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What Caused The Crash Of 2:45 PM

William RutherfordOn May 6, at 2:45 p.m., the equity markets in the U.S. crashed without warning. During a unique 17- minute period, the market suffered the largest intraday decline in market history. Stock prices fell about 9 percent only to recover much of the loss moments later. Shares in Procter & Gamble, one of the most liquid stocks on the exchange, fell 35 percent in moments. Accenture slid from $40 to a penny. With a cascade of sell orders coming in, traders, specialists and even computers stood aside as prices plummeted. Many stocks, including Procter & Gamble, did not trade for several minutes. This has become known as the “flash crash.

While it is unknown exactly what caused the crash, some people believe that a large, $12 billion sell order in mini S&P futures, entered by a Midwestern brokerage firm, may have been the catalyst.

About 70 percent of the orders on the New York Stock Exchange are now done by computers in what is known as flash or high-frequency trading (I wrote about this previously in an August 2009 column for the Daily Journal of Commerce). When the computers saw this huge trade, they instantly sold and started the crash. The NYSE shifted into “slow mode,” which caused incoming orders to shift to humans (specialists charged with maintaining an orderly market) and to other exchanges. (There are more than fifty other exchanges.)

Both the specialists and the other exchanges were swamped. Floor traders at first thought a large European bank must have failed, but then realized that was not true. But the specialists and the computers did get out of the way. Their action […]

June 15th, 2010|Categories: Daily Journal of Commerce|Tags: , , , |Comments Off on What Caused The Crash Of 2:45 PM

Will Obama Keep On Truckin’ With Agenda?

William RutherfordWhile president focuses on health care, voters’ actions suggest they’re more concerned with the economy

Nearly a year ago, Vice President Joe Biden notoriously asked, “Why are we focusing on health care when the economy is the problem?” Apparently Obama didn’t get the memo.

In the Scott heard around the world, previously unknown Massachusetts state Rep. Scott Brown (R-Mass.) drove his dusty, old pickup truck to victory in knocking off the Democratic nominee for the U.S. Senate seat previously held by Ted Kennedy. Elected in the bluest of the blue states, Brown is the first Republican elected to the U.S. Senate from Massachusetts in 38 years. German news source Der Spiegel pronounced: “The World Bids Farewell to Obama.” Elected just a year ago in a stunning victory, President Barack Obama now finds himself facing declining approval ratings and upheaval. He promised change, but voters did not like what they perceived as European style socialism. With the nation suffering through the worst economic conditions since the Great Depression, exit polls from his presidential election showed that two-thirds of the voters cited the economy as their number one concern, and fewer than 10 percent mentioned health care. Since taking office, Obama has focused on health care. Obama, in his first year in office, gave 158 interviews and 411 speeches – more than any other U.S. president; perhaps more than all of them put together. Yet the Democrats have now lost the governorships of Virginia and New Jersey, and a Senate seat in Massachusetts.

In the meantime, the Brookings Institution says the largest and fastest growing population of poor people in the U.S. is in the suburbs. […]

April 6th, 2010|Categories: Daily Journal of Commerce|Tags: , , , , , |Comments Off on Will Obama Keep On Truckin’ With Agenda?

Economic Data Suggest Reasons For Optimism

William RutherfordAs I have stated before, the economy won’t hit the bottom until housing prices stabilize. Recent reports show that single-family home prices in the U.S. posted a slight 0.2-percent increase in the third quarter. This was the first quarterly gain in two years. The biggest increases were in the West, despite California, Arizona and Nevada being some of the most troubled states. Sales of new homes unexpectedly increased in October.

Sales of new single-family homes increased 6.2 percent. Sales of existing homes increased 3.7 percent. All of these reports augur well for the economy.

Also, job losses in November slowed to 11,000, the fewest since this recession began, and the unemployment rate fell unexpectedly, indicating that the economy is in a healing process. Unemployment remains stubbornly high, at around 10 percent, although most believe the real level is much higher. Nevertheless, payroll data reflect a notable improvement in the jobs market. Some think that firings have been too aggressive and that firms will have to start hiring in the next few months. There is a long way to go, however; nearly 8 million people have lost their jobs since the start of the recession.

Average hourly earnings rose a penny in November and the average workweek expanded by 0.2 hours.
Another report showed U.S. factory orders rose for the sixth time in seven months in October, posting a larger-than-expected gain of 0.6 percent. In the third quarter, the U.S. economy grew 2.8 percent, expanding for the first time in more than a year.

The economy still faces stiff headwinds, including higher taxes and more regulation. But perhaps the strongest is banks’ reluctance to lend. Banks have taken billions […]

March 18th, 2010|Categories: Daily Journal of Commerce|Tags: , , , |Comments Off on Economic Data Suggest Reasons For Optimism

Bill Rutherford Quoted In Dow Jones

Consumer Staples, Health Care Seen As Recessionary Havens

by Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145; maryellen.lloyd@dowjones.com

A year into the U.S. recession, the smart money on Wall Street says traditionally defensive sectors such as consumer staples, health care and telecommunications remain among the best bets.

That’s because it is businesses like drugstores, food producers, managed-care companies, and beer and cigarette makers that tend to do well despite tough economic times, according to several market strategists, money managers, economists and fund data managers.

“You’re dealing with industries and companies that provide necessities – everything from toothpaste to stents to pharmaceuticals to cereal,” said Brian Belski, Merrill Lynch’s U.S. sector strategist.

And some not-so-basic items can feel like necessary luxuries for folks during times of stress. “People tend to drink and smoke more during recessions and slowing times in the economy and the stock market,” Belski said. […]

December 18th, 2008|Categories: Bill Quoted|Tags: , , , , , , , , |Comments Off on Bill Rutherford Quoted In Dow Jones

Bill Rutherford Quoted In Business Week

Inside Wall Street: Bring on the Cranes and Road Graders by Gene Marcial

http://www.businessweek.com/magazine/content/08_48/c4110insidewal446718.htm

The Dow Jones industrial average has plunged some 41% since its record close at 14,164 on Oct. 9, 2007—for a $1.7 trillion loss in market capitalization. And the broader Dow Jones Wilshire 5000-stock index has lost 46%, or $9.1 trillion. The huge sell-off is causing some strategists to figure that the market has already priced in a recession. Not only that, “it also has posted the worst performance entering a recession in over 60 years,” notes Jeffrey Kleintop, chief market strategist at LPL Financial. While volatility is likely to continue, history suggests additional significant downside is unlikely. “The stage is set for an eventual recovery, led by the early cyclical sectors,” predicts Kleintop. It’s well-known, he adds, that powerful gains in the stock market come well before the end of a recession. […]

Bill Rutherford Quoted By CNNMoney.com

CNNMoney.com

Dow sheds 486 points: Post-election worries about the weak economy are front and center.

by Alexandra Twin, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) — Stocks fell sharply Wednesday, with the Dow sliding as much as 513 points, as Barack Obama’s historic victory gave way to renewed worries about the struggling economy.

The Dow Jones industrial average (INDU) lost 486 points or 5%. The blue-chip average lost as much as 513 points earlier. The Standard & Poor’s 500 (SPX) index lost 5.3% and the Nasdaq composite (COMP) gave up 5.5%.

Investors were taking a classic “buy the rumor, sell the news” response to President-elect Barack Obama’s victory over John McCain, said Bill Stone, chief investment strategist at PNC Financial Services Group. […]

How Could Mr. Right Have Been So Wrong?

Amid the financial meltdown, former Fed chairman Alan Greenspan is a rock star no more

by The Oregonian Editorial Board

He was a legend, the “maestro,” the man who knew how to pull the levers that others couldn’t even see, the man who uttered the market-crippling phrase “irrational exuberance,” who courted celebrity and married the television news reporter, whose absolute faith in free markets led many to declare him the greatest chairman of the Federal Reserve the country had ever known.

Now, with markets crashing and wealth evaporating around the world, he is regarded as the man who steered blindly into a storm, tacking when he should have jibed.

“Man, I loved Alan Greenspan,” lamented Portland economist and business consultant Bill Conerly this month on his Businomics blog, “but it turns out that he is to blame for today’s problems.”

Conerly says Greenspan and many others failed to see that the Fed’s policy of keeping interest rates low was fueling a housing bubble — a bubble that popped and has plunged the world into recession. […]

Bill Rutherford In BusinessWeek

Business Week

Marcial: How Four Pros Played the Stock Meltdown

One waded into fallen bank stocks and shorted credit-card shares, another eyed health-care issues, a third bought countercyclicals—and a fourth sat tight

by Gene Marcial

What did investors do when the Dow Jones industrial average plunged 777.68 points, or 7%, on Sept. 29, to 10,365.45? Head for the nearest bar for a double? Or rush to double up, or down, on their stocks?

Either way, the Dow’s sharp response to the unexpected rejection by the House of Representatives of the Treasury’s buyout plan reminded investors yet again of how unpredictable and volatile the market can be.

“You’ve got to have a steel stomach to confront these types of markets—to survive or win,” says William Harnisch, president of hedge fund Peconic Partners, which manages some $1.5 billion in assets. And a winner he’s been at a time when most other hedge funds are struggling to avoid sinking. In 2007, Peconic posted a 64% gain, and this year is up 8% though Sept. 29, vs. a decline of more than 20% for the Standard & Poor’s 500-stock index. So Harnisch wasn’t one of those who scurried to the nearest tavern: He dared to buy stocks as the market plummeted. […]

Bill Rutherford Quoted In Barron’s

Earnings Estimates Still Too Lofty

By JOHANNA BENNETT

WHILE WALL STREET’S OUTLOOK for corporate earnings has grown more bearish by the day, the estimates are still not grisly enough.

Analysts have sharply cut their third-quarter and full-year financial profit estimates for companies in the Standard & Poor’s 500 since the summer, finally giving up on the notion that profits will climb much in 2008.

A poll by Thomson Reuters shows that the Street expects earnings to fall 2.3% in the quarter ending Tuesday from a year earlier. For the entire year, profits are expected to remain flat, a big change from the 6.7% gain analysts had forecast in July.

But some are skeptical about even those modest expectations and expect earnings to be down this year by as much as 8%. And there’s little confidence that the 22% gains predicted in 2009 will materialize given the uncertain economy, falling oil prices and the turmoil plaguing financial markets. […]

Bill Rutherford Quoted By MarketWatch.com

Beyond the pail: Where to invest in a post-bailout world

by Jonathan Burton, MarketWatch

SAN FRANCISCO (MarketWatch) — Wall Street is bound to get its bailout, in one form or another. The government’s rescue package will be costly to taxpayers, politically controversial — and quite possibly not the last. It will also dramatically change the landscape for U.S. stock investors.

The bailout has a singular task: to grease the locked wheels of the financial system and get credit moving again. What investors need to remember is that even if this plan works, the deep problems plaguing homeowners, consumers and the broader economy won’t magically disappear. The Troubled Asset Relief Plan isn’t called TARP for no reason. It is intended to avert a flood of Depression-era size, but the ground around us will still be soaked. […]

September 26th, 2008|Categories: Bill Quoted|Tags: , , , , , , , , , , |Comments Off on Bill Rutherford Quoted By MarketWatch.com
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