Market Wrap – SnP 500 at 1,000 and Clunkers breathe life into Ford and GM
By Robert Perrego, at 4:37 pm on August 3rd, 2009The Big Round Number Theory came true with 1,000 on the S&P 500 drawing the market like a magnet the last few trading days. Today the S&P 500 not only traded 1,000 but traded through to a high of 1003.61 before backing off and closing at 1002.62. Talking heads on CNBC are mentioning 1,120 as the next level to be reached as that would be a 50% Fibonacci Retracement from the 1,576 highs of October 2007 to the 666 lows of March 2009. For more on Fibonacci see the Market Wrap from July 24th. The S&P 500 has rallied 50% from that 666 low adding 336 (ok, real close) and once again the Fibonacci 50% raises its head.
There were three other big pieces of news today concerning Clunkers, Taxes and Apple’s Board. The U.S. Governments Cash-for-Clunkers program has been a runaway hit generating sales for car dealers and manufacturers. This program is a hit with the current car-buying public as they are getting a fat government funded rebate check and a cheaper car. The environmentalists love it as, supposedly, gas chugging cars are being taken off the road and being replaced by gas sipping more environmentally friendly autos. This is a great program if you are buying a car, selling a car or hugging a tree. If you think about it though these groups of people are in the minority and what everyone else has to realize is that money has to come from somewhere – as in your tax dollars. So, if you think this is a great program and you are not buying or selling, you are getting sold out!
Over the weekend Larry Summers and Treasury Secretary Geithner were asked if they would rule out a middle-class tax increase and they did not exactly say ‘NO’. This caused a wave of news stories about Obama breaking yet another campaign promise. President Obama should be careful in here – it is not like he has made good on the long list (or any) of promises Candidate Obama made just last year.
In the last piece of big news on the day, Eric Schmidt CEO of the tech gargantuan Google (NSDQ: GOOG) resigned from the Board of Directors of the consumer tech goods giant Apple Inc. (NSDQ: AAPL). After three years on Apple’s board Eric may have finally noticed that the two companies are now producing a lot of similar products including browsers (Chrome vs. Safari), cell phones (Android vs. iPhone) and the recent dust up after Apple would not let a Google app be sold through its iTunes hub.
On the economic news front the ISM Manufacturing Index almost, ALMOST, showed expansion in that beat down sector. The way this index reads is above 50 means expansion and below contraction. This morning the number reported in at 48.9 above the expected 46.5 with the prior number being 44.8. Definitely headed in the right direction.
The dollar got hit again as after closing on Friday at its lowest levels since September showed weakness to every chart reader on the planet so the bears lined up to hit it today dropping the Powershares Dollar ETF (NYSE: UUP) 0.81% and this drop in the dollar fueled a commodities rally across the board. You put a strong manufacturing number together (well a ‘less bad’ number) with a commodities rally, throw in no significant ‘bad’ news and you are going to get a rally.
New York Spot Gold was only up $1.70 at $956.20 an ounce at 4:07 p.m. est after trading up as much as $8 an ounce. Gold is still trying to blast out from this resistance band around $950 and after that would be the $1,000 level. NYMEX Light Sweet Crude Oil ripped up $2.13 a barrel (+3.08%, $71.20) at 3:59 p.m. est amid news that world oil supplies are running out.
OK – enough already! Last year we got all these stories and oil went to $145 and then, lo and behold, 8 months later oil is at $30 a barrel and someone made a lot of money on the way up and on the way down. This is all just starting to seem a bit too cute – oil is down and the economy is moribund and then as soon as things start turning around the ‘experts’ come out of the woodwork wishing there were more rotten, percolated dinosaurs around. The Chief Economist at the International Energy Agency (IEA) in Paris states that we have only 10 years of oil left. Someone check this guys bank accounts and look for recent large deposits please. I have seen this movie before.
The Dow finished up 114.95 points (+1.25%, 9286.56) and the S&P 500 closed above 1,000 at 1002.63 (+1.53%, 15.15) with the Nasdaq 100 rising 24.76 points (+1.54%, 1628.12).
In the sector watch we have the top performer being energy popping 3.65% on that $2+ jump in oil with the industrial sector up 2.15% on the rise in the ISM number. In third was the financial sector up 1.92%. The ‘loser’ of the group was merely the sector to rise the least as today was an across the board rally with tech bringing up the rear at plus 1.31%.
Economic Reports Tuesday: ICSC Goldman Stores Index 7:45 a.m., Personal Income and Outlays at 8:45 a.m. -1.1% expected, Pending Home Sales index 10 a.m.
Earnings Tuesday: AYE (0.43) before the open, ADM (0.45) bto, BMC (0.49) after the close, SAM (0.62) atc, CHD (0.79), ED (0.49), DHI (-0.23) bto, EMR (0.57) bto, ETR (1.26), HCP (0.51) bto, ICE (1.13) bto, KFT (0.54) atc, MLM (0.77) bto, NI (0.01) bto, PZZA (0.34) atc, PPL (0.40) bto, RTI (-0.02) bto, SXE (0.41) atc, TM (N/A) bto, AUY (0.09) atc
