This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Subprime Crashes Dow Party

Traders seem to be drawing a line in the sand at Dow 14,000.

The blue chip index flirted with the 14,000 mark again Tuesday, but the rally couldn't sustain itself into the closing bell. Perhaps there's just too much rumbling below in the credit markets to justify such a cork-popping event, even with a growing list of strong earnings reports and news of more mergers.

After trading as high as 14,021.95 intraday, the Dow Jones Industrial Average marked yet another record, gaining 0.2% to close at 13,971.55 and the Nasdaq Composite hit a new six-and-a-half-year high, closing up 0.6% at 2712.29. The S&P 500 slipped 0.1% to close at 1549.38 after trading above 1555 intraday.

"We know the problems out there about subprime and the credit markets, we just aren't sure of the lag time between events and a view into what the effects will be," says Art Hogan, chief market analyst at Jefferies & Co.

Indeed, traders spent much of the day chattering about the true losses at two Bear Stearns (BSC) hedge funds -- the High-Grade Structured Credit Strategies Fund and its sister vehicle, High Grade Structured Credit Enhanced Leveraged Fund. In March, the more highly levered fund had $638 million in equity, and the less levered fund had $925 million, according to The Wall Street Journal.

The funds' manager Ralph Cioffi and his team at Bear have been trying to "mark to market" the subprime securities that primarily make up their collateralized debt obligations -- pools of loans and bonds backed by subprime paper. Insight into how much these funds are actually worth and how they priced these assets will help the rest of the market assess the potential damage at other funds, and the potential liquidity-drying ripple effects.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
INTC $30.09 0.67%
KLAC $58.43 -1.60%
PPP $3.49 -3.10%
YHOO $44.49 0.66%
AAPL $124.26 0.71%


DOW 17,678.03 -40.51 -0.23%
S&P 500 2,058.21 -2.84 -0.14%
NASDAQ 4,867.4670 -9.0520 -0.19%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs