Coming Week: Summer Stress
06/30/07 - 06:22 AM EDT
Liz Rappaport
Wall Street may be half-staffed in the holiday-shortened coming week, but the capitalist canyon will still be flooded with anxiety.
The volatility of recent weeks is likely to continue as investors digest what may have been the first steps in a broad reassessment of risk in the market. The coming weeks are likely to remain tainted by concerns about credit conditions for financing leveraged buyouts, for subprime mortgage and other collateralized debt investors in the wake of the blowup of two Bear Stearns(BSC Quote - Cramer on BSC - Stock Picks) hedge funds, and for consumers who may suffer from mortgage resets and tighter lending standards. In particular, traders say all eyes will be on the credit markets, where last week the financing for the leveraged buyout of Ahold's(AHO Quote - Cramer on AHO - Stock Picks) U.S. Foodservice unit was tabled. And with volume likely light in the coming week as traders take off for the July Fourth holiday, the smallest drop of concern could lead to a tempest. "The market can be more volatile when market participants aren't around," says Art Hogan, chief market analyst at Jefferies & Co. "You can hit these air pockets where you get big moves on little news or rumors." Indeed, the quarter ended with a dramatic 100-point drop in the Dow Friday afternoon as word swirled through trading floors that collateralized debt securities were being marked to market, or repriced dramatically lower, as hedge funds and other investors settle up their portfolios at quarter's end. The lowest-quality portions of the collateralized debt were being marked down as much as 80 basis points, according to sources.
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