Wall Street Wrap

Wall Street Wrap – The Selloff Gains Steam as The Dollar Rallies

By Robert Perrego, at 5:23 pm on October 28th, 2009

The inverse correlation between the dollar and the market continues to hold as the Dow Jones Industrial Average sold off 1.21% (-119.48, 9,762.69) while the PowerShares Dollar ETF (NYSE: UUP) gained 0.40%.  Leading the Dow 30 into the tank was Caterpillar, Inc. (NYSE: CAT) which dropped $2.26 (-3.98%, $54.43) as the Durable Goods report this morning missed expectations coming in at up 1% while expectations were for up 1.5%.  New Home Sales also disappointed (402K vs. 440 exp.) and the Dow Jones Industrial Index uptrend line, that has been in effect since the market bottom in March, was broken to the downside.

The Nasdaq 100 was the weakest of the three indexes, dropping 2.34% (-40.40, 1,682.06) as technology was hit hard.  Apple Inc. (NSDQ: AAPL) lost $4.97 (-2.51%, $192.40) as the uptrend line in effect for that stock since July 7th was broken today.  The next two support levels for Apple are $191 and $186.  Intel Corp. (NSDQ: INTC) broke its uptrend line in effect since February 23rd and also broke down through its 50 day exponential moving average (EMA) at $19.51, dropping $0.71 (-3.59%, $19.03) with minor support in the $18.60 area and gap support at $18.  The S&P 500 dropped 1.95% (-20.78, 1,042.63).

Since the market bottom on March 9th, the Dow has enjoyed a nicely confirmed uptrend line that was set by three points; the bottom, July 10th and October 2nd.  The close below the uptrend line on Monday was the first cause for worry, and yesterdays close below this line was a second day break, which is one indicator or confirmation the trend line would fail.  To technical analysts, today’s sell-off comes as no surprise and to those watching the dollar rally, today’s stock performance was expected.

As I have mentioned in many previous ‘Wraps’, the dollar bottomed out last Thursday and has been rallying since.  The major market indexes all peaked last Thursday and the S&P 500 has dropped 4.6% since.  The UUP has its 50 day EMA just above it at $22.84 as resistance while the Dow has its 50 day EMA just below it at 9,667 as support.  The S&P 500 has 50 day EMA support at 1047 while the Nasdaq 100’s was broken today (1,688 vs 1,682 close).

Going Down?

Going Down?

Bill Gross, a Managing Director at PIMCO, the largest bond fund in the world, called the market top yesterday in his monthly market commentary.  The big question is whether or not this is just another correction or is it a reversal in market trend and heading lower?  While the S&P 500 and Nasdaq 100 broke their longer term uptrend lines awhile ago, now with the Dow Jones Industrial Index break, all three indexes are showing weakness.  The Dow, which was most likely oversold in March, ran up 54% bottom to top, and that is a nice move.

The economic and fundamental reasoning behind the decline of the dollar was a $1.4 trillion current budget deficit, all the money spent and/or committed to attempt to haul the country (approx $12 trillion) out of recession and future spending programs being debated now in D.C.  These factors still exist and the longer term trend for the dollar could be lower, so if the relationship continues to hold, the stock market should find a bottom soon and head higher again.  This could all be nothing but ’stock inflation’ and not be creating real value as the drop in the dollar kills purchasing power while stock prices increase.  Given the choice between higher and lower stock prices, most people would choose higher.

The dollar rally hit gold and oil prices with New York Spot Gold dropping $11.90 an ounce (-1,14%, $1,027.70, 4:54 p.m.) and Nymex crude lost $2.09 a barrel (-2.63%, $77.28, 4:50 p.m.)

Remaining Economic Reports expected this week:

  • Thursday: 8:30 a.m. GDP (3.0%) and Jobless Claims (525K)
  • Friday: 8:30 a.m. Personal Income and Outlays (0.0%, -0.5%) and Employment Cost Index (0.5%), at 9:45 a.m. Chicago PMI (48.5) and at 9:55 a.m. Consumer Sentiment (70.0).

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News

Hunt for a Green October

By Mark Pason, at 5:37 pm on October 27th, 2009

October, the month of Halloween, has been anything but scary for a few tech titans.  Jeff Bezos, the Founder, Chairman, CEO and President of Amazon.com (NYSE:AMZN) is having quite a month so far.  In a time where many CEOs and Board Members own very little of their company’s stock, Bezos continues to put his money where his mouth is, still owning almost 22% of AMZN’s total shares outstanding.  As of Tuesday’s close, Bezos has made an October profit of $2.96bb.  Bill Gates, who owns a little over 8% of Microsoft (NASDQ:MSFT), through Cascade Investments, made a $2.6bb profit so far in October.  Steve Jobs who, surprisingly, owns less than 1% of Apple Inc. (NASDQ:AAPL) cleared only $91mm on his 5.5mm shares.

You will rarely find an executive who has his hands around the day-to-day operations of a company more than Jeff Bezos.  The fact that he owns 22% of the company is a real incentive for him to come to work with his “A” game each day.  One last note about Bezos.  He doesn’t sit on the board of any other public company.  Why waste time and energy at another company’s board meetings when you can be working on the next version of the Kindle, making your $11.5bb worth of AMZN stock worth just a little more?

Greenoctober

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Tracked.com Topics

Tracked.com Topics: IPO, My!

By Taryn Cooper, at 1:46 pm on October 27th, 2009

I’m not sure if this week is more of the exception than the norm, but I felt like I was being transported back to the late-1990s with all the IPO filings that have been announced.

It’s not just the sheer volumes that I have seen, but the names that are being floated around in the IPO filings in the last week.  Recently,  Ancestry.com and Birds Eye Foods, to name a few, filed their S-1’s with the SEC.

The  big news on Monday of this week was that ten years after their “failed” merger, Time Warner’s shareholders approved the spin-out of its AOL unit.  AOL’s star-studded Board of Directors, including the likes of former FCC-chairman Michael Powell and Procter & Gamble veteran Jim Stengel, were announced Monday as well.  Check out this article about what AOL and Time Warner will split up in the “divorce.”

D0le Foods priced its IPO last week, and has not fared well, with BreakingViews suggesting that expectations should be tamed for buyout firms expecting a big return on previously LBO’d units.

Finally, the never-ending saga of will-they-or-won’t-they, Vivendi CEO Jean-Bernard Levy suggested the company could IPO its 20% in NBC Universal IF they in fact decided to sell the stake.

Be on stand-by for the rest of the week, as we’ll be tracking IPOs this week at Tracked.com.

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Wall Street Wrap

Wall Street Wrap – Amazon and the Dollar Trade Up, Market Drops

By Robert Perrego, at 4:56 pm on October 26th, 2009

Amazon.com Inc. (NSDQ: AMZN) continued its earnings driven momentum higher today adding another 5.2% to the 27% it gained Friday, after announcing earnings Thursday after the market close.  Jim Cramer of ‘Mad Money’ fame stated today that Amazon is the “low cost producer on the web” and is now beating Wal-Mart Stores, Inc. (NYSE: WMT) at that game.  Most people view Amazon as an Internet retailer, but what sets Amazon apart is their technological edge.  Amazon is one of the dominant forces behind the development of cloud computing, a cutting edge area of Internet development, and when you have Ph.D.s on staff trying to figure out how to sell books and iPods better, you have an advantage.

Amazon closed up $6.15 (+5.19%, $124.64) while the rest of the market had a rough slide lower.  The market traded as much as 100 points higher off the open this morning, but at 11:08 a.m., a large block of shares were traded in the PowerShares Dollar Bull ETF (NYSE: UUP) which reversed the dollar ETF from being down 5 cents ($22.38) and after this the dollar traded up as high as $22.60, a 1% intra-day move before closing at $22.58 (+0.66%, +$0.15).  At 11:08 a.m. the Dow Jones peaked at the high of the day (10,070) and reversed to the day’s low (9,849) dropping 221 points intra-day.  The Dow closed down 104.22 points (-1.04%, 9,867.96) while the S&P dropped 12.65 points (-1.17%, 1,066.95).  The Nasdaq showed relative strength on the backs of Amazon and Microsoft, losing only 6.88 points (-0.39%, 1,746.75).

Finance led the sector race lower dropping 1.50% with the multi-line insurers getting clobbered.  Genworth Financial (NYSE: GNW) dropped 7.93% (-$0.84, $9.56) and American International Group (NYSE: AIG) dropped 6.81% (-$2.65, $36.25).  The energy sector was the second biggest loser dropping 1.47% with National Oilwell Varco (NYSE: NOV)dropping 5.43% (-$2.55, $44.34).

Gold, oil, commodities, commodity based stocks and the stock market as a whole dropped on this dollar strength.  The UUP traded 6.85 million shares today, second only to the 6.98 million it traded on September 22, 2008.  The UUP closed right up against the down trend line that has been the defining trend line in the dollar since its second peak of a double top on March 9, 2009.  Remember the significance of that day?  That was the market bottom for the major indexes – Dow 6,547, S&P 500 676, Nasdaq 100 1,044.

New York Spot Gold lost $16.60 an ounce (-1.57%, $1,038.20, 4:06 p.m.) and Nymex crude dropped $1.82 a barrel (-2.26%, $78.55, 4 p.m.)

How far the dollar can run will be in part influenced by this week’s record sale of $123 billion in Treasury Notes.  Also, the Fed is expected to end its $300 billion debt buyback program by the end of the week.  This completion of the debt repurchase plan and the planned sale of a large amount of debt, caused the 10-year to drop and interest rates rose to their highest level in two months.  The higher the rate paid by treasuries, the more the dollar is worth, relative to the rates other currencies earn.

The market seems to be liking the weak dollar, as since the UUP peaked on March 9th it dropped 16.6% to its low close last Thursday while the Dow rose 54% during this same time period.  If the dollar continues upwards from here, weakness in stocks would be the result if the recent ‘Dollar up, Dow down’ relationship continues.

Economic reports due out this week:

  • Tuesday: 10 a.m. Consumer Confidence (54 expected)
  • Wednesday: Durable Goods Orders 8:30 a.m. (1.5%) and New Home Sales 10 a.m. (440K),
  • Thursday: 8:30 a.m. GDP (3.0%) and Jobless Claims (525K)
  • Friday: 8:30 a.m. Personal Income and Outlays (0.0%, -0.5%) and Employment Cost Index (0.5%), at 9:45 a.m. Chicago PMI (48.5) and at 9:55 a.m. Consumer Sentiment (70.0).

Earnings due Tuesday (b = before the market opens, a = after market close):

ACE 1.97 a, AKS 0.00 b, ACL 1.45 a, APOL 1.04 a, AVY 0.57 b, BIDU 1.78 b, BP 1.03 b, CP 0.76 b, CRS -0.23 b, CE 0.43 b, CX 0.14 a, CHE 0.88 a, CPO 0.63 b, CTS 0.07 a, DAI -0.40 b, DV 0.65, DWA 0.16 a, ETFC -0.09 a, ECL 0.60 b, FE 1.03, FTI 0.63 a, FPL 1.43 b, BEN 1.32 b, HRS 0.77 a, IACI 0.13 b, JCI 0.50, LLL 1.85 b, LCAV -0.30 b, MEE 0.17 a, MCK 1.01 a, NSC 0.79 a, NTRI 0.24 a, ORB 0.10 a, PCAR 0.02 b, PDLI 0.26, PLT 0.31 a, RYN 0.41 b, SAH 0.24 b, TXT -0.03 b, X -2.87, VLO -0.33 b, V 0.72 b, WAT 0.77, WYNN 0.15 b

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Wall Street Wrap

Wall Street Wrap – Amazing Amazon and the Microsoft Revival

By Robert Perrego, at 4:59 pm on October 23rd, 2009

Two of the world’s biggest companies just got bigger, and they did it by executing and making money.  Amazon.com Inc. (NSDQ: AMZN) announced Q3 earnings of 45 cents a share vs. the 33 cents analyst’s expected, and this number propelled the stock to a new 52-week high (+26.79%, +$25.04, $118.49).  Amazon reported strong results across the board and that their number of ‘active users’ had risen to 98 million people.  And guess what?  The Christmas shopping season is right around the corner!

Microsoft Corp. (NSDQ: MSFT), that old stodgy PC based software company that Apple loves to poke fun at… you know, the ‘uncool’ tech giant that has a nerdy businessman on those TV advertisements… well that nerd is banking a LOT of profits.  Mr. Softy reported revenues at a mere $12.9 billion and their earnings were just $3.6 billion or 40 cents a share.  The street expected 32 cents, so this 25% beat jumped the company’s stock to $28.02 (+5.37%, +$1.43).  Hidden behind some good numbers is the fact that Microsoft did not book all the Windows 7 orders they received into this quarters numbers.  It has been eight years since XP came out, and with Vista being hailed as a disaster, most PC owners avoided it and are still running old operating system software.  A very strong upgrade cycle looms of users jumping straight to ‘7′, and now all the orders taken in Q3 that have not been booked into the Q3 numbers, are being pushed into Q4.

You would think that with two companies of this size reporting earnings like this the market would be up, right?  If I told you the dollar was up what would you think then?  In keeping with the latest trend; ‘Dollar Up – Dow Down’, the dollar ETF (NYSE: UUP) was up 12 cents (+0.53%, $22.43) and the Dow dropped 109.13 points (-1.08%, 9,972.18).  The S&P 500 dropped 13.31 points (-1.21%, 1,079.60) and the Nasdaq 100 lost 9.52 points (-0.53%, 1,753.63).

The dollar rallied against the pound sterling today on bad news released about U.K. GDP.  In response to this, the UUP broke above its short term down trend line that dates back to October 1st.  The UUP currently has two important down trend lines, one that shows the long term decline of the dollar and this one broken today, which has a steeper downward slope.  This break signals some near term strength in the dollar, and if the recent relationship with the Dow holds true, weakness for the stock market.  But not to worry, the long term down trend line looms above at about $22.55 (and as it is down sloping, this number gets lower every day).  According to my charts, by November 3rd, this line will come down to $22.43 and possibly reverse the dollar back to the downside.

Why the market seems to think a weak dollar is good news is beyond me.  Having the reserve currency for the world has kept our interest rates low and been a tailwind to our productivity for the last 50 years.  Right now our national debt is blowing up, and if we lose the relatively low interest rates we pay on this debt, the future costs of losing the dollar as the reserve currency are staggering to say the least.  The simple explanation for why the market is going up when the dollar drops is ’stock inflation’.  This smells like a bubble to me.

New York Spot Gold dropped $6.50 to $1,053.30 an ounce (4:39 p.m.) after trading as high as $1,068.50 prior to the stock markets open this morning.  Gold may trade in the commodity pits, but the wallop the Gold ETF (NYSE: GLD) packs from the stock market into the commodity pits is significant.  The GLD opened up at $104.50 but traded off most the day to close at $103.39.

Nymex crude dropped 69 cents a barrel (-0.86%, $79.65) and closed below $80 a barrel.  This weakness (as with gold’s) is most likely attributable to today’s strong dollar.  Many investment professionals are saying this high price for oil does not reflect the fundamentals of supply and demand properly, and that a move higher to the $100 area will cripple the economic recovery.

These days it seems watching the stock market is a lot more complicated; you have to keep an eye on the dollar, oil and gold as indicators.  Luckily we have the ETF’s for all of these now.

Numbers on the Week:

  • Dow Jones -23.73, -0.23%
  • S&P 500 -8.23, -0.75%
  • Nasdaq 100 +14.31, +0.82%
  • Gold ETF (GLD) +$0.31, +0.3%
  • Dollar ETF (UUP) -$0.04, -0.17%
  • Oil ETF (USO) +$0.46, +1.14%

Looks like that if you were in tech or commodities this week you were a winner.  If you were not, it is Friday.  Go enjoy your weekend and get ‘em next week!

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