Market Wrap – In This Corner The Fed Champ Benjamin Bernanke!
By Robert Perrego, at 4:26 pm on June 25th, 2009Yesterday Republican Congressman Darrell Issa threw down the gauntlet with some pretty strong language concerning a cover-up, Federal Reserve Chairman Ben Bernanke and Bank of America. Today Congress grilled Bernanke and he testified through this mess like a champ.
Just looking at this logically – who would you bet on in this bout? Considering that if Congress had a smoking gun or any damning evidence they would have used it long ago, you could have felt pretty safe putting your money on Bernanke. On top of this let’s count the number of Ph.D’s, experts and geniuses we have in Congress these days…
The market bet on Bernanke today and won. Not only did the good vibe out of watching Bernanke slap aside Congress’s questions hearten buyers but the 7-Year Treasury auction went well with a 2.82 cover ratio causing yields across the curve to drop. More importantly, this brought mortgage rates down a little after being on the rise of late, becoming a concern as higher rates mean more costly homes and it would be nice to sell a few more houses these days (30 year fixed – 5.6%). All in all, the $104 billion the government borrowed this week showed no sign that bond buyers were all too worried about the next trillion dollars plus to come. Even if these auctions were for refunding purposes the fact that buyers stepped up is a positive sign.
First Quarter GDP’s final revision came out at 8:30 a.m. and was revised up to -5.5% from -5.7% while jobless claims came in above what was expected at 627,000 with the consensus being 613,000. Seems like the market is getting a little immune to bad jobs data as the Dow jumped 173 points strong out of the open and kept the pace most the day. 613,000 – 627,000, ah, that’s only a 2% difference.
The Dow Jones closed up 172.54 points (+2.07%, 8472.40) and was as high as 8490 at it’s intra-day peak. The S&P 500 led the trio closing up 19.33 points (+2.14%, 920.27) and put a little safety space between the much ballyhooed 900 support level all the talking heads keep talking about and the Nasdaq 100 added 28.76 points (+1.98%, 1475.82).
Lennar and Avis lost money but the stocks made money as they lost less than they were expected to. I did that in Vegas once and, net-net, I still lost money. Avis Budget Group, Inc. (NYSE: CAR) lost 48 cents a share which is better than losing the 63 cents the street expected and stock jumped 16.6% to $5.29. Of course it did not hurt that Hertz Global holdings, Inc. (NYSE: HTZ) announced favorable Q2 and full year guidance. Now over from the auto related disaster sector to the home building disaster sector – Lennar Corporation (NYSE: LEN) lost 49 cents a share after non-recurring items and the street expected them to drop 63 cents a share. Lennar jumped 16.3% on the news and that is a little less than Avis but they did lose 1 penny a share more.
Crude Light Sweet Oil added $1.56 and closed above $70 a barrell ($70.32) on news of a Nigerian pipeline attack. I always wonder if these guys buy call options before they run off and play ‘destructo’. Gold rose but on a percentage basis less than the market (0.7% vs. 2.07%) with the New York Spot Price rising $6.80 an ounce to $939.90 at 4:15 p.m. est.
The sector race came in like this: Industrials +2.97%, Energy +2.9%, Consumer Cyclicals +2.88%, Technology +2.03% and Communications +2.00%.
Looking at this you can see that two of the more economically sensitive sectors led the pack – consumers cyclicals and industrials. This could be showing us that into this latest market dip, buyers are betting that we won’t test the previous lows, and in fact, they are getting a little aggressive and maybe even greedy looking to play a more prolonged run up in the market.
Trading screens were all green today with our best pop since June 1st which could be the market’s proxy vote for Bernanke getting reappointed in 2010. Ben has done a pretty solid job and got us this far and it has not been easy sailing lately. My vote – Ben did what he had to do no matter what it was and the market is still standing. Get off his back!
