Business Information, News and Analysis: Tracked.com Insights 2009 December

The NEW Tech Boom

By Taryn Cooper, at 5:48 pm on December 21st, 2009

Inevitably with the end of the decade near we’re going to hear about Top Ten lists ranging from television shows to albums and now with technology events, according to this post from Tech Republic. No doubt, technology drove much of the economy over the past ten years, and it is far from bottoming out at this point.

At the end of the year 2000, we saw the tech bubble about to burst, and it’s almost literally come full-circle in this year. Possibly the biggest the-more-things-change-the-more-they-stay-the-same story of 2009 was that AOL went public, spinning-off from Time Warner officially earlier this month.

One of the most intriguing stories in tech-media is the advent of social networking sites. I would love to see the statistics on it, but I am sure there is a high percentage of folks using MySpace, Facebook and Twitter on a daily basis, showing just how much technology has evolved in the past 10 years. In fact, an article came out today on Twitter, and how they are in-the-black since it’s 2006 inaugural year. Remember how long it took tech-retail stalwart Amazon.com to return a profit in the early part of the decade?

Google has also done its part to change the face of technology as well, after going public in 2004. They’ve been incredibly acquisitive, buying such “hot” technology properties as YouTube and AdMob. Except for today, when Google almost announced a deal where they would acquire customer-ratings service Yelp.com, however the deal reportedly fell through at the last minute.

Ten years ago, no one had ever heard of “smart phones,” let alone owned one. Mostly anyone who uses a cellular phone has some kind of “smart phone” ability, mostly made by Research in Motion or Apple. Motorola emerged as the Phoenix out of the ashes with its new Droid product this year, making the smart phone choices numerous.

At the end of 2000, websites were shutting down and the “old economy” was thumbing their collective noses at the idea of the “new economy.” What we’ve seen however in the last ten years is that it’s not only resistant, it has evolved and looks like it is here to stay. Most of us should be interested to see what is going to happen in the next ten years.

Wall Street Wrap

Health Care Stocks Strong On 60 Votes

By Robert Perrego, at 4:57 pm on December 21st, 2009

The U.S. Senate advanced their health care package as the Democrats finally managed to get the needed 60 votes, sending health care stocks higher. Health insurance company Aetna Inc. (NYSE: AET) added 4.70% (+$1.53, $34.04) as the Senate plan provides for 30 million new customers for the HMO’s without having them compete against a government option. The health care plan passed by Congress included a government option, but as the Senate’s plan has moved forward without it, the HMO’s have been in rally mode. Since December 4th, Aetna is up 17.5%, UnitedHealth Care Group Inc. (NYSE: UNH) is up 17.2%, Cigna Corp. (NYSE: CI) is up 15.6% and Wellpoint Inc. (NYSE: WLP) is up 11.4%.

The health care sector easily outdistanced the market as a whole as the Dow Jones Industrial Index only rose 0.82% (+85.25, 10,414.14). The broader S&P 500 gained 1.05% (+11.58, 1,114.05) and the tech heavy Nasdaq 100 was up 1.18% (+21.43, 1,828.79). The Nasdaq 100 closed at new 2009 highs today as it broke out of a six week trading range, showing the relative strength tech stocks have had recently.

Sanofi Aventis (NYSE: SNY), a $100+ billion pharmaceutical company, is buying Chattem, Inc. (NSDQ: CHTT) for $93.50 a share in an all-cash deal, causing the shares to rise 33%. Chattem produces over the counter pain relievers, personal care items and dietary supplements. The deal diversifies Sanofi away from prescription drugs and into the over the counter market as competition from generic manufacturers threatens some of the older drugs in their portfolio that have expiring patents. The deal makes sense for Chattem as the stock price was up $23.16 (+33.09%, $93.14) a share today.

The news for health and drugs does not stop there are Walgreen Co. (NYSE: WAG) reported their first quarter profits rose by 20%. The swine flu scare had customers lining up for vaccines as the drug store chain sold 5.4 million seasonal flu shots in the quarter. This was a boon to drug stores as it got customers in the door and Walgreen stated that their prescription drug sales also improved. In retail you have to get them in the store first and there is nothing like a health care scare to drive sales at a drug store that also hopes to sell you a magazine and a candy bar. Walgreen beat by a penny ($0.49 vs. $0.48) but investors must have expected more as the stock dropped 3 cents today and Citigroup issued a sell rating on the stock.

The dollar rally continued as the index future spot price gained 29 cents (+0.37%, 78.06) and put pressure on oil and gold prices, while copper and steel scratched out small gains. Nymex WTI crude was up earlier in the trading day on increasing hopes for an economic recovery, but was last seen trading down $1.05 a barrel (-1.41%, $73.37, 4:16 p.m.) Steel and copper managed to hold onto their gains as they are also viewed as economically sensitive. The Market Vectors Steel ETF (NYSE: SLX) rose 1.38% (+$0.83, $60.73) while the iPath Copper ETF (NYSE: JJC) was up 2 cents at $43.05.

The New York Spot Price for gold fell $21.60 an ounce on the strong dollar closing below $1,100. The SPDR Gold Shares (NYSE: GLD) reversed early gains and lost $2.00 (-1.83%, $106.95), closing below its 50 day exponential moving average and slightly lower than the low set by the sell off last Thursday. Lower lows are never a good sign.

Tomorrow starts the parade of economic releases we have this week with the ICSC-Goldman Store Sales at 7:45 a.m., GDP (2.7% expected) and Corporate Profits at 8:30 a.m., Redbook at 8:55 a.m., and Existing Home Sales (6.25 million) and the FHFA House Price Index at 10 a.m.

We have a shortened trading week this week, with the markets being closed on Friday in observance of Christmas.

Week on Wall Street

Another Slow Week On Wall Street

By Robert Perrego, at 1:20 pm on December 19th, 2009

Stocks went up and down this week on Wall Street as they always do and the net result on the broadest stock index, the S&P 500, was a loss of 0.36% or 3.94 points. On Monday, the S&P 500 closed at its highest level of 2009 at 1114.11. On Tuesday the dollar jumped higher and the markets sold off. The biggest moves of the week were the fossil fuels as inventory data and a cold front sweeping North America drove natural gas higher by 10.97% and crude started the week below $70 and finished above $73 for a 4.73% gain.

For over a month the S&P 500 has been in a narrow sideways trading range between 1087 and 1110, with exception for Monday when a short-lived breakout was attempted. The S&P 500 closed out Friday near the middle of this range at 1102. While the S&P 500 is the broadest stock index, the tech heavy Nasdaq 100 closed out the week at 1807, nearer to the high end of its trading range (1767 to 1810) showing that tech is less susceptible to a rising dollar. The weakest index, relatively, has been the Dow Jones Industrial Average which closed nearest to the lows of its range at 10,328 (10,300 to 10,480).

The connection the dollar has to stocks is via the much talked about carry trade. With U.S. interest near zero the weak dollar has been shorted by the ‘carry trade cowboys’ and those funds put to work buying stocks and other ‘risky’ assets. The relative strength of tech stocks shows that when the dollar rises and the shorts need to cover, the stocks they are least willing to sell to replace these funds are technology stocks.

At the start of the week the biggest story was a monster deal in oil and gas with Exxon Mobil Corp. (NYSE: XOM) buying XTO Energy (NYSE: XTO). Exxon’s fossil fuel portfolio is heavily weighted towards oil and XTO towards natural gas. This buyout may be a large play to hedge the historically wide spread between the costs on natural gas and oil. Thus far the 10% rise in natural gas and 4.73% rise in oil has proven this strategy correct. Monday also saw Citigroup Inc. (NYSE: C) get clearance from the U.S. Treasury to repay their TARP funds.

The Federal Open Market Committee held their last two-day meeting of the year on Tuesday and Wednesday, and announced they were standing pat on interest rate policy. Comments on the decision to leave rates unchanged indicated that the Fed saw job losses slowing, but jobs were still being lost. Of most importance in this announcement may have been that they were ending their quantitative easing program (purchases of agency backed mortgage debt) on February 1, 2010.

Wednesday also saw the Federal Trade Commission file a suit against Intel Corp (NSDQ: INTC). The lawsuit cites bundling practices and even a secretly redesigned compiler software that makes their competitors chips run a little slower. Intel competitors Nvidia Corp. (NSDQ: NVDA) and Advanced Micro Devices (NYSE: AMD) traded higher on this news.

On Thursday, Standard and Poor’s downgraded the government debt of Greece to BBB- causing investors to flee to the safety of the dollar and dump their riskier assets. This caused the largest losses of the week for stocks as the DJIA dropped 132 points, which comprised most of its total loss for the week. Citigroup sold 5.4 billion shares and the Treasury, as the secondary price was too low for its liking, decided not to sell any of their shares. Gold dropped $40 an ounce on the dollar strength. The SPDR Gold Trust (NYSE: GLD) closed below its 50 day exponential moving average for the first time since August.

On Friday the dollar traded higher but reversed course and closed flat. Gold bounced back $15 an ounce and the GLD regained the 50 day EMA, closing just above. Common technical analysis theory states one of the conditions for a break in a support level to be two consecutive closes below it. The bounce back in gold saved the technical picture and also, now that the support level has been shown to hold, the bullish picture for gold is a bit stronger. Beware, this might seem like the bottom of the ‘dip’ that all the gold bulls say you should buy, as the next few days will give a clearer picture as to whether the dip drops or pops.

Friday was a quadruple options expiration day and the action in the last 20 minutes contained more volatility than all day long. The last 20 minutes saw the stock indexes run up into the close. Once again, tech was relatively strong as the Nasdaq 100 rose all day long on earnings announcements by Oracle Corp. (NSDQ: ORCL) and Research in Motion Ltd. (NSDQ: RIMM) Thursday after the close.

On the week the action was in the fossil fuels and gold. Below are some ETF and stock index movements that sum up the week.

Dow Jones Industrial Average -143 points, -1.36%

S&P 500 -3.94 points, -0.36%

Nasdaq 100 +15.26 points, +0.85%

Gold ETF (GLD) -$0.37, -0.34%

Copper ETN (JJC) -1.3 cents, -0.03%

Coal ETF (KOL) +14 cents, +0.4%

Oil ETF (USO) +$1.18, +3.33%

Natural Gas ETF (UNG) +$1.05, +10.97%

Steel ETF (SLX) -11 cents, -0.18%

Agriculture ETF (DBA) -1 cent, -0.03%

Dollar ETF (UUP) +$0.33, +1.45%

News

Tech Strong, Gold Bounces Back

By Robert Perrego, at 5:09 pm on December 18th, 2009

Oracle Corp. (NSDQ: ORCL) reported after the close yesterday, that earnings rose year-over-year to $1.46 billion or 29 cents a share vs. last years 25 cents a share. When exchange rate effects were backed out of earnings and revenue, both were flat with last years results, but at least they were not falling. This announcement powered the stock higher by $1.46 (+6.38%, $24.34) as most companies, tech and non-tech, have seen either their earnings, revenue, or both decline. Research in Motion Ltd. (NSDQ: RIMM) jumped 10.30% (+$6.54, $70.00) on their earnings announcement as revenues increased 11% while Palm Inc. (NSDQ: PALM) reported a decline of revenues of 59.2%.

Besides the earnings driven technology sector and a bounce back in commodities, the market was flat with the Dow Jones Industrial Average gaining 20 points (+0.19%, 10,328.89), the S&P 500 up 6.31 points (+0.57%, 1,102.47). Looking at the intra-day charts of both these indexes shows you that the Dow gained 45 points and the S&P 500 rose 4 points, all in the last 20 minutes of trading. The Nasdaq 100 was up over 29 points (+1.63%, 1,807.32) and strong all day.

Gold and commodities got hit hard yesterday on a strong dollar and today they bounced back while the dollar stayed flat. New York Spot Gold was down $40+ yesterday but recouped $14.70 an ounce today to $1,111.80 (+1.34%, 4:18 p.m.). This morning, oil jumped almost $2 a barrel to $74.33 on news that Iranian soldiers took over an Iraqi oil well. By 4:12 p.m. this rise had traded down to $73.18 (+$0.53, +0.73%) as it seems this is not an uncommon occurrence.

The carry trade and the recent strength in the dollar has caused much concern that the stock market would get hit if the dollar started to rise. Over the past few years, ETF’s have made it possible for the common investor to diversify into commodities. Let’s take a look at what kind of effect this week’s strong dollar had on the stock market and select commodities;

Dow Jones Industrial Average -143 points, -1.36%

S&P 500 -3.94 points, -0.36%

Nasdaq 100 +15.26 points, +0.85%

Gold ETF (GLD) -$0.37, -0.34%

Copper ETN (JJC) -1.3 cents, -0.03%

Coal ETF (KOL) +14 cents, +0.4%

Oil ETF (USO) +$1.18, +3.33%

Natural Gas ETF (UNG) +$1.05, +10.97%

Steel ETF (SLX) -11 cents, -0.18%

Agriculture ETF (DBA) -1 cent, -0.03%

Dollar ETF (UUP) +$0.33, +1.45%

Looking at these numbers you can see that while the DJIA and the S&P 500 maintained their inverse relationship to the dollar, the tech heavy Nasdaq 100 is bucking the trend. Also, it seems that the dollar strength did not translate into as much commodity weakness as you may have thought. The worst performer of the above listed commodities is gold down 0.34% while the dollar strengthened over four times as much, up 1.45%. Natural gas and oil crushed the dollar effect as natural gas actually rose seven times as fast as the dollar dropped and oil was up more than twice the drop. Completing the fossil fuels sector, coal finished positive on the week and the strength of these three may be attributed to the cold weather sweeping North America.

In the Tracked.com’s ‘Strange-but-true-irony’ category it is freezing and snowing heavily in Copenhagen as politicians gather to discuss ‘global warming’ and Former Vermont Governor and consummate left-winger Howard Dean says he would not vote for the current health-care reform bill. A little advice for the pro-global warming crowd; start holding your conferences in the desert in August as all the ones we keep seeing are during ice storms, blizzards and cold weather and this hardly makes for the press you want. Advice for Howard Dean; run for office and win, then we just might care what you would vote for and then you could actually vote.

So up is down, down is up and who cares – the weekend is here.

Have a great weekend.

Wall Street Wrap

Dollar Up, Everything Else Down

By Robert Perrego, at 5:05 pm on December 17th, 2009

Standard and Poor’s downgraded Greece’s credit rating to BBB- causing investors to flee to the safety of the dollar and dump their riskier assets. Unfortunately, the riskier assets are stocks and commodities, two of the asset classes that have seen the biggest bounces since the March market bottom. All year as the dollar has declined after the Fed lowered interest rates to near zero, market players have been shorting the dollar and using the proceeds to buy stocks and commodities. This carry trade results in the buying of stocks and commodities which pushed them higher, while the dollar goes lower under the pressure of all the shorting. The ticking time bomb here is that once you get a whole lot of shorts in the same trade, when it reverses, it does so quickly as everyone runs to cover their shorts and to sell the longs they bought with the short proceeds.

The PowerShares DB US Dollar Index (NYSE: UUP) gained 1.05% today and is up 1.68% over the last four days. As this run-up in the dollar occurred, the Dow Jones Industrial Average has lost 1.83% and the SPDR Gold Shares (NYSE: GLD) ETF has lost 2.63%. One of the biggest gold mining companies on the planet, Agnico Eagle Mines Ltd. (NYSE: AEM) is down 11.6% as the movement of the mining companies themselves are usually much larger than their underlying commodity.

Stocks did not fare much better than commodities as the Dow Jones Industrial Average lost 1.27% today (-132.86, 10,308.26) and the broader S&P 500 dropped 1.18% (-13.10, 1,096.08). The tech heavy Nasdaq 100 lost 1.25% (-22.55, 1,778.27).

Citigroup Inc. (NYSE: C) sold 5.4 billion shares yesterday at $3.15 apiece in order to raise money to exit the TARP program. The United States Treasury, holder of one-third of Citibank’s shares prior to this offering, decided not to sell any of their shares and the stock fell 25 cents to $3.20 a share. The Government bought in at $3.25, and assuming they are not trying to make a profit and break even (have you seen the U.S. budget lately, if these guys do anything for a profit it is the best kept secret in the world) the stock now has a lid on it at $3.25. Citigroup announced that the Treasury would not sell any stock for 90 days in order to clear the perception of that these shares are out there hanging over the stock, but don’t be fooled, they are there.

FedEx Corp. (NYSE: FDX) reported their quarterly results, which are closely followed as a bell-weather on economic activity, and posted $1.10 a share vs. expectations of $1.05. Year-over-year earnings dropped from $1.58 a share to $1.10 as lower surcharges and lower prices more than offset an increase in number of packages shipped. The stock dropped $5.48 (-6.09%, $84.47) but also brought trading partner United Parcel Service (-1.30%) and the Dow Jones Transportation Index (-1.19%) lower with it.

New York Spot Gold dropped $40.10 an ounce to $1,097.40 (-3.53%, 4:53) on dollar strength but oil held tough gaining 2 cents a barrel to $72.68.

Tomorrow there are no economic releases as it is a quadruple witching Friday. The options expirations can cause a decent amount of volatility so economic reports are not released on these days so as not to have an outlying number rocket the market in one direction or other.

Insights

By the Tracked.com Team

The NEW Tech Boom

Health Care Stocks Strong On 60 Votes

Another Slow Week On Wall Street

Tech Strong, Gold Bounces Back

Dollar Up, Everything Else Down

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