As of 12:52 Eastern, Wall Street is in the green after positive reports from the Commerce Department regarding new home sales and U.S.-made durable goods. Those reading from July – so they indicate that the economy is still vibrant and growing prior to the credit debacle, which really went buzurk in August.
All three big indexes – the Dow, NASDAQ, and the S&P500 is trading a little above half a percent (Yahoo Finance). Meanwhile indexes in Asia closed for the weekend on a negative note with the Nikkei in Tokyo finishing 0.41 percent lower. And in Europe, trading picked up in London, and Paris, by 0.37 percent and 0.83 percent, while the Xetra DAX is slightly lower by 0.06 percent.
The Bank of China disclosed holding securities backed by suprime-mortgages amounting to $10 billion – that’s the most for any Asian bank, and the BOC is one of China’s biggest lenders. With that in mind traders are confirming contagion of subprime default losses to Asia as well.
Of course, this comes after earlier reports of BNP Paribas and other banks getting hit in Europe as well.
Also highlighted this week, Countrywide Financial’s CEO said that the credit crisis isn’t getting any better on a telvevised interview on CNBC. And he also said a recession is in the offing and that the Fed should cut rates to bring in new liquidit into the markets.
A post on the Toro’s Running of the Bulls Market Blog comments that analysts may be over estimating profitability growth. Are they?
Profitability growth is projected to hit 10 percent and 11 percent in 2007 and 2008 respectively. The author says these figures are way too high. The rationale is that although it seems optimistic from a wider perspective, double digit profit growth over a period of 2 years during a slowdown or worse a recession is a littel far-fetched. As the writer correctly points out, after 88 percent profit growth since Q2 of 2002.