News

Consumer Confidence is Up, So is the National Debt

By Robert Perrego, at 5:07 pm on January 26th, 2010

Consumer Confidence came in at 55.9 vs. an expected 53.5, giving a boost to the market this morning that is trying to make up the heavy losses sustained last week.  Since dropping 5.2% in the last three days of last week, the DJIA has tried to rally both yesterday and today, only to sell off into the close and the resulting two day ‘bounce’ is a whopping 21 points.  Early on it looked like we may grab a triple digit day back in the Dow and Apple Inc. (NSDQ: AAPL) was strong on their earnings report and the anticipation of the unveiling of their tablet computer tomorrow.  The DJIA traded as high as 10,285 (+88) but closed at 10,193.54 (-3.32, -0.03%) and Apple traded as high as $213.71 (+$10.64) but closed up only $2.86 (+1.41%, $205.94)

The S&P 500 closed down 4.61 points (-0.40%, 1,092.17) and the Nasdaq 100 was the hero on the day gaining a herculean 1.47 points (+0.06%, 1,803.86).  The light action and relatively unmoved indexes are not uncommon on a Fed Tuesday.  Even though the Fed is certain not to raise interest rates, the market hates uncertainty and the action will be slow until 2:15 p.m. tomorrow when the language of the ‘non-move’ will be sliced and diced and over-analyzed.  Where the economy is right now, if Ben Bernanke even dreamt that he raised interest rates and Obama found out, there would be a new Chairman of the Fed and Ben would be teaching economics at Princeton for the spring semester lickety-split.

As of January 22nd, the public debt of the U.S. Government is $12.3 trillion dollars.  The budget deficit for fiscal year 2009 was a mere $1.4 trillion dollars, more than triple that of fiscal 2008.  Who says we cannot afford health care reform?  According to my handy iPhone national debt app, each and every one of us Americans has a $41,765.93 share of that debt.  What?  You say you were born in Canada now?

The dollar was strong today as the PowerShares DB US Dollar ETF (NYSE: UUP) gained 0.43% ($23.15) and closed at its highest level in a month.  Looking at the UUP chart shows that resistance is not much higher from bottoms made in August ($23.24) and a gap down in September ($25.25).  Above this resistance level the 200 day exponential moving average looms at $23.32.

Gold has a decent inverse correlation to the dollar, so close resistance for the dollar and close support for gold means a long gold trade is setting itself up.  I mentioned in a previous post that there looks to be support for gold in the $1,060 to $1,070 level.  Whether or not gold goes that low, or the dollar rises high enough to tick resistance is any one’s guess, but you don’t need to pick the bottom clean, just be aware of the overall direction of the ride and get on.  New York spot gold barely budged today and was last trading at $1,097.30 (4:33 p.m.)

There was not much action in oil as Nymex crude dropped 66 cents (-0.89%, 4:26 p.m.) and a barrel is now going for $74.60.

Yahoo! Inc. (NSDQ: YHOO) reported after the close today and hit their 11 cent a share estimate and fourth quarter revenues fell to $1.26 billion from $1.38 billion.  When you think of all the major Internet stocks and companies, Yahoo! is probably glad AOL got spun off so they don’t look like the only lame Internet operation hoping someone buys their shares.  Oh wait – someone wanted to buy all of their shares at $34 but the brilliant board, and yes you can call them all “Yahoos”, refused right about the same time the market caved in.  Yahoo! closed today at $15.99 and on the earnings news was trading $16.26 in the after-market (4:51 p.m.)  Only $17+ to go to get to that $34 price!

Tomorrow we have MBA Purchase Applications at 7 a.m., New Home Sales at 10 a.m. (370k expected) and the Fed announcement at 2:15 p.m.

First blush for tomorrow’s earnings is that there are a lot of major oil producers, refiners, drillers, etc… reporting tomorrow.  COP, HES, MUR and VLO to note a few.

By the way – between the time that you read how much your share of the national debt was and now – you owe another dollar.

Selected earnings for Wednesday:

ABT 1.17 before market open, ATI 0.23 bmo, BLK 2.12 bmo, CBT 0.27 after the close, CAT 0.28 bmo, CTXS 0.52 atc, COP 1.13 bmo, ETFC -0.04 atc, FLEX 0.15, GD 1.57, HRS 0.94 atc, HES 0.91, ITW 0.72 bmo, LRCS 0.40, LSI 0.11 atc, MWV 0.23 bmo, MUR 0.85 atc, NFLX 0.45 atc, NE 1.58 atc, NSC 0.84 atc, PX 1.09 bmo, ROK 0.35 bmo, RYL -0.26 atc, SAP 0.94 bmo, STJ 0.62 bmo, BA 1.36 bmo, UA UA -1.47, UTX 1.14 bmo, VLO -0.47 bmo, WLP 1.02 bmo

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Wall Street Wrap

Losing Streak Snapped, DJIA up 23

By Robert Perrego, at 5:09 pm on January 25th, 2010

Last week ended with hard selling on Friday, as the market got spooked that Federal Reserve Chairman Ben Bernanke may not get reappointed.  After the close on Friday, Senate majority leader Harry Reid (D-Nevada) came out in support of Bernanke, after holding a closed meeting with him.  After three days of selling the market posted a gain today, but of course they found something to complain about with new worries that Bernanke may have compromised the Fed’s independence to keep his job.  Are you sick of politics in the market causing this sell off?  Well you shouldn’t be as you have to take the good with the bad.  The market bottom last March was orchestrated by politics, with the congressional hearing to suspend mark-to-market accounting coming just two days after the March 9th low, which had a lot to do with the end of the bleeding.

Today the Dow Jones Industrial Average posted a 23.88 point gain (+0.23%, 10,196.86), while the S&P 500 closed up 5.02 points (+0.45%, 1,096.78).  The Nasdaq 100 rose 7.57 points (+0.42%, 1,802.39)

The market started the day strong but the Bulls got their head of steam dampened when the 10 a.m. Existing Home Sales were announced.  Analysts were expecting 5.9M, a drop from the previous month’s 6.54M.  The number that was reported came in a lot lower at 5.45M, the largest drop month-over-month in 40 years.  Most of the size of this drop was as a result of the waning effects of the $8,000 tax credit for first time home buyers.  The good news was that the median and average price of a home firmed up by 4.9% and 6.4% respectively.

With the average home at $225,400 and the first time home buyers TAX credit being $8,000, if we assume the first time buyer to be paying an effective tax rate of 33% this would mean the tax credit to be worth $11,940 before taxes.  This works out such that being eligible for the first time buyer tax credit is like cashing in a 5.2% coupon on your home purchase.  Or, could it mean that if home prices drop another 5.2% we will see strong buying demand?  People emotionally really like to get something free, so I doubt a mere drop in home prices of 5.2% ends the crisis.

After the close today Apple Inc. (NSDQ: AAPL) came out with earnings and, at first blush, blew away the analyst estimates.  The expectations were for GAAP earnings of $2.07 a share with the reported number being a non-GAAP $3.67 a share.  What looks like a huge beat becomes even more in doubt as there is an accounting change involving how Apple is booking their subscription based iPhone revenues, a sizable chunk of their earnings, that the market did not expect.  Before you have to go comparing the apples (GAAP expectations) to oranges (non-GAAP reported earnings) the appropriate comparisons show $15.68 billion in revenues vs. 14.96 billion expected and $3.67 a share vs. $3.50 a share comparable expected.  This beat of 4.6% for earnings per share is not quite the 77% when compared to the previously expected $2.07 in earnings.  Aren’t you glad the stock was halted when they made the initial announcement?

UPDATE: AAPL trading $201.36 in the after-market (5:05 p.m.) after closing at $203.07.

New York spot gold gained $5.90 an ounce to $1,097.40 (+0.54%, 4:45 p.m.) and oil gained with Nymex crude up 77 cents to $75.31 a barrel (+1.03%, 4:38 p.m.)

This week is a busy week for economists and economic reports as the Federal Open Market Committee begins a 2-day meeting Tuesday with an expected ‘holding steady’ announcement due on interest rates on Wednesday at 2:15 p.m.  Usually volatility on a 2-day meeting dries up at about 11 a.m. on Tuesday until after the announcement.

In addition to the Fed meeting starting tomorrow mornings, we get the S&P Case-Schiller Home Price Index announced at 9 a.m., Consumer Confidence (53.5 expected), FHFA House Price Index and State Street Investor Confidence Index at 10 a.m.

A quick first look at the companies reporting earnings tomorrow shows it is a day with multiple major steel companies; U.S. Steel (NYSE: X), Nucor (NYSE: NUE) and Carpenter Technology (NYSE: CRS).

Selected earnings for Tuesday, January 26th:

AOS 0.57 before market open, ALTR 0.29 after the close, ABC 0.46 bmo, AME 0.47 bmo, BHI 0.35 bmo, BXP 1.06 atc, ELY -0.28 atc, CNI 0.87 atc, CRS 0.24 atc, GLW 0.42 bmo, DV 0.83 atc, ENR 1.84, FPL 0.76 bmo, GILD 0.85 bmo, JEC 0.58 bmo, JNJ 0.97, MCK 1.19 atc, MTH -0.44 atc, NVS N/A, NUE 0.07, BTU 0.29 bmo, RF -0.34 bmo, SANM 0.13 atc, SYK 0.82 atc, X -1.44, VZ 0.54 bmo, WFT 0.11, YHOO 0.11 atc

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News, Wall Street Wrap

Politics Plays Wall Street, Market Gets Hammered

By Robert Perrego, at 5:25 pm on January 22nd, 2010

The sum result of the election in Massachusetts on Tuesday, proposed banking regulations on Thursday and talk of Fed Chairman Ben Bernanke’s reappointment vote on Friday comes to 552 points – straight down.  The super traders from Goldman Sachs Group, Inc. (NYSE: GS) posted earnings on Thursday morning of $8.20 a share, a full $3.00 or 58% above expectations.  The net result was the stock is down 8.15% or $13.67 in two days, or ever since a fat chunk of kryptonite slammed into Wall Street with a note attached…

‘New trading limits, love always, Obama.’

The Dow Jones Industrial Average lost 216.90 points (-2.08%, 10,172.98) today, lost 552.45 in the last three days (5.2%) and is down 436.67 (-4.11%) for the week.  The S&P 500 was down 24.74 points on the day (-2.22%, 1,091.74), 58.49 points for three day period (-5.08%) and 44.29 points for the week (-3.90%).  The Nasdaq 100 fared the worst today and dropped 55.75 points (-3.01%, 1,794.82), 100.66 points (-5.31%) for the three day period and 69.70 points on the week (-3.74%)

To say this was all Obama’s fault would be an exaggeration, but not by much.  Maybe it is Scott Brown’s fault for winning the election in Massachusetts as the shock waves from a Republican in Ted Kennedy’s old seat is what is causing this market to fall.  ‘Cause and Effect’ defines the political whirlwind from Tuesday’s election as incumbent Democrats as far away as San Francisco were confronted with evidence that the voting public is pretty pissed off about a few things and itching to take it out on someone.  One resulting ‘effect’ was Obama’s new proposed trading restrictions and the second hit came today as politicians came out saying they would not vote to reappoint Bernanke to the Chair of the Fed.  Are these politicians, with an election less than ten months away, looking for a scapegoat to serve up as a sacrifice to the voting masses?

Bernanke is associated with Wall Street by most, even though he comes not from the polished halls of Goldman Sachs but the hallowed halls of academia, namely Princeton University.  Ben invented a whole new way to stabilize the market for the Fed with his quantitative easing program.  Some have taken exception to this as the amount of toxic debt bought, as a result of this program, and on the Fed’s off-government balance sheet is not only a secret, but possibly unconstitutional.  The way I see it, Chairman Bernanke is the leading expert on the Great Depression and did some fast and creative thinking on his feet so that depression he studied is still the only depression we have had.  Not allowing Ben to stay in control of the programs he has going at the Fed may not be a disaster, but it definitely should not be decided upon because some politician needs a sacrifice to the voting gods for their own personal job security.

I wrote yesterday that the DJIA broke down through its uptrend line effective since December 17th.  Where the Dow closed yesterday was right on top of two supports.  The 50 day exponential moving average is at 10,394, yesterday’s close was at 10,389 and the last remaining uptrend line for this rally was right at 10,390.  You can see this as the point where the ‘curvy’ blue line and the lower straight red line are on the following chart;

Dow Final

Breaking Support

The announcements today of politicians that are not going to vote for Bernanke caused the market to fall through the support that caught it yesterday, and as it was a Friday, the selling accelerated into the end of the day.  Traders do not like holding long positions into a weekend when the market is weak as that gives the world two days to come out with bad news that could cause these holdings to gap down on Monday morning.  As the market weakness floated into the afternoon session, you could see the orderly exiting of positions as traders lightened the boat and the decline accelerated.  A market that closes on, or very near its low is indicating weakness as it shows that what stopped it going down was not a let up in the selling, but the clock on the wall.  There may be more to sell Monday.

The DJIA has support at 10,090 and then at 9,830.  If the Dow breaks these, the next support is at its 200 day exponential moving average at 9,727.

As the whole market was being sold, New York spot gold dropped 80 cents to $1,092.30 an ounce.  On a $1,000+ price, this is meaningless.  Some of the few stocks up today on my trading screen were gold mining companies.  I think we are seeing a rotation into gold out of other stocks in a ‘flight to safety.’  Charts show support for gold at about $1,060.

Oil now looks headed to $50 as opposed to the $100 level traders were eyeing just a week ago.  Nymex crude dropped $2.05 a barrel to $74.02 (-2.71%, 5:05 p.m.)

Write your Senator and tell them to vote for Bernanke – might just help you get some money back.

Have a great weekend.

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Wall Street Wrap

Weak Jobs Number Puts Market on the Edge, Obama’s Bank Plan Pushes it Over

By Robert Perrego, at 5:17 pm on January 21st, 2010

Yesterday, the Dow Jones Industrial Average dropped 208 points before recovering to post a 122 point loss on the day.  The S&P 500 also experienced the same deeper drop and recovery into the close.  Looking at the charts for the Dow and the S&P 500 shows that where the two market Indexes closed yesterday, was right on the support of short term uptrend lines that have been in effect since December 17th of last year.  All the market needed to drop was a little push…

This morning before the open, the Jobless Claims came in weaker than expected by 42,000 jobs (482K vs. 440K), and the market dropped a bit off the open.  The 10 a.m. release of a weak Philly Fed survey and a brief released by the White House with details about new banking regulations President Obama had a press conference scheduled for, was enough to push the market over the edge.  In 17 minutes the DJIA dropped 105 points as selling, and possibly the cascading of protective sell stops, took the market on a one way trip lower.  An hour later Obama was on TV, and as he announced his plans a second wave of selling drove the market to its day low at down 229 points.

The Dow Jones Industrial Average lost 213.27 points (-2.01%, 10,389.88) on the day making the drop of the last two days total 335 points, which is the biggest two day loss since June of last year.  The S&P 500 dropped 21.56 points (-1.89%, 1,116.48) and the Nasdaq 100 was off 17.38 points (-0.93%, 1,850.57)

There seems to be a difference of opinion about how Goldman Sachs Group, Inc. (NYSE: GS) will fare under the newly proposed legislation.  Dick Bove of Rochdale Securities LLC says you should buy Goldman on the dip, but Michael Hecht at JMP Secutities and Matt Albrecht at Standard and Poor’s disagree, saying the bank will get hit harder than their brethren.  Goldman announced earnings this morning before the opening bell and crushed the analysts estimates of $5.20 a share by a full $3.00 ($8.20).  With a weak and slowly trending lower market, Goldman stock was off about a dollar when the first market slide hit.  This first slide only took the stock down three more dollars and when Obama got on TV, Goldman was trading at about $164.  Fifteen minutes later, as Obama gave details of his plan, 7 points evaporated off of Goldman’s stock as it traded as low as $156.77.  Calls to Goldman and other banks all got pretty much the same answer of “we don’t really know until we see all the details” which sounds to me like; “It is only proposed legislation and let’s just see what they get signed into law after we pay our lobbyists a small fortune to go talk to some politicians in D.C.”  Goldman stock rebounded to close the day down $6.92 (-4.12%, $160.87).

The newly proposed regulation has at its heart a ban on commercial banks engaging in proprietary trading.  Obama seems to believe that this type of law would be a safeguard against a future financial meltdown similar to that which occurred over the last 18 months.  Never mind the fact that proprietary trading did not have much to do with financial crisis, or that American International Group, Inc. (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) did not engage in any proprietary trading at all, were at the epicenter of the crisis and together cost the TARP well over $200 billion.  Never mind the fact that Goldman and every other large bank that did engage in proprietary trading have paid back, with interest, every dime the Government loaned them.  The question is, is this type of legislation motivated by actually trying to regulate and make the markets safer, or is it politically expedient to attack the big banks to score a victory after the election in Massachusetts earlier in the week?

Google Inc. (NSDQ: GOOG) reported after the close today, with some of the bigger market players anticipating a large beat.  The analysts estimate for earnings was $6.50 a share and one player I spoke with cited the fact that Google’s numbers were never taken lower during the past year, and that, with the economic pick up the reported earnings beat should be sizable.  In today’s down market, Google closed up $2.57 at $582.57.  The search engine giant reported earnings of $6.79 a share, beating the $6.50, but only by 4.4%.  The stock immediately dropped in after hours trading as it seems others anticipated a larger earnings beat and started to sell.  The stock is currently down 25 points in the after market at 557 (5:00 p.m.).  This pattern seems to be keeping form with selling the tech earnings after the beat expectations (see Intel and IBM earlier in the week).

New York spot gold dropped $17.80 to $1,093.50 and Nymex crude lost $1.92 a barrel to $75.82 as just about everything got hit today.

Selected earnings for Friday:

BBT 0.21 before the open, EXC 0.85, GE 0.26 bmo, HOG -0.32 bmo, JCI 0.29, KMB 1.25, MCD 1.02 bmo, SLB 0.64 bmo, STI -0.75 bmo.

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News

China and Massachusetts Drive the Market Lower

By Robert Perrego, at 5:15 pm on January 20th, 2010

Mining stocks got hit today as the market took back what was gained Tuesday on the hopes of a Republican win in Massachusetts.  Hardest hit was Silver Standard Resources, Inc. (NSDQ: SSRI), which dropped 8.72% (-$2.02, $21.15).  Yesterday we tacked on 116 points on the hopes of a 41st vote for the Republicans in the U.S. Senate.  Well, the party was last night, the Republican candidate Scott Brown won and today the market posted its worst loss since November.  Hangover.  The party was being all happy about the possibility the Repub’s could block the Dem’s grand spending plans which would keep the debt, spending and taxes down.  The hangover is realizing that if Obama does not print the greenback into oblivion, if all of a sudden the trillion dollar health plan may not pass, then the expectations for a weak dollar will decrease.  Now ask yourself what the carry trade cowboys, who are short the dollar and long stocks and commodities, are going to do?

The Dow Jones Industrial Average dropped 122.28 points today (-1.14%, 10,603.15) with 24 of 30 components finishing lower. The S&P500 lost 12.19 points (-1.06%, 1,138.04) and the Nasdaq 100 led the charge lower as weak tech caused the index to close down 27.53 points (-1.45%, 1,867.95)

International Business Machines (NYSE: IBM) reported after the close yesterday and beat earnings, and also took first place in leading the DJIA lower today losing $3.89 (-2.89%, $130.25).  They sold the Intel Corp. (NSDQ: INTC) earnings after beating estimates and, starting in the after-market yesterday, they sold the IBM earnings beat as well.  Keep an eye on what happens to the eBay Inc. (NSDQ: EBAY) earnings announced after the close today and Google Inc. (NSDQ: GOOG), which reports after the close tomorrow.  If both these companies beat, and they sell the stock off after, this quarters reporting play is to sell tech earnings after the announcement.

The banks were strong today relative to the rest of the market as Bank of America Corp. (NYSE: BAC) reported a loss of 60 cents.  This loss included a one-time charge of $4 billion for a TARP payment spurring an Oppenheimer analyst to raise his rating on the stock.  BofA led the DJIA higher today gaining 17 cents (+1.04%, $16.49).  Bank of New York Mellon Corp. (NYSE: BK) posted a 49 cent per share profit after charges and 60 cents before, which beat the analysts’ estimate of 51 cents, powering the  stock higher by 4.84% (+$1.43, $30.96).  Wells Fargo & Co. (NYSE: WFC) posted an 8 cent per share profit with the analysts expecting a 1 cent loss.  Wells Fargo stock dropped 1.62% (-$0.46, $27.82).  Morgan Stanley (NYSE: MS) posted 29 cents per share profit with the analysts expecting 36 cents, causing the stock to drop 1.70% (-$0.53, $30.63)

Other than a Republican winning the Senate seat long occupied by Ted Kennedy, the big news today was a report that Chinese authorities asked some commercial banks to stop giving loans for the rest of the month of January.  China’s top banking official denied the report, but then again they had nothing to do with the Google hack last week right?  The Shanghai Composite dropped 2.9% on the report and a tightening of the loans in China will slow growth there and here as well.  The more buildings China builds the more Caterpillar, Inc. (NYSE: CAT) tractors they buy.

The combined news of the election in Massachusetts and the loan tightening in China caused the PowerShares DB US Dollar ETF (NYSE: UUP) to gap higher this morning on the open.  The UUP gained 1.22% on the day (+$0.28, $23.12) and broke its short term down trendline.  The stochastics for the UUP are reversed at a low level and heading higher so, with this breaking of a trendline and the stochastics all bullish, the chart points up for the dollar.

As a result of the report that China is slowing down their economic growth and that the dollar might be given a reprieve from death row, commodities got hit hard today.  Steel got hit for 3.11%, coal lost 2.86%, copper down 2.68% and gold down 2.39%.  New York spot gold lost $27.20 an ounce (-2.39%, $1,1140.40, 4:50 p.m.) and Nymex crude was down $1.59 a barrel (-2.00%, $77.73)

UPDATE: eBay earnings came in at 44 cents a share vs. the expected 40.  Revenue was reported to be $2.4 billion with expectations of $2.29.

Selected earnings for Thursday, January 21, 2010:

ACS 0.99 after the close, AXP 0.56 atc, APH 0.49, BNI 1.22 atc, COF 0.45 atc, CMA -0.49 before the open, ED 0.76, CAL -0.07 bmo, ELX 0.16 atc, FCS 0.17 bmo, FITB -0.31 bmo, GS 5.20 bmo, GOOG 6.45 atc, ISRG 1.71, ESI 2.36 bmo, KEY -0.39 bmo, LM 0.31 bmo, PNC 0.77, PPG 0.73 bmo, PCP 1.64 bmo, UNP 1.04 bmo, UNH 0.73 bmo, WDC 1.36 atc, XRX 0.22 bmo

Economic reports for Thursday:

Jobless Claims 8:30 a.m. 440K expected

Leading Indicators 10 a.m. 0.7%

Philadelphia 10 a.m. Fed Survey 18.0

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