Thursday’s Market Recap: Lehman Looks For Buyers, Trade Deficit Grows

Lehman Brothers (LEH) has approached many other major financial firms trying to find a potential buyer for some (or all) of the investment firm. Deutsche Bank AG (DB), Britain’s Barclay’s Plc, France’s BNP Paribas, and Bank of America (BAC) have all been named potential buyers of Lehman, along with a few private equity firms like Bain Capital. Many analysts speculated that Goldman Sachs (GS) would pursue the acquisition of Lehman Brothers, but integrating the investment firm would be too disruptive for Goldman. However, due to Goldman’s policy on market speculation they declined to comment, so many speculators feel there is still a slight possibility of such an acquisition. The uncertainty in the financial sector pushed stocks down early in today’s trading session, but the markets rebounded and ended the day on a relatively strong note fueled by the materials and transportation sectors, along with a short rally toward some of the financial sector’s stronger companies.

The Dow Jones Industrial Average rose 164.79 points (or 1.46%) to close the day at 11,433.71. The Nasdaq rose 1.32% (or 29.52 points) to close at 2,258.22. The S&P500 closed at 1,249.05, up 17.01 points (or 1.38%). Oil prices fell below $101 per barrel today, down 2.08% (or $2.13) to $100.45 a barrel, as investors still seemed worried about declines in worldwide demand. Gasoline prices jumped severely today throughout the Gulf Coast, ranging anywhere from $4.00-$5.00 a gallon as Hurricane Ike took aim at Texas oil refineries. The national average for a gallon of standard gasoline was $3.671 today. The Dollar continued its strengthening against the Euro and is currently trading at 0.7162 vs. the Euro. The Dollar fell against the Yen today, and is currently trading at 107.00 vs. the Yen. Gold continued its decline, falling for the ninth straight trading session, declining 2.19% or $16.60 today to settle at $741.30 per ounce. The 10 year Treasury note fell to 3.6220% today, falling 52 basis points.

The Commerce Department announced today that America’s trade deficit (the gap between what America imports and what it sells abroad) climbed 5.7% in July, reaching $62.2 billion, $4.2 billion higher than the $58 billion trade deficit analysts expected. The $62.2 billion deficit is America’s highest since March of 2007, driven by America’s oil import prices which totaled $51.4 billion in July (with an average price of $124.66 per barrel), up 13.7% from June. Overall imports for July totaled $230.3 billion. American exports rose 3.3% in July from the previous month, reaching a record high total of $168.1, which was much overshadowed by July’s record import total. American-made cars, computers, and commercial aircrafts all made big strides in oversea sales, shedding some positive light on our economy which has looked rather dark as of late. America’s deficit with China grew 16.1% to $24.9 billion in July, the second largest deficit with China in history. The deficit with the European Union grew 33.8% to $11 billion in July. Annually, the deficit totals $719.8 billion, up 2.8% from last year.

A nationwide survey by Freddie Mac (FRE) found that the national average rate for 30-year fixed rate mortgages fell to 5.93% this week, falling below 6% for the first time in 5 months which can be accredited to the government’s takeover of Freddie Mac and Fannie Mae (FNM). The national average for 30-year fixed-rate mortgages last week was 6.35%. Rates for 15-year fixed rate and 5-year adjustable rate mortgages also fell from last week, to 5.54% from 5.90% and 5.87% from 5.97% respectively. 1-year adjustable rate mortgages increased slightly from last week, to 5.21% from 5.15%. Many economists expect mortgage rates to continue to fall, and expect 30-year fixed rate mortgages to level off at around 5.5% as the government has removed some of the uncertainty from the mortgage market.

Disclosure: The mutual fund the author is associated with is long BAC and GS

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