Wall Street Wrap

Wall Street Wrap – March 2, 2010

By Taryn Cooper, at 5:03 pm on March 2nd, 2010

Stocks finished slightly higher on Tuesday, March 2, with the Dow closing at 10,406 (+2.2, 0.0%), Nasdaq at 2,281 (+7.2, 0.3%) and the S&P at 1,118 (+2.6, 0.2%).

Technology stocks were boosted by bellwether Qualcomm, announcing a $3 billion stock buyback plan as well as a dividend raise of 12%.

Merger Monday continued into Tie-Up Tuesday as CF Industries raised its hostile bid for Terra Industries (the target having agreed to terms with Yara) and Dow Chemical has agreed to sell its Styron plastics unit to Bain Capital in a deal valued at $1.6 billion.

After hours, the activity did not stop as Elliott Associates offered to acquire Novell in a deal with an implied value of $1 billion shortly after market close.  As a result, Novell’s stock shot up 29% in the after-market.

In commodities, gold and crude oil prices rose, and the dollar fell.  Investors appear to be waiting for economic data results before making a move.

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Wall Street Wrap

Wall Street Wrap – 10.2%!

By Robert Perrego, at 5:12 pm on November 6th, 2009

The U.S. economy lost 190,000 jobs in October, causing the unemployment rate to jump to 10.2%! Lions and tigers and bears, oh my!  We have not seen a number this high in 26 years, and sans the Great Depression, the top has been 10.8%.  In the August report we jumped from 9.4 to 9.7%, then we added just 0.1 to 9.8% in September.  At this rate we will hit 10.7% by the end of the 2009, and that inglorious 10.8% is easily within reach by the end of the Q1 2010.

Strangely enough, the market did not drop.  The stock market did pretty much nothing as upgrades on General Electric Co. (NYSE: GE) and speculation that the Fed will now have to lay low on interest rates for an even longer period of time than previously thought, gave stocks support even in the face of double digit unemployment.  The Fed Funds Futures now point to Q4 2010 as when The Fed first raises interest rates.

Stock valuation models take into account the present value of future cash flows, and these cash flows are their earnings.  If you discount expected earnings for stocks with a lower interest rate, the present value increases and stocks seem cheaper.  That 10.2% number pushed Bernanke out into Q4 of 2010 and increased the present value of earnings.  Earnings go up and so do stocks.  Or, in this case we didn’t get hammered because two digits describe the miserable job market instead of one.

The Dow Jones Industrial Average added a pedestrian 17.46 points (+0.17%, 10.023.42) and closed above 10,000 for a second straight day.  The S&P 500 gained 2.67 points (+0.25%, 1,069.30) and the Nasdaq 100 was up 9.67 points (+0.56%, 1,730.76) to be the grand winner of the race to the top of the molehill.

New York Spot Gold climbed to its highest closing price ever, finishing the week at $1,096.90 (+0.68%, +$7.40, 5:15 p.m.) and traded $1,100 today before backing off.  The call I made on Monday for gold $1,100 was based on low and turning up stochastics and a nicely defined uptrend channel.  When evaluating a gold chart, I look at the SPDR Gold ETF (NYSE: GLD). Right now the GLD is pushed right up against the ‘reaction’ trend line, or the top line of the uptrend channel.  The good news here is that the line slopes up, so each day gold can advance.  The bad news is this upper line is not called the ‘reaction’ line for no reason.  The really good news is that the stochastics are pointing up in the power alley of their values, so if we break through the reaction line there is nothing holding gold back.  No chart resistance, no previous historical bottoms, nothing.  Clear sailing upwards and the GLD calls I own would really like that.

Nymex crude dropped $2.19 a barrel (-2.74%, $77.60, 4:57 p.m.) to finish the week about where it started.  Oil ran up on the dropping dollar but plunged today as new studies found that people without jobs buy less gas.

In the ‘Sun Sets in the West’ category, Fannie Mae (NYSE: FNM) needs more money! Here is where I want to make a joke about the name, but I won’t.  Fannie Mae reported earnings after the close yesterday and posted a net loss of $19.8 million, causing one to ask what happened to the other $15 billion Fannie?  Fannie says they needed this $15 billion (on top of the $44.9 billion the company has already stuck the government for) ‘to eliminate our net worth deficit’.  I have an idea – if this brings Fannie to even, lets dismantle that “too-big-to-fail” disaster as fast as possible as I have a hunch that black hole is getting bigger.  No price report here for Fannie – do yourself a favor – don’t buy it.

Have a Great Weekend!

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News

Market Wrap – The Financial Risk Team Zombies lead the Market lower.

By Robert Perrego, at 5:14 pm on August 11th, 2009

Looks like we have a new trading group the Market players are toying with hereby named the ‘Financial Risk Team Zombies’.  The ‘Zombies’ rose from the dead last Wednesday and had huge gains together.  (August 5 Market Wrap for more info…)  First let’s define the team;  Meltdown epicenter stock American International Group (NYSE: AIG) is the Captain of the team (move over Derek Jeter) with MBIA  Inc. (NYSE: MBI), CIT Group Inc. (NYSE: CIT), MGIC Investment Corp (NYSE: MTG), Radian Group Inc. (NYSE: RDN) and honorary members Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE) and Citigroup inc. (NYSE: C) rounding out the team.

Most all these stocks traded up between 20 and 63% last Wednesday as traders jumped on these beaten down stocks and ran their momentum all day.  The ‘Zombies’ have been very active and traded high volume over the last week as they gained the focus of traders looking for volatility and profits.  While no one likes a boring market, these stocks are like playing with fire lately.

The Dow Jones dropped 96.50 today (-1.03%, 9241.45) and these stocks led the drop.  AIG dropped over 13%, MBI down 13%, CIT down 19%, Citi down 6%, MTG down 10%, etc…  With this same group of names running up big one day and then all getting hit another a few days later it looks like pools of money (most likely hedge funds) have this ’sector’ identified as active and profitable stocks to trade.  So what does this mean?  Considering all the chatter about a market top being put in after last weeks rally this means that traders are dumping the high volatility names to cut back on their risk exposure.

Looking at the sectors shows that finance led the losers dropping 2.75% with energy second down 2%.  Stocks were pretty much down across the board with only the bio-techs and chemical companies showing any strength at all.

New York Spot Gold was flat, the dollar was up slightly and NYMEX crude dropped $1.76 to $69.36 a barrel.

Productivity jumped 6.4% as employers tightened their belts and cranked out more product per factor of input.  When I hear numbers like this the first thing I think is that employees nationwide are worried about their jobs and employers are putting the screws to them to work harder.  Of course all the layoffs and trimming down of all non-essential employees and functions are creating lean, mean and more productive companies, but it does not hurt to have your employees scared of pink showing up in the pay envelope as added motivation.

Tomorrow at 2:15 p.m. The Fed will tell us they are not raising interest rates from zero to, well, anything.  Bernanke still wants his job and the economy is still losing jobs at way too fast a rate.  Worry points such as rising oil prices and a heavy Treasury auction schedule are constantly debated on CNBC as forces that could derail our ‘economic recovery’.  Call me dismal but I do not think much of this recovery – all we have seen recover really is a stock market that probably got hit too hard on the downside so it had some pop room to the upside to run.  We are still down some 34% from the top of the market, the U.S. economy has shed a full 1/9th of its GDP and people are still getting fired at a rate of about 5.7 per minute – 24/7.  That is one person fired or laid off every 10.5 seconds.  Sound like a recovery to you?

We had a good reception to the $37 billion 3-Year Note treasury Auction with a bid-to-cover ratio of 2.89 (average lately about 2.54).  As I wrote in a previous Market Wrap, I think large holders of our debt are still interested in the short maturities as they are much less risky but tomorrow we have a 10-Year note auction and then 30-Year Bonds on Thursday.  How these auctions go will tell us a lot about where interest rates will be soon.

So the times to watch tomorrow are 1 p.m. for the Ten Year Auction and 2:25 p.m. for the Fed announcement.

Technically speaking the charts all look to be pointing down and a quick look at the Dow shows moderate support at 9100 with a lower stronger support level at 8800 formed not only by tops but also have the 200 and 50 EMA moving averages converging here.

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News

Market Wrap – Day of the Walking Dead

By Robert Perrego, at 4:46 pm on August 5th, 2009

On a day that the S&P had to fight to keep holding onto its recently gained 1,000 level, five of the top seven stocks on top of the RakedIn Top Gainers Board jumped 20 to 83% percent today and these four ‘walking dead’ had at one point all traded in the stock graveyard below $1.

Radian Group, Inc. (NYSE: RDN) sells “Credit Risk Management Services” which basically means it is an insurance company that was waist deep in the derivatives mess and traded as low as $0.70 last July, reported earnings and today was up over 83% (+$3.05, $6.72) and has returned 860% from its trading low in the last 12 months.  Zombie left for dead stock number two on today’s top percentage gainers list is good ole’ AIG (NYSE: AIG) which was up 63% today (+$8.48, $22.00), not forgetting their reverse 1-for-20 split we see that AIG traded as low as $0.33 and has returned 233% since its low on March 9, 2009.  AIG gets a new CEO so add this in with some short covering and viola! 63%!  The newest Zombie, CIT Group Inc. (NYSE: CIT) was up 38% today (+$0.38, $1.39) and has returned 348% since trading its low less than a month ago on July 16, 2009.  This rise was on no particular news today so maybe the other Zombies dug them up.  To continue the ‘no way, that stock is up?’ list we go to Fannie Mae, yes, Fannie Mae (NYSE: FNM).  This stock is the original Zombie and was up 30% today on news their housing regulator was stepping down (+$0.17, $0.74) and adding this news to all the rest of the great news on this gem of a stock has it up only 146% from its trading low on November 21, 2008.  These were the top four stocks and now we have to jump all the way to number 7 (skipping GRMN +24% and CBL +20%) to get to MGIC Investment Corporation (NYSE: MTG) which added a tiny 20% (+$1.24, $8.57) today on news they are delaying an investment into a subsidiary.  MTG is up a whopping 1,124% since trading $0.70 on March 12, 2009.  The King of the Zombies!

Even more shocking is that these Zombies all jumped up on a day the market was down with the Dow losing 38.22 points (-0.42%, 9280.97) and the S&P 500 traded below the 1,000 level but regained it to close down 2.93 (-0.29%, 1002.72) while the Nasdaq 100 dropped 17.31 points (-1.05%, 1614.44).

As this must be either Bizarro world or the Twilight Zone, looking across other performing stocks we see that Genworth Financial (NYSE: GNW +10.79%), Bank of America (NYSE: BAC +6.52%), American Express (NYSE: AXP +5.74%) and Citigroup (NYSE: C +10.15%) all had strong days.  Ok, now all you have to do is tell me Apple Inc. (NSDQ: AAPL) was down today and this must be a chemically induced illusion.  Apple closed down 44 cents at $165.11.

Before even looking for the top sector my money is on finance.  Leading the sector race was, surprise, finance up 2.25% on a day when no other sector was positive.  Consumer non-cyclicals led the losers dropping 1.24% with energy coming in a close second losing 1.12%.

New York Spot Gold traded as high as $969.70 today but was trading down $3.10 at 4:32 p.m. est at $964.60.  NYMEX WTI Oil added 52 cents to trade at $71.79.

To put my last two cents in on the Cash-for-Clunkers fiasco, has anyone considered the amount of power or the carbon footprint it takes to manufacture an automobile?  I am talking about the energy to mine the iron ore, transport, smelt, manufacture, build the factories, etc… All the inputs it takes to build a car.  I found a site online that says the material inputs for a car costs approximately 10% of all the oil a car will burn in its lifetime.  This 10% does not even include the carbon footprint to build the plant to build the car and the gaseous releases of the auto workers while helping build that car (hey, if it’s good enough for cows, it works for humans too).  Throw all this in with the fact that 17 mpg cars are being swapped for 21 mpg cars (in some cases) and this is a big loser of a program as if they didn’t even build that second car we could all be better off environmentally and less of our tax dollars would be wasted.  While 17 for 21 might be the worst case scenario, if there are other valid reasons to debate this program and if it just plain does not save us anything on the environmental front it is a useless program unless you want to admit it is flat out welfare for the auto industry.  Think about it.

If we are going to proclaim this Cash-for-Clunkers a victory then I would like to propose Dollars-for-DELL’s, Bucks-for-Beer, Greenbacks-for-Golfing, Mint-for-Magazines, Paychecks-for-Politicians (oops we already have that one), etc…

WASTE OF TAXPAYER DOLLARS!  Get the idea yet?

Tomorrow we have Jobless Claims before the open and we are expecting another 575,000 people to have lost their jobs.

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News

Market Wrap – Microsoft and Yahoo sittin’ in a Tree…

By Robert Perrego, at 4:40 pm on July 29th, 2009

The big news today hit before the market opened with Microsoft (NSDQ: MSFT) and Yahoo (NSDQ: YHOO) announcing a business alliance which will have Yahoo using Microsoft’s Bing search engine on their websites and Yahoo selling ads that appear next to the Internet-search results.  There was no cash exchanged in the deal and Yahoo’s stock dropped significantly today as some analysts speculated that an up-front Microsoft payment of up to $3 billion would be included.  It looks like Yahoo needed the deal worse and did not want to walk away from another Microsoft deal after Jerry Yang and Terry Semel missed the chance to sell the company to Microsoft for $31 a share in 2008.  Yahoo closed today at less than half that bid at $15.14 (-$2.08, -12.07%).  Microsoft gained $0.33 (+1.4%, $23.80).

Other big news that came out before the open was that the Chinese stock market had its biggest fall in five weeks with a one day drop of 5% after running up 7% in the past five trading days.  China sold off on speculation that banks would tighten up their lending.  China, the largest of the world’s emerging economies, threw a damper on emerging market exchanges worldwide.  Having the highest GDP growth rate, and also one of the few current positive GDP growth rates, has made the Chinese economy appear to be the growth engine of the planet with the drop in this market throwing copper and other commodities into a tailspin.  The double whammy of China’s perceived lessening appetite for commodities to fuel its economic build out, and the fact that many emerging market economies are commodity exporters, set an opening negative tone for the U.S. market as many foreign exchanges were lower and the price of commodities, especially economically sensitive copper was falling.

Durable Goods orders released at 8:30 a.m. showed a drop of 2.5% vs an expected drop of 0.5%.  This was the headline bad economic news until 1 p.m. when the 5-year Treasury auction met with tepid demand.  $39 billion of 5-year notes were sold at 2.689% with a bid-to-cover ratio of 1.92, the lowest b-t-c since 2002.  As mentioned in an earlier “Raked InSights” report on Treasury Auctions (7/27/2009), it appears there still is strong interest in very short term Treasury maturities as they are much less risky.  Once you start going out the curve the big buyers (China, Middle East, anyone with a brain) are getting much more worried about the value of the dollar with a U.S. $1.92 trillion dollar 2009 budget deficit and plans to fund such future expensive programs as socialized health care, cap and trade and a journey to the center of the Earth (OK, so I am exaggerating just a little).  This poor auction caused bonds to fall and interest rates to rise and this is very worrying.  If I were holding a lot of long term Treasuries and was worried about the dollar falling, I would be quietly selling off what long paper I could as not to cause a selling spiral, and so that the front page statistics did not show I was dumping Treasuries, I would be buying back into the short term paper so I can say ‘look Ma’ same dollar holdings’.

Weakness in the longer end of the Treasury curve is something we do not need right now as it is one of the things that could kill any economic recovery.  The big question remains; If our traditional large long term Treasury buyers shy from the upcoming huge amount of issuance scheduled, causing interest rates to spike, what then?  This could leave the only serious buyer of U.S. long term debt being Bernanke and the Fed with his quantitative easing program.  This would basically eliminate any efficacy of this program as the U.S. would be selling the bonds with one hand and buying them with the other and that is nothing short of monetizing the deficit and printing money – which would cause rates to rise and the dollar to drop.  The only hope we have that foreign money will continue to finance our spending and deficits is that they need to prop up the dollars and bonds they already own, but just like with OPEC – countries and people will cheat.  Maybe by selling long term and shifting assets to short term?

In spite of the bad news today the market held up surprisingly well so there still is hope.  The Dow Jones lost just 26 points (-0.28%, 9070.72) with the S&P 500 dropping 4.47 points (-0.45%, 975.15) and the Nasdaq 100 losing 5.86 points (-0.36%, 1599.61).

NYMEX WTI Crude Oil had a rough day getting clocked for a huge $4.29 a barrel at 4:42 p.m. est (-6.40%, $62.93) on a reported build in inventory of 5.2 million barrels and the beginning yesterday of hearings held by the Commodity Futures Trading Commission into position limits on the commodities markets here in the U.S.  Gold, which could also be affected by these hearings, dropped $7.80 an ounce ($929.20/ounce at 4:43 p.m. est).

The sectors that led today were consumer non-cyclicals up 0.36% and technology while losing 0.10% lost less than the other sectors.  Down big was energy on the oil drop at -2.54% followed by industrials down 0.60%.

Looking on the bright side we are going to get Jobless claims numbers tomorrow!  OK, so it is not a ‘bright side’ to see people losing their jobs and we are expecting 585,000 additional job losses to be announced at 8:30 a.m.  Let’s hope for less than 554,000 as that was last weeks number and this would continue of a trend of dropping job losses and that would be good news.

Earnings season tomorrow continues with many reporting.  The long list concludes:  ABC (0.39) before the open, AOC (0.74) bto, APA (1.07) bto, AZN (1.40) bto, ADP (0.45) bto, AVP (0.34), ABX (0.38) bto, BEC (0.81) after the close, BDX (1.24), CVC (0.29) bto, CRS (-0.28) bto, CI (0.96) bto, CL (1.05), DTE (0.15) atc, EK (-0.37) bto, XOM (1.02) bto, FSLR (1.62) atc, BEN (0.87) bto, GT (-0.70) bto, HP (0.51) bto, IP (0.00) bto, KSU (0.10) bto, K (0.82) bto, LVS (-0.01), MA (2.42) bto, MFE (0.57), MET (0.68) atc, MHK (0.47), MOT (-0.04) bto, NBL (0.55), OMX (-0.07), OSK (-0.18) bto, PBI (0.60) atc, PDE (0.66) bto, COL (0.90) bto, SLW (0.07) atc, SNE (-0.69), TSM (0.13), DOW (-0.08) bto, TYC (0.45) bto, VCI (0.14), DIS (0.51) atc, WMI (0.54) bto, XEL (0.25) bto, YRCW (-1.71) atc

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