CALABASAS, Calif. (AP) -- Countrywide Financial Corp. boosted its borrowing capacity by $12 billion as the mortgage lender struggles to weather the slowdown in the housing market, the company said Thursday.
The move came after the largest U.S. home lender borrowed $11.5 billion and sold a $2 billion stake to Bank of America in recent weeks so it could keep operating its retail banking and mortgage businesses.
In addition:
The decline in the U.S. commercial paper market slowed last week, prompting speculation that the worst of the short-term credit rout may be over.
U.S. stocks rose and Treasuries fell after the Federal Reserve reported short-term debt dropped by $8.2 billion, compared with a decline of $54.1 billion a week earlier. That coincided with Countrywide Financial Corp. obtaining new financing and banks finding buyers for loans to fund Kohlberg Kravis Roberts & Co.'s buyout of Alliance Boots.
Traders took this as a sign that credit market problems were easing and bid the market up accordingly.
Today there were two trends. The first was a rally that started with an upward gap at the open. The market rallied and formed a head and shoulders top formation then sold-off below the neckline right before the close. The market printed a big volume bar at the 3:45 mark which I think was traders taking some money off the table from the longer run we've had (see next chart).
The markets have been rallying since mid-morning on Monday. That's why I think the big volume coming out of the head and shoulders formation was traders selling from this mini-rally.
By way of comparison, I've included this chart of the IWNs (Russell 2000). Notice that while this index started to rally at the same time as the SPYs, it peaked early yesterday morning and has traded in more of a sideways move since. It broke through resistance briefly a little after lunch but couldn't maintain upward momentum. The sideways action may indicate that traders are still shying away from the more speculative areas of the market right now and are favoring the large cap S%P 500 issues over the small caps.
Finally notice that this weeks rally has occurred on decreasing volume. That's a bad technical development.
