The Goldman Sachs lawsuit brought some fear back to Wall Street and sparked a sharp 1.5% sell-off today. The week will go out flat after being up almost 2% through the first four days. This is the 7th straight week without a loss. The declines came on heavy volume and broad selling with 4 stocks falling for every 1 rising.
All in all, the market is still in the middle of an incredible rally and investors were willing to buy into today’s morning sell-off. Stocks are up 9 of the last 11 sessions and today’s downside put a minor dent in the powerful surge since the February low. The primary fears were sparked over the potential for more lawsuits and potentially damaging regulatory changes.
By Daily Futures:
U.S. Economy – SEC Charges Goldman Sachs With Fraud
The Securities Exchange Commission charged Goldman Sachs with securities fraud in a civil suit related to subprime mortgage securities (see article). Today’s news rattled investors and triggered some selling in the stock and commodities markets.
The U.S. Census Bureau said that housing starts were at an annual rate of 626,000 in March, up 1.6% from February and more than expected. Building permits were up 7.5% in March, also more than expected. July lumber closed up its $10 daily limit at a new contract high of $325.60.
The University of Michigan said that its consumer sentiment index fell from 73.6 to 69.5 in April. The June 2011 eurodollars jumped up .105 to a new contract high at 98.62, helped by a flight to safety after the news about Goldman Sachs.
Grains and Cotton
Rain is falling over the winter wheat states of Kansas, Oklahoma, and Texas today. Wet areas in Missouri and Illinois are also getting rain. July wheat closed up 7.25 cents at $5.00, blamed on short-covering in spite of today’s higher U.S. dollar.
In spite of today’s lower stock market performance, cattle and hog prices held up relatively well. June cattle ended up .35 at 94.65 and June hogs were up .07 at 86.15.
After the close, the USDA estimated this week’s beef production at 480.5 million pounds, up 2.5% from a year ago. Pork production was estimated at 414.3 million pounds, down 4.9% from a year ago.
The National Confectioners Cocoa Association said late yesterday that North American cocoa grindings totaled 116,122 tons in the first quarter of 2010, up 16% from a year ago and better than expected. July cocoa jumped up $98 to $2,988.
Coffee prices continue to disappoint many like the International Coffee Organization that have been hoping for higher prices. July coffee fell 2.60 cents to $1.3080, the lowest close in seven months.
June gold dropped $23.40 to $1,136.90, troubled by ongoing concerns about Greece and today’s news that the SEC is going after Goldman Sachs.
Eurostat said that consumer prices in the EU-27 were up 1.9% in March from a year ago, more than expected. Also, European Finance Ministers met in Madrid and investors are watching to see if they will offer more support for Greece. The June euro closed down .0078 at $1.3498.
Statistics Canada said that manufacturing sales were up .1% in February and up 6.4% from a year ago to C$44.1 billion, weaker than expected. Also, new vehicle sales were up 8.1% in February. The June Canadian dollar fell 1.24 cents to 98.53, pressured by today’s sell-off in commodities.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.