News

Wall Street Wrap – Four Dow Jones Stocks Beat Earnings, Market Rises

By Robert Perrego, at 5:37 pm on October 22nd, 2009

Four Dow Jones Industrial Average companies announced Q3 earnings and beat analyst’s estimates today.  The Travelers Companies, Inc. (NYSE: TRV) quadrupled earnings from last year, increased their dividend and announced a stock buyback.  3M Inc. (NYSE: MMM) beat their earnings estimate by 17% AND beat their revenue estimate by 6%.  McDonald’s (NYSE: MCD) beat earnings estimates and saw an increase in revenue year-over-year and AT&T beat earnings estimates by 8% and signed up 3.2 million iPhone users.  That is a lot of good news and the Dow took off for 131.95 points (+1.32%, 10,081.31).

The S&P 500 did not have 10%+ of their index post good news today, so this index was only up 1.06% (+11.51, 1,092.91), which is still a solid day.  The Nasdaq 100, the index that has been relatively strong for the last few days, only gained 0.54% (+9.59, 1,763.15) as the rest of the market played catch up to tech.  AT&T was up $0.16 (+0.61%, $26.10), MMM was up 3.22% (+$2.46, $78.79), MCD up 2% (+$1.17, $59.50) and TRV was up 7.66% (+$3.68, $51.70).

The dollar ETF (NYSE: UUP) popped up off its 14 month low close yesterday, peaked intra-day just before 10 a.m. and then traded off to finish marginally lower.  There was not much movement in oil or gold with Nymex crude dropping 18 cents to $81.25 a barrel (4:13 p.m.) and New York Spot Gold was up $1.10 to $1,059.90 an ounce (4:23 p.m.)

PNC Financial Services Group (NYSE: PNC) announced they will be able to pay their TARP funds back within 15 months.  Funny how this comes out on the day Washington D.C. decides to slash pay to the 7 largest TARP receiving companies by up to 90%.  Senator Charles Schumer (D-NY) is making noise about applying these limits to all TARP receiving companies.  Schumer also is sponsoring legislation to give shareholders more control over the board of director, a so called “shareholders bill of rights”.  If I were a top executive of a TARP firm, right now I would be working late trying to figure out how to get these funds repaid.  If I was not doing that, or if I was down $165 billion (AIG), I would be calling the corporate recruiters putting my name out there for a job with a non-TARP firm.  The biggest problem with this 90% slash and burn on compensation is first the government gives them all this money and invests in these companies, then they chase all the top talent away.  Citigroup (NYSE: C) no longer has their top trader that netted the firm billions of dollars over the past few years as Washington objected to how much he was getting paid.  “Whoops, there it goes…the talent, that is”

The only economic report due tomorrow is Existing Home Sales at 10 a.m. with 5.35M expected.

Earnings of note Friday:  (DOV, 0.48), (EXC 0.96), (FO, 0.61), (HON 0.72), (IR 0.61), (MSFT 0.32), SLB (0.63), (WHR 0.77),

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Wall Street Wrap – Goldman’s Trading Desks are on Fire!

By Robert Perrego, at 5:07 pm on October 15th, 2009

Goldman Sachs Group Inc. (NYSE: GS) reported earnings before the open and posted $5.45 a share in earnings on net income of $3.03 billion and revenues of $12.37 billion.  Expectations were for $4.24 and $11.02 billion.  Goldman crushed the earnings number by 28% on strong performances by fixed income, commodities and currency trading.  If you were to ask Goldman the questions oft heard on CNBC; “Should the government have stepped in and not let Lehman go bankrupt?” and “Should the government have saved Bear Stearns?”  their answer… NO WAY!

Goldman is the undisputed king of the trading world.  When the mortgage bond market was teetering on the edge of collapse, and then did collapse, where was Goldman?  Short.  When other financial firms were posting loss after loss after loss and taking asset write-downs, what was Goldman doing?  Making money.  Now that two of Goldman’s biggest competitors in bond and commodity trading are defunct, whats is Goldman doing?  Goldman is making money hand over fist!

Bear Stearns profitable trading operations were absorbed by JP Morgan and merged in with existing operations.  Lehman’s trading operations were simply dismantled.  Now, the inside spreads in the markets Lehman and Bear were active in are wider, leaving more profit for the existing players.  Besides the obvious loss of competition, what has characterized the third quarter?  The third quarter has seen gold rise 5.9%, steel up 18%, copper up 22%, oil up 6.5%, coal up 24% and the dollar down over 5%.  Not only are the spreads wider in the bond markets, but the commodity and currency markets are hot and active.

But even better, there is still fear in the markets.  People are afraid of losing their jobs all over Wall Street.  The government is sharpening the long knives and screaming about compensation.  A trader plays a ’strong hand’ when he can afford to lose.  A trader makes maximum money when he sticks to his convictions and rides the trade for all its worth.  When a trader is looking over their shoulder, worried about whether or not the firm has enough capital and hence worried about his trading line, worried about some bureaucrat making life difficult, worried about the P&L manager calling him, or otherwise distracted from anything but the trading, they are dead meat.  This ‘weak hand’ jumps out of winners too early, doubles down on losers and does not make huge profits.  Goldman was short the hot mess of a mortgage market, Goldman was long commodities, Goldman is bid low and offered high in the bond market.  Goldman is focused, liquid, lean, mean and killing it!  And, Goldman is trading against traders playing ‘weak hands’.

Citibank (NYSE: C) lost another $3.2 billion, caved in to the U.S. government and sold their most profitable trading unit, is selling divisions, downsizing, blah, blah blah…  they are a mess.

Goldman’s stock lost $3.65 today (-1.89%, $188.63) with today’s closing price up 28% since the start of the quarter, the same percentage as what their earnings beat was.  Goldy made $3.54 last quarter, so earnings increased 54% QoQ.

The Dow Jones Industrial Average gained 47.08 points (+0.47%, 10,062.94) and the S&P 500 was up 4.54 points (+0.41%, 1096.56) while the Nasdaq 100 dropped 0.901 points (-0.05%, 1753.36).  The energy sector was up 2.28% as oil broke above $75 and tech was the weakest sector down 0.34%.

Nymex crude added $2.40 a barrel (+3.19%, $77.55, 4:24 p.m.) as the charts showed a breaking of resistance at $75.  Today, the EIA Petroleum Report at 11:00 a.m., showed a giant 5.2 million barrel draw in gasoline stocks causing an immediate jump in oil prices.  It was off to the races for the rest of the day after that.

New York Spot Gold got clocked for $12.90 (-1.21%, $1,049.80, 4:45 p.m.) even though the CPI came in at the high end of estimates this morning (+o.2%).  This drop could be the beginning of a pullback to support at the $1,020 level, before a possible attack on $1,100.

The two major economic reports tomorrow are Industrial production at 9:15 a.m. (0.2%, 69.6%) and Consumer Sentiment  (74.0).

Major Earnings for tomorrow; (BAC, -0.07, before market open), (GE, 0.20, bmo), (GPC, 0.65, b,o), (HAL, 0.26), (MAT, 0.63, bmo) and (MTG, -1.62, bmo).

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Wall Street Wrap – The Market closes at its Highest Level of 2009

By Robert Perrego, at 5:12 pm on September 22nd, 2009

All three major market indexes closed at their highs of 2009 today as the march upwards from the March lows continues.  The Dow added 51.01 points to close at 9829.87, the S&P 500 rose 7.00 points to close at 1071.66 and the Nasdaq 100 gained 2.51 points to finish at 1734.09.  The largest percentage gainer in the Dow was Caterpillar Inc. (NYSE: CAT) which rose $1.88 or 3.58% to $54.34.  Dow 10,000 looms on the horizon and many times, when you trade this close to a ‘big round number’ like this, it is like a magnet drawing the market.

Once again energy led the sector race up 2.30% as Smith International Inc. (NYSE: SII) gained $1.64 or 5.82% to $29.79.  The finance sector took second place gaining 1.65% with Citigroup up 22 cents or 4.96% to $4.65.

The dollar gapped lower on the open and closed at a new low for the year causing the commodities and commodity stocks to rise today.  New York Spot Gold was up over $15 in the pre-market, trading as high as $1,020.70 an ounce today and was last seen at $1,014.50 up $11.50 an ounce at 4:33 p.m.

The drop in the dollar pushed oil up as well making its stay below $70 a barrel short lived.  Oil gained $1.84 or 2.64% and was trading $71.55 a barrel at 4:12 p.m.

This will be a busy week in government as the G-20 prepares to meet in Pittsburgh on Thursday and Friday, the Federal Reserve Open Market Committee started a two day meeting yesterday and will announce their interest rate decision tomorrow at 2:15 p.m., and a showdown on health care looms in Washington D.C.

The drama continued in American International Group (NYSE: AIG) as reports yesterday of some type of favorable change in terms regarding bailout funds with the U.S. government might be in the works.  Yesterday the stock shot up over $8 and this morning the stock gapped higher on the open and was continuing its run.  At 3:00 p.m. a rumor circulated around the trading desks that AIG was planning a secondary offering and over the next hour the stock dropped $5.  This drama driven stock must be a day-traders favorite as it has been very volatile ever since the reverse 1 for 20 split back on July 7th.  That is of course if you are on the right side of this volatility.

As one person here at RakedIn was heard to say; “I’m not touching that stock, that thing’s crazy”.

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News

Wall Street Wrap – Proctor and Gamble, E-Trade catch Upgrades

By Robert Perrego, at 5:27 pm on September 18th, 2009

E-Trade Financial Corp. (NSDQ: ETFC) caught an upgrade from Goldman Sachs Group Inc. (NYSE: GS) today and Citigroup Inc. (NYSE: C) upgraded Proctor & Gamble Co. (NYSE: PG) stock and raised its price target to $66 from $54.

E-Trade has been having a solid few weeks as in late August a large debt-for-equity swap caused S&P to upgrade the companies debt.  Two days later, Citadel, E-Trades largest shareholder, canceled plans to sell up to 120 million shares of the company, causing the stock to jump from $1.44 to $1.76 and trade as high as $1.94.  On Monday, Citigroup upgraded E-Trade to buy from hold.  Tuesday, E-Trade reported their August trading volume was up 18.3% from July and up 37% year over year.  It did not take long for more upgrades after that.  Give Citigroup credit for getting out in front of the trading update and today Goldman Sachs not only upgraded E-Trade to a buy, but they recommended selling one of their largest competitors, Charles Schwab Corp. (NSDQ: SCHW).  All in, E-Trade is up 26.8% since the debt for equity swap and was up 8.23% today, adding 14 cents a share and closing at $1.84.

Proctor & Gamble gapped up this morning on their own Citigroup upgrade rising $1.79 today (+3.22%, $57.32).  P&G is a member of the Dow Jones Industrial 30 and approximately each $1 move in a Dow component translates into about 7 points on the index.  The Dow closed up 36.28 points today and P&G chipped in for about 12.5 points, or one third of today’s market move.

The Dow gained 36.28 (+0.37%, 9820.20) and closed above 9,800 for the first time since October 10, 2008.  The S&P 500 rose 2.81 points (+0.26%, 1068.30) while the Nasdaq 100 added 4.15 points (+0.24, 1725.24).

Consumer cyclicals were up 0.92% followed by finance up 0.72%.  Energy fell 0.37% as oil dropped dropped 43 cents a barrel or 0.6% ($71.80, 4:37 p.m.).

New York Spot Gold is still hovering just above the $1,000 watermark after losing $5.90 an ounce today.  The yellow metal was last seen trading $1,006.40 (4:53 p.m.) after trading as high as $1,018.70.  While many may be afraid of buying into gold at this ‘high’ level, the question is whether it is in a consolidation or distribution phase.  As gold has risen to approximately this level multiple times in the past, a break higher from here would provide technical chart support at $1,000, setting up a  move many analysts see to as high as $1,250.

Natural gas had a strong day with the United States Natural Gas ETF (NYSE: UNG) jumping 3.19% (+$0.36, $11.64).  UNG has been in hot water lately as it has traded at a premium to its net asset value as a result of the options and futures strategies the fund employs.  The confusion about how these ETFs affect the actual trading of their commodities and the complicated strategies that are needed to model the price action of the underlying index or commodity, have attracted the eyes of the SEC and CFTC, only making potential investors less likely to buy.  Well, UNG has popped from $9.01 to $11.64 in the past two weeks (29%) so an iron stomach and taking on risk has paid off for anyone that got in recently.

Next Wednesday there is a meeting of the Federal Reserve Open Market Committee with a rate decision announcement at 2:15 p.m.  There is no expectation of a rate raise as most economists agree that the tepid economic recovery should not be subjected to rising rates.  Other than The Fed meeting, we have Jobless Claims and Existing Home Sales on Thursday with Consumer Sentiment, Durable Goods and New Home Sales on Friday.

Have a great weekend.

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Market Wrap – Dell and Intel looking good, Dow gains 75 points on the Week

By Robert Perrego, at 5:02 pm on August 28th, 2009

Today the Dow and S&P 500 finished lower while the Nasdaq 100 added 2.27 points.  The relative performance by the Nasdaq was the result of good news out of the hardware space by Dell (NSDQ: DELL), which beat top and bottom line numbers after the close yesterday.

Dell beat the top line revenue number by $200 million ($12.8 billion vs. $12.6) and beat the bottom line earnings number by 5 cents ($0.28 vs. $0.23).  CEO Michael Dell stated that Dell expects strong performance in 2010 helped by a replacement cycle sparked by the release of Windows 7 by Microsoft (NSDQ: MSFT), which is due in October.  DELL gained $0.27 on the day (+1.76%, $15.93).

Intel (NSDQ: INTC) raised their third quarter expected revenues by $500 million saying chip sales were looking up.  Combining this news with the Dell release, a case can be made that the tech sector could be gaining new life and coming out of this recession.  Intel gained $0.78 today (+4.00%, $20.25).

On the week, the Nasdaq 100 was mostly unchanged gaining just over 5 points (+0.3%, 1643.24).  The Dow rose 75 points this week (+0.7%, 9580.63) and the S&P 500 was up 2.8 points (+0.3%, 1028.93).  The week was characterized by low volume and a zig-zagging market with many reversals.  Over the past 5 years the month of August has had the following returns for the Dow; +1.4%, +1.1%, +1.7%, -1.5% and +0.3% with the average being a gain of 0.6%.  With the Dow up 0.7% for the month thus far, it looks like we are right on track to keep with the August trend – a gain with low volume.

Gold gained $6.70 and finishes the week at $955 an ounce.  Looking at the weekly chart of the SPDR Gold Trust (NYSE: GLD), shows that gold has closed out the week no lower than $93.00 in the past 6 weeks, and today’s close at $93.87 is the highest weekly close for the GLD in 12 weeks.  Oil gained 25 cents on the day and traded just below $70 as its low for the week while trading $75 for the weekly high.  Today’s close at $72.76 leaves oil right in the middle of its weekly range.

American International Group (NYSE: AIG) went vertical again, trading up 5 points in the pre-market with the stock spiking to the day high of $55.80 within two minutes of the open.  Yesterday, AIG closed at $47.85, so adding $7.95 within two minutes while trading five million shares may qualify as a blow off top (commonly associated with peaks in a stock).  The trading frenzy settled a bit after the first hour of trading, as the stock proceeded to form a rough symmetrical triangle intra-day, otherwise known as a spring or a coil.  This formation is most commonly a continuation pattern, but can also signal a reversal if the stock breaks down below the lower uptrend line forming the triangle.

A second signal a stock is breaking down out of a triangle is when it trades lower than the previous definable bottom forming the triangle.  AIG broke through this level of $53.80 at 11:25 a.m. and the stock promptly dropped like a stone, trading all the way down to $45.55 in 53 minutes (12:18 p.m.)  To put into perspective how crazy this volatility is, this one move in 53 minutes is more than 99% of stocks move on any given day.  AIG rebounded of its lows and closed at $50.20 (+4.9%, $2.39).

With this being one of the ‘doldrums of summer’ trading weeks for the markets, the traders that are not on vacation and gunned up for action, seem to have adopted Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Citigroup Inc. (NYSE: C) and AIG as their ‘roll the dice and let’s have some fun’ stocks.  This is kind of like a group of teenagers hanging out on the street corner trying to see what kind of trouble they can get into to stave off boredom.  If you are playing any of these stocks make sure you are nimble, make sure you are quick because Market Jack can take away this candlestick in the blink of an eye.

The major headlines for the week included; the U.S. is $2 trillion more in the hole, signs the housing market might be bottoming out, Ben Bernanke keeps his job but loses his identity, trading in AIG goes crazy, Alan Stanford engages in blood rituals and the Boeing Dreamliner 787 may FINALLY fly.

Have a greet weekend.

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