Wall Street Wrap

The Greece No-Bailout-Bailout Waiting Game, Market Drops and Pops

By Robert Perrego, at 4:37 pm on February 10th, 2010

The Dow Jones Industrial Average dropped almost 100 points off the open this morning as no bailout for Greece had materialized overnight.  Then, as rumors circulated across trading desks that a plan was forming, the DJIA popped back up to go positive for a short time before selling off moderately into the close as the Greece watching no-bailout-bailout speculation game resumed.

The Dow Jones Industrial Average closed down 20.26 points (-0.20%, 10,0.38.38) with its ETF, “The Diamonds” (NYSE: DIA) losing $0.13 (-0.12%, $100.52).  For the S&P 500 (-2.39, -0.22%, 1,068.13) the ETF is called “The Spiders”, which dropped $0.21 (-0.19%, $107.01).  The Nasdaq 100 lost 4.08 points (-0.23%, 1,749.76) and the tech index’s ETF, “The Q’s” (NSDQ: QQQQ) lost $0.09 (-0.20%, $43.02)

There are rules in place that bar the ECB or other member governments from bailing out Greece by buying their bonds or extending credit, and now that a dire situation is up against these rules it looks like politicians are scrambling to find a loophole.   As strikes and protests loom, Greek Prime Minister George Papandreou stated that they have not asked for aid and market players are either of the belief help is on the way or the bottom is going to drop out.  You can place your bets on any stock exchange in the world by just buying or shorting stocks because if no substantial aid package comes through soon, there will be “blood on the walls” in the credit markets according to one strategist.  You can bet that bleeding in the credit markets turns stock traders screens red as equity markets will drop like they did at the end of last week without these politicians doing something besides holding a lot of lunch meetings.

Federal Reserve Chairman Ben Bernanke testified in front of the House Financial Services Committee today, contrary to reports it was canceled due to the weather, and stated that the central bank is considering raising the discount rate (not the federal funds rate) soon.  This rate usually follows the federal funds rate and is seen by Bernanke as one way to tighten without having to raise the more economically sensitive federal funds rate.  Many past statements by Bernanke have been that the federal funds rate will remain low for ‘an extended period of time.’

American International Group Inc. (NYSE: AIG) was up 16.33% (+$3.78, $26.92) on news they were selling their Alico subsidiary to MetLife Inc. (NYSE: MET) for $15 billion in stock and cash.  Last August AIG’s share price rocketed on speculation of the sale of a different subsidiary, a short squeeze and news founder Hank Greenberg was back in the fold.  While that rip in the stock took it up to over $55, the unit was never sold due to lack of interest.  This stock move, while not as large as the move to $55, seems to be real even though officers from both firms refused to comment on the situation.

Baidu, Inc. (NSDQ: BIDU) jumped $47.12 (+10.83%, $482.13) to a new all time on above average volume after reporting earnings after the bell yesterday.  BIDU also stands to gain market share as a result of statements by Google Inc. (NSDQ: GOOG) that they might be pulling out of China.  Google currently only has a 17% share of the search market in China, but 17% more is 17% more and the Chinese market is huge.

New York spot gold dropped over $10 an ounce this morning but recovered and was last seen trading at $1,071.90 (-$5.70, -0.53%, 4:30 p.m.).  Nymex crude gained 71 cents to $74.43 a barrel (+0.92%, 4:23 p.m.).  The dollar strengthened on the comments by Bernanke regarding raising the discount rate.  The PowerShares DB US Dollar ETF (NYSE: UUP) finished up 0.29% (+$0.07, $23.56)

Economic reports out of Washington D.C. are being delayed as a result of the federal government being shut down.  When President Obama mentioned a spending freeze for the national budget during his recent State of the Union speech, my reaction was I will believe it when I see it.  I am not sure this is what he meant, but one government official stated that having the Government shut down costs the taxpayers $100 million a day.  If you ask me, the less time these guys have to vote on raising my taxes the more money it saves me, so three cheers for Mother Nature!

Selected earnings estimates for Thursday, February 11:

ASF 0.15 before market open, A 0.32 after the close, ALU 0.08 bmo, AN 0.27 bmo, BEC 1.26, BWA 0.22, CEPH 1.58 atc, CS bmo, DVA 1.06, EXPE 0.28 bmo, BGC 0.24 atc, GPI 0.44 bmo, JASO 0.11, LH 1.15 bmo, CLI 0.76 bmo, MFC 0.57, MAR 0.25 bmo, MFE 0.64, MOH -0.16, PEP 0.91 bmo, PM 0.79, PGN 0.50 bmo, RNWK -0.06 atc, RTP, STRA 2.30 bmo, CAKE 0.24, VFC 1.47, VIA 0.87 bmo, WWE 0.18 bmo.

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Wall Street Wrap

Welcome to The 2010 Stock Market

By Robert Perrego, at 4:46 pm on January 4th, 2010

Federal Reserve Chairman Ben Bernanke did some number crunching and determined as far as the blame for the housing bubble goes – ‘wasn’t me’.  Ben went on to explain that it was not The Fed’s fault the housing market bubbled up and popped, and that low interest rates only contributed fractionally to the problem of soaring and then crashing housing prices.  These comments came in response to a lot of criticism as of late that has been leveled at Bernanke, and Former Fed Chairman Alan Greenspan, for leaving interest rates too low for too long.  This conclusion of Bernanke’s provides more leeway for leaving current rates at their current historic lows.  Traders heard this and sent the market higher today by buying just about everything in sight.

The Dow Jones Industrial Average gained 155.91 points (+1.49%, 10,583.96) on the first trading day of 2010, sending the Average to its highest level since October 3rd, 2008.  The S&P 500 tacked on 17.88 points (+1.60%, 1,132.97) and the Nasdaq 100 added 26.39 points (+1.41%, 1,886.70).

The ‘all clear’ sign from The Fed regarding interest rates was not the only good news the market received today as the 10 a.m. ISM Manufacturing Index beat its number (55.9 vs. 54.8) lifting expectations for a more rapid recovery in 2010.  Another piece of today’s puzzle is that China is also seeing strong growth in their manufacturing sector, and this news sent commodities prices higher.  Coal, natural gas, oil and anything used to heat a home was higher as cities around the world are getting hit by snow and cold weather from Seoul, with its heaviest snowfall in 70 years, to the coldest weather in Beijing in 40 years, to temperatures 30 degrees below normal in Iowa.

The positive manufacturing data caused funds to flow to riskier assets and out of the safe haven of the dollar dropping the U.S. dollar index future spot price by $0.39 (-0.50%, 77.48) which drove the New York Spot price of gold up by $23.70 an ounce (+2.16%, $1,120.10, 4:10 p.m.).

Nymex crude jumped above $80 a barrel for the first time in months as the cold weather and the weak dollar popped the per barrel price by $2.19 (+2.76%, 4:08 p.m.) to $81.55.

The chemical, materials and metals sectors topped the industry movers list as 2010 continued the commodities investing stampede.  With the fed funds rate at 0-0.25% one can only wonder how much longer before the word ‘bubble’ gets thrown around and then of course someone will want to blame The Fed.

No worries though, Bernanke, still awaiting his Senate confirmation for a second term as Fed Chairman, can always do another study and say ‘wasn’t me’, again.

Tomorrow we get Domestic Vehicle Sales which are expected to come in at 8.4 million.  Factory Orders are expected to increase by 0.4% and this number is released at 10 a.m. along with the Pending Home Sales Index.

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Wall Street Wrap

Oil Catches Up Going Down, Gold Bulls Dig In

By Robert Perrego, at 4:51 pm on December 7th, 2009

The big news Friday, and last week, was the jobs report which caused the sagging dollar to rally 1.48%, and seemed to spell the end for the commodities trade, especially the exploding gold market.  Friday, Nymex crude lost only 99 cents a barrel while gold got hammered for $46 an ounce after falling over $70 at one point.  Today, New York Spot Gold was trading lower by only 0.32% (-$3.70, $1,157.70, 4:25 p.m.) while oil extended its losses by 2.04% (-$1.54, $73.96, 4:10 p.m.).  The dollar jump that was sparked by Friday’s move in the headline unemployment rate to 10% from 10.2%, was slowed by a speech Ben Bernanke gave that traders interpreted to mean that a rate hike was not coming anytime soon.

The stock market had a short run up early, but came back in and spent the rest of the day going nowhere. The Dow Jones Industrial Average closed up just 1.21 points (+0.01%, 10,390.11) while the S&P 500 dropped 2.73 points (-0.24%, 1,103.25).  The Nasdaq 100 lost 8.26 points (-0.46%, 1,783.65).

The TV talking heads focused on when the fed rate hikes would come and also about hedge funds moving to the sidelines for the rest of the year.  After this year’s massive drop and pop in the stock market, any hedge fund managers that avoided dissolving and have met their numbers for the year (or even come close), are speculated to be moving to the sidelines for the rest of the year.  The volatility in stocks has dried up as of late, and the last big momentum trade and market action was in commodities.  The SPDR Gold Trust (NYSE: GLD) traded a massive 79 million shares Friday, which may have been all the ‘hot’ money getting out, while the longer term bulls were buying the dip.  Star hedge fund managers George Soros and John Paulson are gold bulls and they are investing for the long term.  Most the talking heads interviewed today were still of the opinion that in the longer term, gold is going higher.

The gold market had been heating up for a few months sparked by various news stories about central bank purchases, John Paulson splitting off a special fund for gold and Barrick Gold Corp. (NYSE: ABX) buying back in billions of dollars worth off hedges.  This created a feeding frenzy and that inevitable game of chicken a market gets into when players smell profit.  The small loss in gold today, after dropping so much early in the trading day, showed no follow through on Friday’s selling.  This buying might be indicating the underlying strength in a longer term move.

On the tech side, Intel Corp. (NSDQ: INTC) dropped plans to roll out a stand-alone graphics chip and this boosted Nvidia Corp. (NSDQ: NVDA) by 12.8% (+$1.83, $16.09), which is the dominant player in the space.  Advanced Micro Devices Inc. (NYSE: AMD) got a foothold in the graphics chip market by merging with ATI Technologies, and gained 8.4% on the news (+$0.66, $8.52).

The economic calendar is light this week as the market takes a seasonal slow-down going into the holiday period.  We get no major economic releases until Thursday with the weekly Jobless Claims and International Trade numbers at 8:30 a.m.  Federal Reserve Governor Elizabeth Duke speaks to the Chicago Fed’s mortgage foreclosure policy conference in Chicago at 12:45 p.m. on Thursday.

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News

The NBC Deal Gets Inked, Ben on the Spot, Goldman ups Gold Again

By Robert Perrego, at 4:32 pm on December 3rd, 2009

Jeff Immelt will get $8 billion to play M&A (pretty much just A) with as the deal was inked that delivered 51% of NBC Universal into the eager hands of Brian Roberts and Comcast Corp. (NSDQ: CMCSA).  The full deal may not be done for years as the FCC, the Justice Department, the FTC and maybe even the Harlem Globetrotters all will want to examine the deal and hopefully plunk down their stamp of approval.  This deal makes sense as General Electric Co. (NYSE: GE) can now focus on the industrial space and Comcast becomes the Goliath of media.  With the way media has been cannibalizing itself through evolution, and the growth prospects in the industrial sector in the coming years, this is a good deal for GE.   Comcast will now be the king of cable AND content in a space that sees fierce competition from Verizon and AT&T.  I like GE’s side of this one.

GE dropped seven cents (-0.43%, $16.00), Comcast added $0.97 (+6.49%, $15.91), Verizon was up four cents (+0.12%, $32.69) and AT&T added $0.17 (+0.62%, $27.52).

The market had some early trading volatility but went flat as Ben Bernanke testified in front of the Senate Banking Committee seeking to be appointed to another term as Chairman of The Federal Reserve.  Early on it seemed everyone was going to play nice but then it got ugly with Senator Shelby (R-Ala) judging the job done by the Fed as “horrible.”  Former MLB Pitcher Senator Bunning (R-Ky) looked more like a hitter than a pitcher as he went in swinging away at Ben, but Bernanke kept his cool and answered questions for hours on end.  If you are into watching a few white guys in suits argue while trying to seem somewhat civil, it made for good television.  Otherwise it was downright boring and seemed to have lulled traders to sleep.  These traders woke up looking for some action at about 3:20 p.m. and started selling the market hard.

The Dow Jones Industrial Average got clocked for over 100 points in the last 40 minutes of trading, rallied slightly into the close and finished at 10,366.15 (-86.53, -0.82%).  The S&P 500 dropped 9.32 points (-0.84%, 1,099.92) and the Nasdaq 100 rolled over for 7.91 points (-0.44%, 1,782.91).

Gold actually went down today with NY Spot dropping $3.30 an ounce (-0.27%, 1,211.50, 4:10 p.m.) after trading another new intra-day all time high at $1,221.50.  The SPDR Gold Trust (NYSE: GLD) ticked a new all time high at $119.54 right before the market started to tank.  Gold got caught up in the selling and the GLD lost $0.83 in the late wave of selling.

Goldman Sachs Group Inc. (NYSE: GS) upped their estimates for gold for the second time in the last month.  In early November they made a call for $1,200 gold after watching India take 200 tonnes of the precious metal off the market.  Now Goldman is up to $1,200 (3 months – already there Lloyd), $1,260 (6-month) and $1,350 (12-month).  I bet we break that $1,260, and maybe even $1,350, in under 3 months as Goldman has been a little too conservative when going yellow.  They called for $1,200 by the end of the year and we broke that a few weeks later.  Maybe the stiff-suit crowd read my article yesterday on the 2009 gold rally and decided late was better than never.  I love it though, I am long GLD calls and a miner and am thankful for their help.  Goldman is calling for an average price for gold of $1,425 an ounce in 2011.

Oil finished basically flat with Nymex crude dropping 14 cents to $75.99 a barrel.  The smart money hedgies are getting cozy with longer term high oil prices as they have been snapping up shares of Canadian oil company, Suncor Energy (TO: SU).

Tomorrow is the headline Employment Situation report at 8:30 a.m.  Estimates say -100,000 and 10.2% and lower.  I say 10.2% and higher.

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Wall Street Wrap

Market Posts Solid Gains, NBC Sold, New Highs for Gold

By Robert Perrego, at 5:27 pm on December 1st, 2009

The Market ripped higher today, making up the ground lost last Friday on the Dubai World news.  Traders decided the crisis would be contained and that this was not ‘Meltdown 2′, so they got back to business as usual shorting the dollar and buying up stocks and commodities.  Gold traded a new all time high above $1,200 an ounce on the weak dollar.  General Electric (NYSE: GE) and Vivendi struck a deal that clears the way for the sale of NBC to Comcast (NSDQ: CMCSA), as reported by David Faber from CNBC, the deal with Comcast was all but done except for the paperwork.

On that news, GE gained 15 cents on the day (+0.93%, $16.17) and Comcast was also up 30 cents (+2.04%, $14.96) on a deal the market seems to like for both players.  Positive results from Cyber Monday provided a lift to retail and every sector started running except for finance.  The Dow Jones Industrial Average traded above 10,500 for the first time in 2009 and closed up 126.74 points (+1.22%, 10,471.58), a new closing high for the year.  The S&P 500 added 13.23 points (+1.20%, 1,108.86) and the Nasdaq 100 tacked on 20.28 points (+1.14%, 1,787.71).

The dollar was hit as the carry trade cowboys went back to shorting it, after deciding Dubai World was not the next Lehman Brothers.  This should not be a surprise as Dubai and the UAE are sitting on 80 billion barrels of oil, a massive amount of natural gas and the Middle East is flooded with petro-dollars.  During the meltdown last winter, traders got nervous and flew to quality, which ironically was the dollar.  Looking at a chart of the dollar you can see that it peaked as the market bottomed March 9th.  Last Friday when the Dubai World news came out, traders once again instinctively flew to the dollar.  Currently, with so many shorts positions in the dollar as a result of the carry trade, market players feared a short squeeze and a rapid jump higher in the dollar.  Everyone knows the dollar is heavily shorted right now, so those short are going to hit that buy button the second they think others are about to.    When the going gets tough, the tough get going into treasuries and the dollar.  Conversely, when the coast is clear they short the dollar like crazy.

This pressure on the dollar caused New York Spot Gold to trade a new all time high of $1,202.50 an ounce.  NY Spot was last seen trading $1,197.20 (+1.55%, +$18.30, 4:24 p.m.).  The SPDR Gold Trust (NYSE: GLD) gained 1.5% while the Market Vectors Gold Miners Index (NYSE: GDX) jumped 5.12%.  No matter how you owned an interest in gold, you made money as it just keeps on going higher.

Oil was higher on the weak dollar and also on manufacturing news out of China and here at home.  The ISM Manufacturing Index released this morning came in below expectations but was still above 50, which means an expansion in manufacturing (53.6 vs. 55.0).  This marks four straight months above 50.  Nymex crude added $1.09 a barrel (+1.42%, $78.11, 4:20 p.m.) and briefly traded above $79.

The financial sector lagged the market rising an anemic 0.52% with energy turning in the top performance gaining 1.83%.  Tech put in a solid showing at 1.59% while the S&P 500 as a whole gained 1.20%.

Philadelphia Fed President Charles Plosser became the first central banker to come out for higher interest rates sooner than later.  Just a few weeks ago all the bankers lined up and said they saw low rates as far as the eye could see, but now Plosser is running counter to that.  Whenever it happens that they make that first move higher in interest rates, the heavy short position in the dollar is going to cause a short squeeze.  As the dollar shoots up, commodities will get hit and stocks will get hit as the carry trade is unwound in rapid fashion.  This puts the Fed in a precarious position, as knowing there is that much short dollar-long stocks carry trade air in the market, their move means ‘POP’ as they prick yet another bubble of their creation.

Tomorrow we have the MBA Purchase Applications at 7 a.m. and the ADP Employment Report at 8:15 a.m.  Geithner speaks before the Senate Agriculture Committee at 9:30 a.m. and the FOMC Beige Book is released at 2 p.m.

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