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Consumer Confidence is Up, So is the National Debt

By Robert Perrego, at 5:07 pm on January 26th, 2010

Consumer Confidence came in at 55.9 vs. an expected 53.5, giving a boost to the market this morning that is trying to make up the heavy losses sustained last week. Since dropping 5.2% in the last three days of last week, the DJIA has tried to rally both yesterday and today, only to sell off into the close and the resulting two day ‘bounce’ is a whopping 21 points. Early on it looked like we may grab a triple digit day back in the Dow and Apple Inc. (NSDQ: AAPL) was strong on their earnings report and the anticipation of the unveiling of their tablet computer tomorrow. The DJIA traded as high as 10,285 (+88) but closed at 10,193.54 (-3.32, -0.03%) and Apple traded as high as $213.71 (+$10.64) but closed up only $2.86 (+1.41%, $205.94)

The S&P 500 closed down 4.61 points (-0.40%, 1,092.17) and the Nasdaq 100 was the hero on the day gaining a herculean 1.47 points (+0.06%, 1,803.86). The light action and relatively unmoved indexes are not uncommon on a Fed Tuesday. Even though the Fed is certain not to raise interest rates, the market hates uncertainty and the action will be slow until 2:15 p.m. tomorrow when the language of the ‘non-move’ will be sliced and diced and over-analyzed. Where the economy is right now, if Ben Bernanke even dreamt that he raised interest rates and Obama found out, there would be a new Chairman of the Fed and Ben would be teaching economics at Princeton for the spring semester lickety-split.

As of January 22nd, the public debt of the U.S. Government is $12.3 trillion dollars. The budget deficit for fiscal year 2009 was a mere $1.4 trillion dollars, more than triple that of fiscal 2008. Who says we cannot afford health care reform? According to my handy iPhone national debt app, each and every one of us Americans has a $41,765.93 share of that debt. What? You say you were born in Canada now?

The dollar was strong today as the PowerShares DB US Dollar ETF (NYSE: UUP) gained 0.43% ($23.15) and closed at its highest level in a month. Looking at the UUP chart shows that resistance is not much higher from bottoms made in August ($23.24) and a gap down in September ($25.25). Above this resistance level the 200 day exponential moving average looms at $23.32.

Gold has a decent inverse correlation to the dollar, so close resistance for the dollar and close support for gold means a long gold trade is setting itself up. I mentioned in a previous post that there looks to be support for gold in the $1,060 to $1,070 level. Whether or not gold goes that low, or the dollar rises high enough to tick resistance is any one’s guess, but you don’t need to pick the bottom clean, just be aware of the overall direction of the ride and get on. New York spot gold barely budged today and was last trading at $1,097.30 (4:33 p.m.)

There was not much action in oil as Nymex crude dropped 66 cents (-0.89%, 4:26 p.m.) and a barrel is now going for $74.60.

Yahoo! Inc. (NSDQ: YHOO) reported after the close today and hit their 11 cent a share estimate and fourth quarter revenues fell to $1.26 billion from $1.38 billion. When you think of all the major Internet stocks and companies, Yahoo! is probably glad AOL got spun off so they don’t look like the only lame Internet operation hoping someone buys their shares. Oh wait – someone wanted to buy all of their shares at $34 but the brilliant board, and yes you can call them all “Yahoos”, refused right about the same time the market caved in. Yahoo! closed today at $15.99 and on the earnings news was trading $16.26 in the after-market (4:51 p.m.) Only $17+ to go to get to that $34 price!

Tomorrow we have MBA Purchase Applications at 7 a.m., New Home Sales at 10 a.m. (370k expected) and the Fed announcement at 2:15 p.m.

First blush for tomorrow’s earnings is that there are a lot of major oil producers, refiners, drillers, etc… reporting tomorrow. COP, HES, MUR and VLO to note a few.

By the way – between the time that you read how much your share of the national debt was and now – you owe another dollar.

Selected earnings for Wednesday:

ABT 1.17 before market open, ATI 0.23 bmo, BLK 2.12 bmo, CBT 0.27 after the close, CAT 0.28 bmo, CTXS 0.52 atc, COP 1.13 bmo, ETFC -0.04 atc, FLEX 0.15, GD 1.57, HRS 0.94 atc, HES 0.91, ITW 0.72 bmo, LRCS 0.40, LSI 0.11 atc, MWV 0.23 bmo, MUR 0.85 atc, NFLX 0.45 atc, NE 1.58 atc, NSC 0.84 atc, PX 1.09 bmo, ROK 0.35 bmo, RYL -0.26 atc, SAP 0.94 bmo, STJ 0.62 bmo, BA 1.36 bmo, UA UA -1.47, UTX 1.14 bmo, VLO -0.47 bmo, WLP 1.02 bmo

Wall Street Wrap

Steel Jumps Higher and the FOMC Minutes

By Robert Perrego, at 4:33 pm on January 6th, 2010

The commodities surge continued from last year and steel led the charge today. Fueled by a comment from Goldman Sachs Group Inc. (NYSE: GS) stating that steel should be up 8% in 2010, the Market Vectors Steel ETF (NYSE: SLX) climbed 2.19% (+$1.42, $66.14) and closed at its highest level since September 22, 2008. Worthington Industries, Inc. (NYSE: WOR), a steel manufacturer and processor, blew away estimates this morning posting 29 cents of profit vs. the expected 9 cents, and the stock gained 20.5% (+$2.85, $16.73) on the day.

The Federal Open Market Committee released the notes from their last meeting at 2 p.m. today and the market instantly reacted. Gold jumped to new highs on the day as the minutes were released and the market became more aware that The Fed is worried about the economy after government stimulus ends. The coming end to The Fed’s purchase of mortgage bonds has some worried as Jim Cramer commented on CNBC today that once these purchases that are supporting the mortgage bond market end, he sees mortgage rates moving higher. Another wave of resets for adjustable rate mortgages are expected soon and the market is afraid that this added pressure to the housing market, at a time when the Fed stops supporting it, may cause a double dip in housing.

The Dow Jones Industrial Average floated around unchanged all day and closed up a 1.66 points (+0.01%, 10,573.68) while the S&P 500 also had no direction (-0.29, -0.03%, 1,136.16). The Nasdaq 100 lost 10.01 points (-0.53%, 1,878.42).

The Volatility Index (VIX) is trading at levels not seen since the pre-Lehman days indicating a lack of fear in the market. For the past few months the unemployment reports have been getting ‘less bad’, which is a trend in the right direction and market players are less worried about the economy as a whole. This complacency could be signaling a top in the market as the market loves to disappoint. The trend of the VIX could also continue and the market could continue to climb, but, just when you think it’s safe to go back in the water…

Looking at today’s chart of the SPDR Gold Trust (NYSE: GLD) shows two spikes in volume and price action. At 10 a.m., the ISM Non-Manufacturing Index was released and the GLD moved higher on high volume from $110.53 to $111.40 within thirty minutes. The ISM number came in at 50.1 vs. the 50.4 expected. At 2 p.m., on the release of the FOMC minutes, the GLD once again jumped higher moving from $111.35 to $111.65 in five minutes on high volume. The GLD closed at $111.51 (+1.64%, +$1.81) after trading at its highest level since December 16th.

With the steel move today possibly igniting an interest in the commodity space again, gold gained $20.40 an ounce (+1.83%, $1,137.60, 4:11 p.m.) while most non-commodity stocks hovered around unchanged all day.

Nymex crude traded up $1.27 a barrel to levels not seen since the fourth quarter of 2008. Nymex crude was below $70 a barrel briefly in mid-December and has climed to the current level of $83.04 (4:02 p.m.) in under a month, a move of over 18%.

The moves in gold and oil came amid a falling dollar that opened higher in the morning and traded off all day long, with the PowerShares DB US Dollar Index (NYSE: UUP) closing at its lowest level since December 16th. The correlation between the dollar and commodities remains very much intact, as shown by the action in gold and oil.

Tomorrow the Monster Employment Index is released at 6 p.m. and the Weekly Jobless Claims at 8:30 a.m. (450K expected).

There is a laundry list of bill, note and bond announcements tomorrow with reports on the 3-Month Bill, the 30-Year Bond, the 6-Month Bill, the 52-Week Bill, the 3-Year Note, the 10-Year Note, the 10-Year TIPS, and Treasury Strips expected throughout the day. That is a lot of debt reports.

Also, two regional Fed Presidents are expected to speak, with James Bullard of the St. Louis Federal Reserve speaking at the Shanghai Jiao Tong University Forum and Kansas City Fed’s Tom Hoenig speaking at the Central Exchange in Kansas City.

Wall Street Wrap

Health Care Stocks Strong On 60 Votes

By Robert Perrego, at 4:57 pm on December 21st, 2009

The U.S. Senate advanced their health care package as the Democrats finally managed to get the needed 60 votes, sending health care stocks higher. Health insurance company Aetna Inc. (NYSE: AET) added 4.70% (+$1.53, $34.04) as the Senate plan provides for 30 million new customers for the HMO’s without having them compete against a government option. The health care plan passed by Congress included a government option, but as the Senate’s plan has moved forward without it, the HMO’s have been in rally mode. Since December 4th, Aetna is up 17.5%, UnitedHealth Care Group Inc. (NYSE: UNH) is up 17.2%, Cigna Corp. (NYSE: CI) is up 15.6% and Wellpoint Inc. (NYSE: WLP) is up 11.4%.

The health care sector easily outdistanced the market as a whole as the Dow Jones Industrial Index only rose 0.82% (+85.25, 10,414.14). The broader S&P 500 gained 1.05% (+11.58, 1,114.05) and the tech heavy Nasdaq 100 was up 1.18% (+21.43, 1,828.79). The Nasdaq 100 closed at new 2009 highs today as it broke out of a six week trading range, showing the relative strength tech stocks have had recently.

Sanofi Aventis (NYSE: SNY), a $100+ billion pharmaceutical company, is buying Chattem, Inc. (NSDQ: CHTT) for $93.50 a share in an all-cash deal, causing the shares to rise 33%. Chattem produces over the counter pain relievers, personal care items and dietary supplements. The deal diversifies Sanofi away from prescription drugs and into the over the counter market as competition from generic manufacturers threatens some of the older drugs in their portfolio that have expiring patents. The deal makes sense for Chattem as the stock price was up $23.16 (+33.09%, $93.14) a share today.

The news for health and drugs does not stop there are Walgreen Co. (NYSE: WAG) reported their first quarter profits rose by 20%. The swine flu scare had customers lining up for vaccines as the drug store chain sold 5.4 million seasonal flu shots in the quarter. This was a boon to drug stores as it got customers in the door and Walgreen stated that their prescription drug sales also improved. In retail you have to get them in the store first and there is nothing like a health care scare to drive sales at a drug store that also hopes to sell you a magazine and a candy bar. Walgreen beat by a penny ($0.49 vs. $0.48) but investors must have expected more as the stock dropped 3 cents today and Citigroup issued a sell rating on the stock.

The dollar rally continued as the index future spot price gained 29 cents (+0.37%, 78.06) and put pressure on oil and gold prices, while copper and steel scratched out small gains. Nymex WTI crude was up earlier in the trading day on increasing hopes for an economic recovery, but was last seen trading down $1.05 a barrel (-1.41%, $73.37, 4:16 p.m.) Steel and copper managed to hold onto their gains as they are also viewed as economically sensitive. The Market Vectors Steel ETF (NYSE: SLX) rose 1.38% (+$0.83, $60.73) while the iPath Copper ETF (NYSE: JJC) was up 2 cents at $43.05.

The New York Spot Price for gold fell $21.60 an ounce on the strong dollar closing below $1,100. The SPDR Gold Shares (NYSE: GLD) reversed early gains and lost $2.00 (-1.83%, $106.95), closing below its 50 day exponential moving average and slightly lower than the low set by the sell off last Thursday. Lower lows are never a good sign.

Tomorrow starts the parade of economic releases we have this week with the ICSC-Goldman Store Sales at 7:45 a.m., GDP (2.7% expected) and Corporate Profits at 8:30 a.m., Redbook at 8:55 a.m., and Existing Home Sales (6.25 million) and the FHFA House Price Index at 10 a.m.

We have a shortened trading week this week, with the markets being closed on Friday in observance of Christmas.

Week on Wall Street

Another Slow Week On Wall Street

By Robert Perrego, at 1:20 pm on December 19th, 2009

Stocks went up and down this week on Wall Street as they always do and the net result on the broadest stock index, the S&P 500, was a loss of 0.36% or 3.94 points. On Monday, the S&P 500 closed at its highest level of 2009 at 1114.11. On Tuesday the dollar jumped higher and the markets sold off. The biggest moves of the week were the fossil fuels as inventory data and a cold front sweeping North America drove natural gas higher by 10.97% and crude started the week below $70 and finished above $73 for a 4.73% gain.

For over a month the S&P 500 has been in a narrow sideways trading range between 1087 and 1110, with exception for Monday when a short-lived breakout was attempted. The S&P 500 closed out Friday near the middle of this range at 1102. While the S&P 500 is the broadest stock index, the tech heavy Nasdaq 100 closed out the week at 1807, nearer to the high end of its trading range (1767 to 1810) showing that tech is less susceptible to a rising dollar. The weakest index, relatively, has been the Dow Jones Industrial Average which closed nearest to the lows of its range at 10,328 (10,300 to 10,480).

The connection the dollar has to stocks is via the much talked about carry trade. With U.S. interest near zero the weak dollar has been shorted by the ‘carry trade cowboys’ and those funds put to work buying stocks and other ‘risky’ assets. The relative strength of tech stocks shows that when the dollar rises and the shorts need to cover, the stocks they are least willing to sell to replace these funds are technology stocks.

At the start of the week the biggest story was a monster deal in oil and gas with Exxon Mobil Corp. (NYSE: XOM) buying XTO Energy (NYSE: XTO). Exxon’s fossil fuel portfolio is heavily weighted towards oil and XTO towards natural gas. This buyout may be a large play to hedge the historically wide spread between the costs on natural gas and oil. Thus far the 10% rise in natural gas and 4.73% rise in oil has proven this strategy correct. Monday also saw Citigroup Inc. (NYSE: C) get clearance from the U.S. Treasury to repay their TARP funds.

The Federal Open Market Committee held their last two-day meeting of the year on Tuesday and Wednesday, and announced they were standing pat on interest rate policy. Comments on the decision to leave rates unchanged indicated that the Fed saw job losses slowing, but jobs were still being lost. Of most importance in this announcement may have been that they were ending their quantitative easing program (purchases of agency backed mortgage debt) on February 1, 2010.

Wednesday also saw the Federal Trade Commission file a suit against Intel Corp (NSDQ: INTC). The lawsuit cites bundling practices and even a secretly redesigned compiler software that makes their competitors chips run a little slower. Intel competitors Nvidia Corp. (NSDQ: NVDA) and Advanced Micro Devices (NYSE: AMD) traded higher on this news.

On Thursday, Standard and Poor’s downgraded the government debt of Greece to BBB- causing investors to flee to the safety of the dollar and dump their riskier assets. This caused the largest losses of the week for stocks as the DJIA dropped 132 points, which comprised most of its total loss for the week. Citigroup sold 5.4 billion shares and the Treasury, as the secondary price was too low for its liking, decided not to sell any of their shares. Gold dropped $40 an ounce on the dollar strength. The SPDR Gold Trust (NYSE: GLD) closed below its 50 day exponential moving average for the first time since August.

On Friday the dollar traded higher but reversed course and closed flat. Gold bounced back $15 an ounce and the GLD regained the 50 day EMA, closing just above. Common technical analysis theory states one of the conditions for a break in a support level to be two consecutive closes below it. The bounce back in gold saved the technical picture and also, now that the support level has been shown to hold, the bullish picture for gold is a bit stronger. Beware, this might seem like the bottom of the ‘dip’ that all the gold bulls say you should buy, as the next few days will give a clearer picture as to whether the dip drops or pops.

Friday was a quadruple options expiration day and the action in the last 20 minutes contained more volatility than all day long. The last 20 minutes saw the stock indexes run up into the close. Once again, tech was relatively strong as the Nasdaq 100 rose all day long on earnings announcements by Oracle Corp. (NSDQ: ORCL) and Research in Motion Ltd. (NSDQ: RIMM) Thursday after the close.

On the week the action was in the fossil fuels and gold. Below are some ETF and stock index movements that sum up the week.

Dow Jones Industrial Average -143 points, -1.36%

S&P 500 -3.94 points, -0.36%

Nasdaq 100 +15.26 points, +0.85%

Gold ETF (GLD) -$0.37, -0.34%

Copper ETN (JJC) -1.3 cents, -0.03%

Coal ETF (KOL) +14 cents, +0.4%

Oil ETF (USO) +$1.18, +3.33%

Natural Gas ETF (UNG) +$1.05, +10.97%

Steel ETF (SLX) -11 cents, -0.18%

Agriculture ETF (DBA) -1 cent, -0.03%

Dollar ETF (UUP) +$0.33, +1.45%

News

Tech Strong, Gold Bounces Back

By Robert Perrego, at 5:09 pm on December 18th, 2009

Oracle Corp. (NSDQ: ORCL) reported after the close yesterday, that earnings rose year-over-year to $1.46 billion or 29 cents a share vs. last years 25 cents a share. When exchange rate effects were backed out of earnings and revenue, both were flat with last years results, but at least they were not falling. This announcement powered the stock higher by $1.46 (+6.38%, $24.34) as most companies, tech and non-tech, have seen either their earnings, revenue, or both decline. Research in Motion Ltd. (NSDQ: RIMM) jumped 10.30% (+$6.54, $70.00) on their earnings announcement as revenues increased 11% while Palm Inc. (NSDQ: PALM) reported a decline of revenues of 59.2%.

Besides the earnings driven technology sector and a bounce back in commodities, the market was flat with the Dow Jones Industrial Average gaining 20 points (+0.19%, 10,328.89), the S&P 500 up 6.31 points (+0.57%, 1,102.47). Looking at the intra-day charts of both these indexes shows you that the Dow gained 45 points and the S&P 500 rose 4 points, all in the last 20 minutes of trading. The Nasdaq 100 was up over 29 points (+1.63%, 1,807.32) and strong all day.

Gold and commodities got hit hard yesterday on a strong dollar and today they bounced back while the dollar stayed flat. New York Spot Gold was down $40+ yesterday but recouped $14.70 an ounce today to $1,111.80 (+1.34%, 4:18 p.m.). This morning, oil jumped almost $2 a barrel to $74.33 on news that Iranian soldiers took over an Iraqi oil well. By 4:12 p.m. this rise had traded down to $73.18 (+$0.53, +0.73%) as it seems this is not an uncommon occurrence.

The carry trade and the recent strength in the dollar has caused much concern that the stock market would get hit if the dollar started to rise. Over the past few years, ETF’s have made it possible for the common investor to diversify into commodities. Let’s take a look at what kind of effect this week’s strong dollar had on the stock market and select commodities;

Dow Jones Industrial Average -143 points, -1.36%

S&P 500 -3.94 points, -0.36%

Nasdaq 100 +15.26 points, +0.85%

Gold ETF (GLD) -$0.37, -0.34%

Copper ETN (JJC) -1.3 cents, -0.03%

Coal ETF (KOL) +14 cents, +0.4%

Oil ETF (USO) +$1.18, +3.33%

Natural Gas ETF (UNG) +$1.05, +10.97%

Steel ETF (SLX) -11 cents, -0.18%

Agriculture ETF (DBA) -1 cent, -0.03%

Dollar ETF (UUP) +$0.33, +1.45%

Looking at these numbers you can see that while the DJIA and the S&P 500 maintained their inverse relationship to the dollar, the tech heavy Nasdaq 100 is bucking the trend. Also, it seems that the dollar strength did not translate into as much commodity weakness as you may have thought. The worst performer of the above listed commodities is gold down 0.34% while the dollar strengthened over four times as much, up 1.45%. Natural gas and oil crushed the dollar effect as natural gas actually rose seven times as fast as the dollar dropped and oil was up more than twice the drop. Completing the fossil fuels sector, coal finished positive on the week and the strength of these three may be attributed to the cold weather sweeping North America.

In the Tracked.com’s ‘Strange-but-true-irony’ category it is freezing and snowing heavily in Copenhagen as politicians gather to discuss ‘global warming’ and Former Vermont Governor and consummate left-winger Howard Dean says he would not vote for the current health-care reform bill. A little advice for the pro-global warming crowd; start holding your conferences in the desert in August as all the ones we keep seeing are during ice storms, blizzards and cold weather and this hardly makes for the press you want. Advice for Howard Dean; run for office and win, then we just might care what you would vote for and then you could actually vote.

So up is down, down is up and who cares – the weekend is here.

Have a great weekend.

Insights

By the Tracked.com Team

Consumer Confidence is Up, So is the National Debt

Steel Jumps Higher and the FOMC Minutes

Health Care Stocks Strong On 60 Votes

Another Slow Week On Wall Street

Tech Strong, Gold Bounces Back

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