Wall Street Wrap

Afternoon Rally Keeps Stocks From a Big Loss

By Robert Perrego, at 5:10 pm on February 25th, 2010

Over the past two weeks, workers filing for first time Jobless Claims have jumped 12% and stocks reacted by dropping steeply off the open this morning.  After the close yesterday, rumors flew that Coca-Cola Co. (NYSE: KO) was near striking a deal to buy their bottler’s North American business.  The official announcement came out this morning and this sent the shares of Coca-Cola Enterprises (NYSE: CCE) up by a whopping 32.84% (+$6.30, $25.48).  The cost of the acquisition dropped the shares of Coke down by $2.04 (-3.69%, $53.12), lopping about 14 points off the Dow Jones Industrial Average on its own.

The Dow Jones Industrial Average traded as low as 10,185 (-188, -1.82%) before staging an impressive 137 point rally off the lows to finish with a loss of only 53.13 points on the day (-0.51%, 10,321.03).  The S&P 500 dropped 2.30 points (-0.20%, 1,102.94) and the Nasdaq 100 showed some relative strength, closing in the green fractionally (+0.40, +0.02%, 1,812.91)

The ‘non-partisan’ politicians were at it again in Washington D.C. as top Republicans and Democrats got together for a televised health care summit.  If you watched this it was an exercise in people talking and not listening.  While this is not unusual with our hot-air oversupplied elected officials, the ‘discussion’ turned a bit hostile at times with Obama interrupting McCain, McCain snapping back with ‘let me finish’ and other unpleasantness.  My favorite part had to be when Obama criticized Cantor for bringing all 2,400 pages of the bill to the meeting discussing that bill.  I never knew how thick a document that is 2,400 pages was until today and it seemed Obama did not want the rest of the country to see it either.

At the $1 trillion price tag put on the health care bill, each page is worth (spends) about $417 billion.  Maybe the U.S. Treasury should just start printing copies of the health care bill and forget about printing dollars.  We could pay off the national debt in no time but just try carrying the change home when you go buy a six-pack of Coke.

Goldman Sachs Group Inc. (NYSE: GS) is in hot water over the role they played in structuring a large loan to Greece in 2001 such that it looked like a currency transaction.  Greece no doubt did this to hide the debt from the European Union and Goldman did it for a very large commission.  Goldman stock dropped $1.89 to $156.44.

Apple Inc. (NSDQ: AAPL) CEO Steve Jobs told shareholders the company was going to sit tight on its $40 billion cash hoard as having that kind of money in the bank provides “tremendous security and flexibility.”  Apple has never been too active in buying other companies, preferring to develop their own technology, rarely buys stock back and does not pay a dividend.  With economic times like these sitting on a mountain of cash is a great idea but just try keeping track of the 160,000 accounts you need to keep $250,000 or less in for FDIC protection.

New York spot gold bounced back for a gain today for the first time in three days.  The precious yellow metal added $8.20 to $1,105.40 (+0.75%, 4:39 p.m.).  Over the past few days I have seen a lot of stories and heard chatter on the financial TV shows about the coming demise of gold.  With central banks worldwide being net buyers, a $1.56 trillion budget deficit and U.S. national debt skyrocketing I don’t believe it for a second.  Want to see gold go through the roof?  If that health care plan gets passed or that massively deficient budget gets ratified hang on tight – we are going for a wild upside ride.

I commented yesterday to keep a close eye on the SPDR Gold Shares ETF (NYSE: GLD) and a support level of $104.  The GLD closed slightly above its 50 day exponential moving average today ($108.31 vs. $108.15) and this is a positive sign.  The numbers to watch on the GLD are $104 and $111.  A close above $111 would be signaling a possible break out and a close below $104 a possible break down.

Nymex crude does not seem to be able to hold the $80 level as the barrel dropped $1.74 today on weaker economic expectations (-2.18%, $78.26, 4:44 p.m.).

The PowerShares DB US Dollar Index (NYSE: UUP) gapped up on the open but traded lower all day long losing 0.21% (-$0.05, $23.71).  If you think this Greek tragedy is blowing over keep an eye on the CurrencyShares Euro Trust (NYSE: FXE).  A very large volume spike last Friday could have marked this as a reversal low and it has pretty much been trading sideways all week.  If it rises above $136 I would get very interested.  Besides, how many more days can they strike in Greece anyway?  All the bad news could be out.

Tomorrow we have GDP at 8:30 a.m. (5.7%, 0.6%), Chicago PMI at 9:45 a.m. (60.0), Consumer sentiment at 9:55 a.m. (73.7) and Existing Home Sales at 10 a.m. (5.5M)

Fed Presidents Naranyana Kocherlakota (Minneapolis), William Dudley (New York), Charles Evans (Chicago) and Fed Gov. Daniel Tarullo speak at the annual U.S. Monetary Policy Forum in New York tomorrow.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Wall Street Wrap

Market Strong on ISM Number

By Robert Perrego, at 5:37 pm on February 1st, 2010

The Dow Jones Industrial Average has lost 6.1% over the past two trading weeks and closed out last Friday right on a support level.  Futures were up in the pre-market and a favorable report from the ISM Manufacturing Index (58.4 vs. 55.0 expected) at 10 a.m. powered the market higher as the DJIA climbed 118.20 points (+1.17%, 10,185.53).  Apple Inc. (NSDQ: AAPL) gained $2.67 (+1.38%, $194.73) after a two day slide at the end of last week that sliced $15.82 (7.61%) off its stock price.  It seems that the sellers in the tech space were busy hitting Amazon.com (NSDQ: AMZN), as the recent dust-up with Macmillan brought the sellers out in force.  The largest online retailers stock was down $11.59 at its low but rebounded to close down only $6.54 (-5.21%, $118.87)

The S&P 500 rose 15.32 points (+1.43%, 1,089.19) and the Nasdaq 100 gained 19.68 points (+1.13%, 1,760.72)

Commodities were strong as the dollar sold off.  What we have most likely been seeing over the last couple of weeks is the unwinding of the dollar carry trade.  The very low short term interest rates in the U.S. right now has made shorting the dollar and using those funds to buy stocks and commodities a very popular, and profitable trade since March 9th of 2009. As the dollar strengthened on gradually improving economic conditions domestically, the shorts started to get squeezed, bought their short positions in and then had to sell some stocks.  As the dollar has reached a short term peak and the technical picture points to it selling off for now, these same ‘carry trade cowboys’ may be once again shorting the dollar and buying into the stock market.

New York spot gold ripped higher by $24.60 an ounce (+2.28%, $1,104.80, 4:40 p.m.) as the dollar declined, optimism rose about the global economy and on comments by St. Louis Federal Reserve President James Bullard that deflation was no longer a risk for the U.S. economy.  Eliminating the possibly of deflation makes the probabilities of the economy experience inflation increase, and many economists have said that keeping the current near zero interest rates this low for long could even result in hyper-inflationary conditions in the next few years.  This is not lost on the investing public as all one has to do to see an example of the belief that gold is an inflationary fighting vehicle, is to turn on any financial television station and count the number of advertisements about buying or selling gold you see per hour.

Inflation expectations also increased as President Obama unveiled the 2011 budget with a whopping $1.56 trillion deficit.  Last week Obama was promising a spending freeze in 2011 during his State of the Union speech and this week we have the biggest spending budget in history and a record projected budget deficit.  There oughta be a law!  Actually I think there is one, but they passed another one exempting all the politicians in Washington D.C. from the first one.

Black gold had an even stronger day than yellow gold as Nymex crude gained $1.97 a barrel (+2.70%, $74.86, 4:35 p.m.) on optimism about the world economy, dollar weakness and cold weather in the United States.  The Market Vectors Steel ETF (NYSE: SLX) rose 6.01% (+$3.28, $57.79) after getting sold off for almost 20% over the last three trading days.  Sugar ticked a 29 year high ($30.40) on the Intercontinental Exchange, the iPath Dow Jones-UBS Copper ETF (NYSE: JJC) was up 2.10% (+$0.87, $42.38), the Market vectors Coal ETF (NYSE: KOL) gained 3.22% (+$1.06, $33.91) and the United States Natural Gas Fund (NYSE: UNG) was up 5.26%, (+$0.49, $9.80)

Tomorrow we get the number for Motor Vehicle Sales (8.37 M expected), the ICSC-Goldman Store Sales at 7:45 a.m., the Redbook at 8:55 a.m. and the Pending Home Sales Index at 10 a.m.  Treasury Secretary Timothy Geithner testifies before the Senate Finance Committee on the fiscal year 2011 budget at 10 a.m. and at the same time Paul Volcker testifies on regulations to limit high-risk bank activities before the Senate Banking Committee.

Selected earnings estimates for Tuesday, February 2, 2010:

A quick scan will show you that we have a decent number of oil companies that are all reporting tomorrow – BP, MRO, SU, TSO and TDW.

ACE 1.93 after the close, AFL 1.15 atc, ADS 1.63, AMB 0.31 before market open, AXE 0.52 bmo, ADM 0.72 bmo, ADP 0.58 bmo, BEAV 0.31 bmo, BP 1.51 bmo, CMI 0.76, DHI -0.14, bmo, EMR 0.42 bmo, ETR 1.55, IRF -0.08 atc, JDSU 0.09 atc, LXK 0.63 bmo, MRO 0.51, MEE 0.27 atc, MET 0.95 atc, NWS atc, PBG 0.43 bmo, PRGO 0.66 bmo, SU 0.36 bmo, TSO -0.92 atc, DOW 0.11, HSY 0.60 bmo, SMG -0.83 bmo, TNB 0.63 bmo, TDW 1.20 bmo, UPS 0.74 bmo, UNM 0.64 atc, VRSN 0.34 atc, WHR 1.32 bmo.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,

News

Doubting Thomas Dissents, iPad iDisappoints?

By Robert Perrego, at 5:46 pm on January 27th, 2010

The Federal Open Market Committee announced that they would keep interest rates at their historically low ‘0-0.25%’ level and also stated that rates would remain low for an “extended period of time.”  Doubting Thomas Hoenig, the Kansas City Fed President, was the dissenting voice but not on the level of interest rates, just on the promise to keep interest rates low.  Hoenig ‘doubts’ the economy is still weak enough to keep the pledge to keep interest rates low for an extended period of time.  This one dissenting vote was enough to send the markets higher after the announcement as the Dow Jones Industrial Average rallied from 10,150 before the release to 10,236.16 (+0.41%, +48.87) at the close.

The S&P 500 experienced a similar turn of fortune on The Fed announcement rising to close at 1,097.50 (+5.57, 0.50%) and the Nasdaq 100 climbed to 1,818.90 (+0.83%, =15.04)

One possible reason why The Fed kept the promise to keep rates low for an “extended period,” is that the U.S. Senate will vote whether or not to confirm Bernanke to a second term as Fed Chairman tomorrow.  While politicians may worry about interest rates and inflation, right now they are more worried about votes and jobs, so losing this ‘extended’ language from the statement might make Ben’s reappointment a bit less certain.

Click ‘here’ to see the text of the FOMC announcement.

Treasury Secretary Timothy Geithner got grilled by members of Congress about his role in how the whole bailout of American International Group (NYSE: AIG) and Goldman Sachs Group, Inc. (NYSE: GS) was handled.  The heart of the issue that members of the House Committee on Oversight and Government pushed was whether or not Geithner made decisions with the best interests of the taxpayer in mind, or the best interests of Goldman Sachs.  Goldman Sachs was the biggest recipient of funds from AIG, and these funds were supplied by the U.S. taxpayer through the TARP fund.  Whether these politicians (and yes, I do not trust any politicians) were stumping and posturing for votes in this coming November’s elections, or whether they actually thought the bailout could have been handled differently, and at a lower cost to the taxpayer, no one knows.  I would say that Geithner and former Treasury Secretary Hank Paulson know a substantial amount more about banking, derivatives and the financial mess we were in than the lawyers and popularity contest winners we call politicians.  Who do you trust more, bankers or politicians?

Steve Jobs rolled out the new Apple Inc. (NSDQ: AAPL) iPad to some underwhelming reviews and this one review that claims it is ‘culture-changing.’ I have an iPhone and its great, but I do not see the reason to buy something that is half the way between my phone and a laptop (or netbook) for $500 to $1,000.  Whether or not the public buys this thing like they bought other Apple products, investors did not like it – until they heard the price!  Apple stock dropped as Jobs unveiled the iPad and you could practically hear the “that’s it?” from stock traders.  When Jobs announced that the lowest cost model would be $499 the stock ripped and closed the day up $1.94 at $207.88.  For Tracked.com’s take on Apple’s new gizmo see:  iPad or iFad?

A Tale of Two Dow Stocks today brings us Boeing Co. (NYSE: BA) and their biggest one day stock jump in over a year on stronger than expected earnings.  Boeing rose $4.22 or 7.31% after reporting $1.77 a share in profit ($1.36 expected) after losing 12 cents a share a year earlier.  The stock you didn’t want to be in today was Caterpillar Inc. (NYSE: CAT) as their earnings announcement came in above expectations ($0.36 vs. $0.28) but their year-over-year comparisons were poor ($0.36 vs. $1.08) and sales in the fourth quarter declined 39% to $7.9 billion.  Just over two weeks ago Caterpillar stock ripped to its highest level since September of 2009 as China announced a strong economy and traders bet Caterpillar was doing brisk business selling them tractors.  This price and volume spike from January 11th has a lot of people disappointed in today’s results from the CAT as the stock dropped $2.41 to $53.44.

Tomorrow we get the vote on whether or not Bernanke keeps his job and Durable Goods Orders (1.6% exp.) and Jobless Claims (440k) at 8:30 a.m.

First look at the companies expected to report tomorrow show that it is airlines day with ALK, JBLU and LCC reporting.  Also, keep an eye on the transportation index as airlines are part and KSU and ABFS are also reporting.

Selected earnings reports for Thursday:

MMM 1.21, ADPT -0.04, MO 0.40 before market open, AEP 0.46, AMCC 0.04 after the close, AZN 1.52 bmo, T 0.51 bmo, BLL 0.71 bmo, BAX 1.03, BDX 1.20 bmo, BMS 0.34 bmo, BCR 1.34 atc, CA 0.42, CP 0.83 bmo, CAH 0.46 bmo, CELG 0.62 bmo, CB 1.46 atc, CL 1.18, CY 0.11 bmo, DHR 1.03, D 0.60 bmo, EK 0.18 bmo, LLY 0.92, BMY N/A, F 0.26 bmo, BEN 1.47 bmo, GNW 0.10 atc, HP 0.50 bmo, JNS 0.19 bmo, JBLU 0.03 bmo, JNPR 0.26 atc, KSU 0.29 bmo, KLAC 0.27 atc, LLL 1.86 bmo, LEG 0.24 atc, LMT 1.99 bmo, MXIM 0.18 atc, MKC 0.91, MSFT 0.59 atc, MOT 0.08 bmo, NOK 0.28 bmo, OXY 1.24, OXPS 0.26 bmo, OSK 1.00 bmo, POT 0.78, PG 1.43, RMBS -0.26 atc, RTN 1.23 bmo, COL 0.73 bmo, SNDK 0.69 atc, SXE 0.47 atc, SY 0.69 bmo, SNV -0.59 atc, TXT 0.09 bmo, EL 1.19 bmo, TWC 0.88 bmo, TYC 0.59, UA 0.25 bmo, LCC -0.50, XEL 0.36 bmo.

Tags: , , , , , , , , , , , , , , , , , , , , , ,

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

Tags: , , , , , , , , , , , , , , , ,

Wall Street Wrap

Google Throws Their Phone into the Ring

By Robert Perrego, at 4:56 pm on January 5th, 2010

Ever since Eric Schmidt, Chairman and CEO of Google Inc. (NSDQ: GOOG), left the board of Apple Inc. (NSDQ: AAPL), people wondered how an executive of a possibly competing company ever got on the board in the first place.  Until today, Apple and Google never had a heads up competition but that all just changed.  The new Google phone, the Nexus One, is not a competitor to the iPhone in the same way as the Blackberry is.  The Google phone has been designed around ‘Apps’ and directly targets the iPhone user, whereas the Blackberry grew up through the business crowd and accessing emails and documents for work related issues.  The biggest winner will be the consumer as a legitimate challenger, supported by a cutting edge technology company, has now set their sights on this very lucrative market.  Google stock dropped 0.44% (-$2.76, $623.99) today while Apple stock gained 0.17% (+$0.37, $214.38).

The market was split today with the Dow Jones Industrial Average losing 11.94 points (-0.11%, 10,572.02) while the S&P 500 gained 3.10 points (+0.27%, 1,136.23).  The tech heavy Nasdaq 100 rose 1.73 points (+0.09%, 1,888.43).

As far away from the newest thing in technology as you can possibly get is where big gains were made today as coal companies posted advances on freezing temperatures around the world.  Massey Energy Corp. (NYSE: MEE) gained 4.25% (+$1.88, $46.03) and is up 10% over the last two days.  Not to be outdone, Arch Coal, Inc. (NYSE: ACI) jumped 4.59% (+$1.08, $24.56) and also is up over 10% in 2010.  Peabody Energy Corp. (NYSE: BTU) added 3.36% (+$1.62, $49.50) and CONSOL Energy Inc. (NYSE: CNX) was up 3.09% (+$1.64, $54.59).  If you got a lump of coal in your stocking this past Christmas, or even better coal shares, this is a belated Merry Christmas for sure.  The Market Vectors Coal ETF (NYSE: KOL) is up from $36.12 to $39.32 in 2010 for a gain of 8.86%.

Factory orders came in very strong as jumps in coal and petroleum prices contributed strongly with the reported number of a 1.1% increase besting the range expected (-1.1% to +1.0%) and more than doubling the expected number of +0.4%.  Tempering the strong results out of the factories was weak results in Pending Home Sales, as the month-over-month number dropped 16%.  This report can be taken with a grain of salt as it is possible few people are shopping for a house while shopping for holiday gifts.

Motor Vehicle Sales came in above the expected number this morning (8.5 million vs. 8.4) for December.  Ford Motor Co. (NYSE: F) saw sales jump 33% while Chrysler and General Motors, or Government Motors, both saw sales drop.  GM had sales down 5.7% but stated that in the four brands they will be keeping, sales were up 2.2% (the axe is falling on Pontiac and Saturn).

The oil market quieted down today after yesterdays $2 plus jump.  Nymex crude was up just 35 cents (+0.43%, $81.86, 4:04 p.m.) today.  The dollar opened lower and traded up into positive territory, as the DXY closed up 0.13% (+0.10, 77.62).  Gold opened higher and traded lower, inverse to the dollar as usual, but finished marginally down losing $2.60 an ounce (-0.23%, $1,118.30).

Byron Wein, BlackRock, Inc. (NYSE: BLK) Vice-Chairman, was on CNBC predicting a strong year for the Japanese stock market in 2010, and this guy has been around and good at picking markets for a long time.  There are a lot of countries you can ‘buy’, by investing in their ETF’s.  Some of these countries’ economies, and thus their ETF’s, are associated with different sectors of the market.  Japan has a tech heavy economy while Australia (EWA) and Canada (EWC) are natural resource plays.  If you want to bet with Byron, the iShares MSCI Japan Index Fund (NYSE: EWJ) would be the way to go and closed at $10.05 today.

Tomorrow we get the ADP Employment Report before the market opens at 8:15 a.m. and the ISM Non-Manufacturing Index (50.4) at 10 a.m.  Also able to move the markets is the minutes from the last FOMC meeting, which will be released tomorrow at 2 p.m.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , ,

« Older Entries