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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV