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Wall Street Wrap – Economic Reports Hammer the Market, Gold Shines $1,000 again
By Robert Perrego, at 5:08 pm on September 30th, 2009The bullish momentum of the stock market ran into a variety of economic reports today, causing sizable swings in the market on the last day of September trading. The market sold off hard at 9:45 a.m. sparked by a poor number from the Chicago PMI. In August the PMI reached 50.0, which is the balance point between expansion and contraction, but the number for September dropped to 46.1, well below the lowest estimate of 48.5. Gold was the best performing asset of the day, jumping $15.20 an ounce, with Eldorado Gold Corp. (NYSE: EGO) the biggest gainer (+3.35%) of the larger gold mining companies as the dollar got hit mostly on a stronger euro.
The day started with the Mortgage Bankers Association (MBA) Purchase Applications falling 6.2% and refinancing activity dropping 0.8%, despite a very low current rate of 4.94% for a 30 year loan. Next the ADP Employment report showed a loss of 254,000 jobs in the private sector when a 200,000 number was expected. The lone star of hope came in with the GDP revision for the second quarter. The previously reported number was a loss of 1% and expectations were that the number would be revised down in the range of -1.5% to -1.0%. The revision was to the upside with the latest number for Q2 GDP reported at -0.7%, and the pre-market futures strengthened into the open.
At 9:45 a.m. as the market traded slightly higher, the other shoe dropped with the PMI coming in low causing the Dow to drop as much as 147 points within the next 20 minutes. The bargain hunters and bottom pickers came into the market by 10 a.m. and the market started to slowly trade up for the next 3 hours, with the Dow going positive at 1 p.m. The wild ride was not over as the market sold off suddenly at 2:45 p.m. with a 90 point drop within 30 minutes only to rebound and finally close down just 29.92 points (-0.30%, 9712.28).
The S&P 500 was on the same wild ride and ended up losing 3.53 points (-0.33%, 1057.08) with the star of the day, the Nasdaq 100, actually gaining 1.32 points (+0.07%, 1718.99).
The European Central Bank lent only 75.2 billion euros at their benchmark rate of 1% to participating banks, after making loans as high as a record 442 billion in June. Banks bid for how much they think they need to borrow and this relatively low number showed strength in the EU which caused the euro to gain against the dollar. The PowerShares Deutsche Bank Dollar Bull ETF (NYSE: UUP) dropped 13 cents for a 0.56% loss after gaining in 4 of the last 5 trading days. This dollar drop energized gold and oil, as gold regained the $1,000 level and oil broke above $70 a barrel.
The economic calendar can get more brutal this week, with numbers for August domestic Motor Vehicle Sales (Thursday expected 8.0M expected), Personal Income and Outlays (Thurs. 8:30 a.m. 0.1%, 1.1% exp.), Jobless Claims (Thurs. 8:30 a.m. -537K exp.), ISM Manufacturing Index (Thurs. 10 a.m. 53.5 exp.), Construction Spending (Thurs. 10 a.m. -0.1% exp.), Factory Orders (Friday 10 a.m. 1.0% exp.) and last but certainly not least the Employment Situation report (Fri. 8:30 a.m. -170K) that could show the unemployment rate increased to as high as 9.9%. Let’s face it – all these areas have been problem areas with a capital ‘P’ for the last year.
The VIX was up 1.66% on today’s wild ride and with these numbers coming in tomorrow and Friday along with a new trading month – hang on, it could get bumpy.
GDP shrinks at a less than expected pace; CIT’s days may be numbered
By Mark Pason, at 9:22 am on September 30th, 2009ADP reports that private-sector employers got rid of 254,000 in September vs. 277,000 in August. This is the smallest decline since July 2008, but larger than expected. Analysts estimated a number around 210,000.
Q2 GDP shrunk (-0.7%), better than the previously reported number of (- 1%). The better than expected number was helped by the “cash for clunkers” plan and first-time homebuyer credits.
Ameriprise Financial (NYSE:AMP) is buying the longer-term asset management business of Columbia Management, a Bank of America company. Columbia Management has over $160bb in assets under management. Bank of America will get between $900mm and $1.2bb for Columbia’s business.
The British Panel on Takeovers and Mergers told Kraft that they must fish or cut bait by November 9th. Kraft needs to make a formal takeover offer for Cadbury by the November deadline, or they have to take a six-month time-out. Analysts are predicting that Kraft will wait until the last minute to make a formal offer, so as not to give much time for counter offers. A dried up credit market will certainly keep some of the private equity power players on the sidelines.
CIT Group (NYSE:CIT) may be preparing an exchange offer that would trim their $30bb of outstanding debt. The Wall Street Journal is reporting a tricky scenario for the financial powerhouse. Short-term bondholders and long-term bond holders may be at odds, and if CIT doesn’t get approval for the plan, they will most likely end up in bankruptcy court. Either plan should hit CIT’s stock price hard, which is getting hammered in pre-market trading. Rumors of a merger with IndyMac offered some hope, but that plan appears have no merit.
Oil futures inch up above $67 per barrel. The increasing price can be attributed to the weaker U.S Dollar. The fact that Iran apparently has a secret nuclear arms plan certainly won’t help keep the price of oil down.
In Washington, we’ll have the Senate’s version of cap-and-trade legislation. The House of Representatives will have a few hearings on the Credit Rating Agencies.
WSJ reports that states are getting hammered by falling tax revenues.
Wall Street Wrap – Walgreen boosts the Drug Stores
By Robert Perrego, at 4:47 pm on September 29th, 2009Walgreen Co. (NYSE: WAG) released earnings before the open this morning and beat estimates by 5 cents. Analysts had expected 39 cents a share and the nation’s largest drug store chain turned in 44 cents, a penny below earnings for the same period one year earlier. A late sell-off resulted in most stocks finishing lower, but the earnings beat by Walgreen was enough to lift the drug store stocks. CVS Caremark Corporation (NYSE: CVS) gained $1.19 (+3.41%, $36.07), Rite Aid Corp. (NYSE: RAD) was up 5 cents (+3.16%, $1.63) and Walgreen’s turned in one of the strongest performances of the day, up $3.16 or 9.24% closing at $37.35, its highest close since April of 2008.
At 9 a.m. the S&P/Case-Shiller Composite 10 and 20 were released showing a 1.7% increase in home prices. This is the third month in a row prices have increased.
The Case-Shiller numbers gave the S&P 500 futures a slight upside bias before the open. The market opened and traded up but this small rally ran into a brick wall at 10 a.m. as Consumer Confidence came in weak (53.1 vs. 57 exp.). Stocks then quickly rolled over and spent most the day trading modestly negative. A late day sell off resulted in a 47.16 point loss for the Dow (-0.48%, 9742.20), a 2.37 point loss for the S&P 500 (-0.22%, 1060.61) and the Nasdaq 100 dropped 6.92 points (-0.40%, 1717.67).
Overall it was a pretty slow trading day with continuous talk from the financial news about one year ago today when the Dow lost 778 points. CNBC has been posting ‘News Flash’ pop up graphics continuously lately that are either so obvious or not news at all, in their struggle to get through slow news days. Today, with all the ‘one-year-ago’ proclamations, I was expecting a pop up saying “News Flash – One Year Ago Today Charlie Gasparino Was One Year Younger.”
Finance lost 0.86% with tech in second on the downside losing 0.64%. Consumer cyclicals surprisingly turned in a positive 1.15% gain on a day consumer sentiment was lower than expected.
Gold was up slightly to $991.70 an ounce and oil was lost 13 cents a barrel to $66.68.
CIT Group may combine with IndyMac, BNP Paribas is paying back France and the SEC looks at short-selling again
By Mark Pason, at 9:26 am on September 29th, 2009Another “one year ago” today story of market meltdown. Media is abuzz about the day the Dow dropped 777.68 points. The House of Representatives was tussling over the bailout, but TARP would eventually come to be. Now, we’re talking about Dow 10,000 again. Go figure.
The New York Post reports that John Paulson is working on a plan that would combine CIT Group and indyMac, in order to save CIT (NYSE:CIT) , which has been teetering on failure. CIT’s bondholders have been silent, but the terms they received were very favorable. The $3bb loan CIT obtained this summer is weighed down with a 10.5% interest rate. CIT is facing an October 1st deadline, when they must submit a restructuring plan to Pimco, Citibank, Bank of America, and the other bondholders.
BNP Paribas will sell $6.3bb shares to repay the French government. Although BNP Paribas is the first French bank to repay the government, expect Societe Generale to follow.
The Securities and Exchange Commission is considering bringing back the uptick rule, which forces short-sellers to short a stock only on an uptick. Of course Goldman Sachs (NYSE:GS), which makes money going long, short and sideways, is one of the firms objecting the rule. Charles Schwab, who wrote a Wall Street Journal editorial in favor of the rule, is part of a camp who believes short selling led to the run on the banks last year. There will be an SEC roundtable today to discuss securities lending in an attempt to increase transparency in a key element of the short selling process.
La Isla Bonita. Puerto Rico is asking the Obama Administration for help battling their $3.2bb budget deficit and bad credit rating. Puerto Rico’s 2009 deficit is running at 29% of the general fund, the highest percentage among any state or territory.
The FDIC meets at 10:00am today.
Richard Fisher, of the Dallas Fed, is speaking today, and Charles Plosser, of the Philly Fed, is speaking tomorrow.
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