markets, LaSorda says. He also notes that Cerberus has "high expectations of performance" and says it's "up to us to make it happen." (TAK)

1:41 (Dow Jones) Weyerhaeuser (WY) investors listening for word on possiblesale of containerboard division or potential conversion into a REIT didn't getmuch from WY's 2Q conference call. CEO Steve Rogel said WY still evaluatingoptions for containerboard and awaits tax legislation on the REIT front.Meanwhile, Rogel said WY's working to manage its businesses as efficiently aspossible, given "challenging" housing cycle. Goldman Sachs says WY's 2Qoperating results were weak. Shares off 1.4% at $67.75. (PLS)

1:29 (Dow Jones) It was nice while it lasted, but this isn't a blip; the bullmarket for financial stocks appears over, says Louise Yamada, head of YamadaTechnical Research Advisors. Between 2002 and this year, the S&P Financial Indexmore than doubled, to 509.55 from 250, but now "The forces of demand have cededto the forces of supply for what may prove to be an extended period of time,suggesting further absolute price risk," Yamada says. (KJT)