Accredited Home Soars 36% before Bush's Speech

Elena
31 Aug, 2007
New York City

Wall Street rallied at opening, lifted by news that President Bush will announce a plan to support subprime mortgage borrowers and loosen credit conditions. Market sentiment was further boosted by optimism that Federal Reserve Chairman Ben Bernanke might hint an interest-rate cut in his speech. Accredited Home Lenders soared 36% after Lone Star Funds said it will offer $214 million for the firm, which is 44% less than it first offered for the troubled lender.

[R]09:45AM Wall Street opened sharply higher ahead of Bush’s speech.[/R]

Wall Street rallied at opening, lifted by news that President Bush will announce a plan to support subprime mortgage borrowers and loosen credit conditions. Reportedly, the planned proposal would allow another 80,000 homeowners in 2008 to get federally insured mortgages in addition to the 160,000 estimated to use the insurance.

Market sentiment was further boosted by optimism that Federal Reserve Chairman Ben Bernanke might hint an interest-rate cut in his speech. However, stocks erased some of their early gains after Chairman Bernanke said that lenders and investors should not rely on protection from the central bank, as it holds no responsibility for their financial decisions.

In general, the Fed Reserve Chairman matched market expectations in his speech. He said the Fed reserve is ready to act adequately to prevent the turmoil in financial markets from spreading into the broader economy. Bernanke also said that the central bank is prepared to take further action to provide liquidity and promote the orderly functioning or markets.

In addition, several economic reports were released on Friday morning. The Commerce Department reported milder-than-expected inflation in July and better-than-forecast growth in personal incomes and spending. The Commerce Department also said factory orders surged 3.7% in July, higher than the 3.3% increase that had been expected.

Among companies in focus, Accredited Home Lenders ((LEND)) soared 36% after Lone Star Funds said it will offer $214 million for the firm, which is 44% less than it first offered for the troubled lender. Mortgage lender Countrywide Financial ((CFC)) climbed 3.5%.

In early trading, the Dow Jones industrial average rose 118.44, or 0.89%, to 13,357.17. The Standard & Poor's 500 index rose 15.65, or 1.07%, to 1,473.29, and the Nasdaq composite index rose 27.19, or 1.06%, to 2,592.49. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.56% from 4.51% late Thursday.


[R]09:00AM U.S. stock futures rallied, boosted by rate optimism.[/R]

U.S. stock futures pointed to a sharply higher opening of Friday trading session, boosted by optimism that Chairman Ben Bernanke will give a clue about interest rate cuts in his speech. The financial futures markets expect one and even two reductions of the key interest rate by the end of September.

Investors were also optimistic because President Bush is expected to announce strategy to aid borrowers struck by the housing market slump to keep their homes. Mortgage lender Countrywide Financial ((CFC)) surged 6.3% in the pre-open, while Accredited Home Lenders ((LEND)) soared 38% after Lone Star Funds said it will offer $214 million for the firm, which is 44% less than it first offered for the troubled lender.

On the earnings news front, Dell ((DELL)) rose 1.9% in pre-open trade after it reported a 46% profit rise and a 5% revenue gain, beating analyst estimates.

Traders also digested economic data which showed that inflation remained cool while household incomes and spending strengthened in July. Personal incomes and spending rose 0.5% and 0.3%, respectively, while core PCE remained at 1.9%.

Dow Jones industrials futures expiring in September rose 101, or 0.76%, to 13,380, while Standard & Poor''s 500 index futures rose 14.60, or 1.00%, to 1,476.20. Nasdaq 100 index futures rose 17.75, or 0.90%, to 1,992.50.


[R]8:00AM Computer maker Dell posted 46% profit increase in Q2.[/R]

Computer maker Dell Inc. ((DELL)) advanced 2.4% in pre-market trading after it reported positive Q2 results, prompting it is trying to regain stability and lost positions in the computer industry. According to preliminary results released after the closing bell Thursday, Dell’s quarterly earnings jumped 46% to $733 million, or 32 cents per share, compared with $502 million, or 22 cents per share a year ago.

The profit increase was attributed to stronger sales of business products and services, improved average selling prices and lower component costs. Sales rose 4% to $14.8 billion. The quarterly financial results exceeded analyst expectations of earnings of 30 cents per share on sales of $14.63 billion. Dell said results were dragged down 5 cents per share by a $102 million charge for payments for expired stock options. Another $59 million was related to the internal probe, which found that Dell employees had misled auditors and manipulated results to meet performance.