News

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, 2009

The 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

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News

Market Wrap – Want the Good News or the Bad News First?

By Robert Perrego, at 4:33 pm on July 20th, 2009

The news today is companies are beating earnings – the same earnings that have been dropped over the past months to such a low level that actual reported earnings are beating left and right.  So which came first?  The chicken or the egg?

In Q2 2008 the crisis was just hitting the stock market and business turned down for many companies.  Ironically enough, today, as the credit-crisis led recession still has long and sharp teeth, the comparables to last year may actually be favorable.

One industry in which the comparables will not be favorable is the energy industry.  Halliburton Co. (NYSE: HAL) reported 29 cents a share this morning down from 55 cents a year ago.  HAL was expected to post 27 cents a share so technically they beat estimates – but that is just estimates and that does not look like a growing business.  The stock traded up today but oil tacked on a solid gain so was it the earnings or today’s commodity move?

Eaton Corp. (NYSE: ETN) posted 17 cents a share vs. $2.03 a share last year with analysts expecting 18 cents.  The good news is that stripping out non-recurring items Eaton beat estimates as its number was 23 cents.  Ok – 23 cents vs. $2.03 – how good does that look?  In Q2 2008 Eaton was in the $85 area and now their stock trades for $49 or so.  Earnings dropped by a factor of almost 10 and the stock price was less than cut in half.  This serves to raise their P/E by a factor of 5.  Today the stock traded up $3.99 a share as I guess this was ‘less bad’ news.  Sure a bull market is fun but the P/E’s are jacked through the roof, no one has any credit or money (except Washington D.C., they just keep printing more UNITED STATES dollars), states are broke as ever and state unemployment rates are topping 10% in an ever longer growing list.

Hey the good news is the comparisons to Q2 2008 are going to be better, the bad news is earnings are still going to stink.  The good news is the Dow was up 104.21 points today, the bad news is we are still 5000+ points off the high.  The good news is your 401k may have regained 301k status, but the bad news is it might look like a 201k again soon.  Welcome to the Q2 2009 Wall Street earnings season.

First Goldman beat, then JP Morgan, then Google and IBM and now we have Apple coming up.  Sure these companies are the best of the best and if they cannot make money who can?  Maybe the answer is here, in a very interesting story about a divergence in CPI and PPI.  If true, the consumer (i.e. taxpayer) just keeps getting screwed coming and going.

So let’s concentrate on some good news – today the Dow and the S&P closed at their highest levels since last November.  Also, in the technical picture, BOTH these indexes closed ABOVE their 50 day exponential moving averages.  The Transportation average closed a half percent off a new high and, should the Tranports close above 3404, this would be a new high on the year giving us a Dow Theory signal of a BULL MARKET!  That’s right folks – we will be in a Dow Theory Bull Market – who cares about earnings!  Did I just say that?

The Dow finished up 104.21(+1.19%, 8848.1) and the S&P 500 closed up 10.74 p[oints (+1.14%, 951.12) with the Nasdaq 100 taking on 19.74 points (+1.09%, 1544.00).

Oil traded up 42 cents a barrel and closed at $64.31 and New York Spot Gold, which was up as much as $19 an ounce early in the trading day is at $950.70 an ounce up $13.00 at 4:08 p.m. est.  Analysts have been saying that above $950 is a breakout for gold so we are right there.  Keep an eye on the shiny yellow stuff as a break above $950 sets off a run at the $1,000 level.

Energy led the sector run up today logging a 2.47% return while industrials ran a close second at 2.43%.  Finance came in at 2.12% and consumer cyclicals at 2.01%.  The laggard on the day was consumer non-cyclicals at 0.80% and this makes sense as when traders get bearish they buy this group, when they get bullish they buy the cyclicals and scale out of the non-cycs.

Economic releases and events to be aware off for tomorrow: ICSC-Goldman Store Sales 7:45 a.m., Redbook 8:55 a.m. and Bernanke speaks before the House Financial Services Committee at 10: 00 a.m.  That should be a joy to watch.  Nothing better than posturing pontificating politicians popping off populist pleasing platitudes all day.

One of the answer areas the politicians will be looking for from Bernanke will be how he intends to withdraw all the liquidity he injected into the system without sending the economy into another swoon.  The very level of the stock market is also creating a lot of liquidity – as in money in your account and everyone else with an account that holds stocks.  This is a very powerful creator of money and could mean that the price of gold could correlate very highly with the market for a while.  We are $50 from the $1,000 an ounce level now and a pop by the market here, which is technically breaking out, could lead to finally a break of that $1,000 ceiling and make gold take off as well.

Earnings Tuesday July 21st:  AMD (-0.48) after the close, AAPL (1.16) after the close, BLK (1.58) Before the open, CAT (0.22) bto, DD (0.52) bto, ELN (-0.15) bto, FRX (0.82) bto, FCX (0.69) bto, LMT (1.81) bto, MRK (0.77), PCP (1.75) bto, SGP (0.45) bto, STX (-.10) atc, STT (0.97) bto, SBUX (0.19) atc, KO (0.89) bto, AMTD (0.29), UTX (1.04) bto, UNH (0.71) bto, VFC (0.59) atc, YHOO (0.08) atc.

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News

Market Wrap – Strike 3 for CIT and a more optimistic Roubini

By Robert Perrego, at 4:30 pm on July 16th, 2009

The major market news today came from all directions; first it looks like CIT Group Inc. (NYSE: CIT) will become the fourth largest bankruptcy in history as negotiations broke down with government agencies.  I guess they are not ‘too big to fail’ (and don’t owe Goldman enough money) and is seems they are not even big enough to weigh seriously on investors minds today as the market showed follow through from yesterdays rally, gaining an additional 95.61 points.

The estimate for new jobless claims was lower than in previous months at 535,000 and the actual number beat coming in at 522,000.  This is only a beat of 11,000 and people are still losing their jobs at a frightening rate but in March over 650,000 jobs were lost in one week.  This is more ‘less bad’ news looked at as good news and it helped boost the market today.

JP Morgan Chase (NYSE: JPM) was supposed to post a 4 cents a share gain today but posted a much bigger number announcing $0.28 a share and $2.72 billion in earnings.  Morgan became the second major financial company to show strong financial results after Goldman Sachs Group (NYSE: GS) beat even aggressively raised estimates on Tuesday. This week the market is up 566 points on a stream of good news on earnings.  The market bottomed in March on good news on the banks and this recent down leg saw its bottom put in by good news on the financials once again.

‘Dr. Doom’ economist Nouriel Roubini even got into the Bullish act saying the worst of the financial crisis is over even though weakness persists.  Roubini made these comments to Chilean investors in NYC and mentioned that China, Chile, Colombia, Uruguay, Peru, India and Brazil are better positioned to recover.  We used to call them the BRIC’s but now Roubini is making a call on the CCCUPIB’s.

The last big piece of news today (besides the nice follow through rally) was a whole room full of chattering, overly verbose, simpletons we commonly call elected officials, peppering Hank Paulson with questions and accusations for hours and hours until about an hour before happy hour (interesting time to quit, yes?).  House of Representative lawmakers all pontificated and rambled, practically making speeches before asking a question and Hank stood firm and answered them.  What I saw as most interesting was many of these inquisitors would cut Hank off while he was answering the questions saying they did not want to run out of their allotted time.  These, our duly elected Representatives, seemed more interested in just being on record for asking their scripted ridiculously long questions than the actual answers at times.  One inquisitor, aptly named Lynch did ask as to why the TARP funds, which were originally approved to buy toxic assets, were then used to bail out banks,  Paulson answered that the developments in the ten days after the TARP was approved made it necessary to use taxpayer money as bailouts as opposed to buying up toxic debt.  When they asked the question they were most worked up to ask; “Did you tell Ken Lewis he would lose his job if he invoked the MAC clause?”  Hank stole their fire and said ‘yes’, and here’s why…  After that it was a fishing expedition as I think the politicians were looking for him to deny it and he did not.  Paulson said it needed to be done and he did it.  Next.

The Dow gained 95.61 points (+1.10%, 8711.82), the S&P 500 added 8.06 points (+0.86%, 940.74) and the Nasdaq 100 came in up 17.89 points (+1.19%, 1518.87).

Looking at the intra-day oil chart you can see it bottomed at about 1:30, which coincided with Roubini’s comments.  A major name in economics says the economy has passed the worst points and expectations of better days, read: the economic machine burns more oil, raises the price of a barrel.  Even though oil only posted a 48 cent gain on the day ($61.98) it is still a green number. (pun intended)

Gold dropped marginally with yesterdays gain taking the yellow metal above its 50 Day moving average and in position to break out.  Most analysts see a move above $950 an ounce would be very positive with a break below $905 a cause for concern.  New York Spot Gold was trading $937.00 an ounce at 4:12 p.m. est.

Sector Watch: Industrials +1.76%, energy +1.69%, tech +1.57% and surprisingly on a rally day with good financial news finance logged in down 0.07%.  Maybe CIT is big enough to hurt the market after all?

After the close today Google Inc. (NSDQ: GOOG) posted $5.36 a share with the estimates at $5.09 and $4.07 billion in revenues vs. $4.06 billion.  Google is trading down at $428 in the aftermarket at 4:18 p.m. (closed $442.86) as it seems they did not beat by enough

IBM (NYSE: IBM) also reported earnings after the bell posting $2.32 a share on a profit of $3.1 billion and revenues of $23.3 billion.  Analysts expected $2.01 and $23.56.  Also, IBM raised their full year estimate by 10 cents.  IBM is trading up in the aftermarket at $112.96 (4:22 p.m.) after closing at $110.59, even with missing the revenue estimate.  I guess it’s better not to be thought of as the greatest tech company since sliced bread so then when you beat just one number you trade up (see Google).

Fact to ponder:  China, a communist country, passed a stimulus bill and their GDP growth has outpaced their own projections and the rest of the world.  The United States of America, a country heretofore based on capitalism, passed their ‘Economic Recovery Act’ and our GDP is anemic and our job losses are huge.  WHY?

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News

Ba-Da Bing: All a Matter of Perspective

By Taryn Cooper, at 11:55 am on July 15th, 2009

I found this quite interesting, but it all goes to show that the saying three types of lies exist: lies, damned lies and statistics.  But I digress.

This posting has to do within five minutes of going through some RakedIn feeds, three articles came up regarding Microsoft’s (MSFT) new search engine, Bing.

The first one that caught my eye was from Dan Frommer of Silicon Valley Insider.  In Bing’s First Month a Bust, the statistic from comScore (SCOR) that has been repeated today was that in the month of June, MSFT’s search market was up 8.4% from 8.0% in May.  Frommer suggests that this represents a “bust” for Microsoft and Bing, regarding all the advertising and marketing we’ve seen behind the newly vamped search engine.

The second article made me chuckle, as it basically used the same statistic of 8.4% growth in June as a positive spin.  This one, from All Things Digital and titled Another Bing Boost: ComScore says Microsoft Search Share Up in June.  While possibly correctly assuming that this modest boost in market share might not bump Microsoft’s shares right away, compared to that of Google (GOOG), IAC Interactive (IACI) and Time Warner’s (TWX) AOL, this is the harbinger of positive things to come.

Possibly the most correct assumption out there is the third and final article I was able to read – the “Goldilocks-Juuuuuust-Right” theory that Bing Reverses Microsoft’s Decline, but Actual Gain Is Modest from The Puget Sound Business Journal.  Ah, yes, perhaps one month of data won’t tell us exactly what Bing is going to do for Microsoft, but a bump is a bump, yes?

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News

Google Android: Future Windows Competitor?

By Taryn Cooper, at 8:48 am on June 2nd, 2009

Bloomberg reported earlier today that Google Android, their free phone operating system, will be running computers next quarter, offering a direct competitor to Microsoft’s Windows operating system.

With Acer scheduled to offer Android-powered notebooks next quarter, the story suggests that Android could be powerful enough to replace traditional-Windows based systems in the future, at the very least for low-cost notebooks.

Stay tuned for more info…

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