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.

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Tracked.com Topics

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.

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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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