Wall Street Wrap

March Comes in Like a Bull – Tech Leads the Way

By Robert Perrego, at 5:07 pm on March 1st, 2010

Technology stocks, and especially semiconductor stocks, were strong as Wall Street started March with a bullish day.  Intel Corp. (NSDQ: INTC) paced the Dow Jones Industrial Average, finishing first with a 1.65% gain (+$0.34, $20.87) and Hewlett Packard Co. (NYSE: HPQ) in second up 1.47% (+$0.75, $51.54).  The PowerShares Dynamic Semiconductor ETF (NYSE: PSI) jumped 2.76% (+$0.36, $13.38) as Entropic Communications Inc. (NSDQ: ENTR) led the broad line semiconductor sector up 7.18% (+$0.26, $3.88) after being up as much as 14.4% earlier in the day.

The Nasdaq 100 turned in the best performance for the month of February among the three major indexes, gaining 4.47% to the second place S&P 500’s 2.86%.  Everyone must have read the summary numbers for February over the weekend and then came in as buyers today as the Nasdaq 100 continued on its winning streak up 1.52% (+27.72, 1,846.40).  The S&P 500 closed up a solid 1.01% (+11.22, 1,115.71) and the Dow Jones Industrial Average gained 0.76% (+78.53, 10,403.79) on the day.

Merger Monday was in full gear as four deals were announced last night and this morning and TrackedInsights Taryn Cooper covered them all earlier today.  Rumors of the biggest deal on the planet, Germany bailing Greece out with loans, prompted the Greek 10-year bond to drop 9 basis points (6.34% to 6.25%, +0.64) and stabilized equity markets around the world.  The Chilean IPSA Index fell 1.7% to 3,761 in reaction to the 8.8 magnitude earthquake Saturday morning, which was the fifth largest recorded since 1900.

When an earthquake hits Chile, what do you buy?  The answer is not peppers, it is copper.  Chile produces 35% of the world’s copper and if any of those mines collapsed this will slow the production and supply of the base metal, sending prices higher.  The iPath Dow Jones-UBS Copper ETN (NYSE: JJC) jumped 2.73% in the first five minutes of trading this morning but faded back, closing up 1.76% (+$0.79, $45.49).

Economists expected Personal Income and Consumer Spending to increase by 0.4% month-over-month, but we got income going up 0.1% and spending up 0.5%.  This means the consumer must have been taking on debt over the last month.  In general, the market likes it when the consumer spends more, even though signs point to them taking on more debt.  If the consumer is out there spending, that means the stocks they trade are doing more business.  Damn the torpedoes!  Who is paying their debts back these days anyways?  There is a problem here though, as Personal Income increased only 0.1% (0.4% expected) with the prior M-o-M increase being 0.4% and before that 0.5%.  The growth trend we have experienced over the past few months is slowing down as workers are receiving less income, which can be attributed to less people working.

The ISM manufacturing Index was reported at 10 a.m. and missed expectations (56.5 vs. 57.4, prior 58.4).  A reading over 50 indicates manufacturing is expanding but the number below that of last month shows it is expanding less quickly.  Construction Spending was also released at the same time and was down 9.3% Year-over-Year and down 0.6% Month-over-Month.  The MoM expectation was -0.8%, so the number was beat, but it is still declining.  While a decline in construction spending means less construction workers on the job, this is probably good in the long run as a contraction in housing supply (or a slower expansion), will mean a lower relative supply of homes in the future and a firming of home prices.

Gold had an uneventful day, gaining marginally, as all the metals action seemed to be in copper today.  The fact that gold did not drop is a story on its own as the dollar traded its highest level since last July, before fading back to gain just 0.38%.  Even the news of Germany buying Greek debt did not hold the euro up as the pound dropped sharply against the dollar with the summer election for Prime Minister in the U.K. is too close to call.  The U.K. has deficit problems of their own, and it seems once you throw in the weak economies of Spain, Portugal and Ireland, the chances of another bailout being needed seems almost certain.  Italy’s budget is always an adventure and it is starting to look like the only decent economy left in Europe is Germany.

Nymex crude dropped 78 cents as the $80 a barrel level is proving to be a difficult fence to jump.  The barrel was trading at $78.88 (-0.98%) at 4:48 p.m.

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Wall Street Wrap

Market Edges Higher as Bonds, Finance and Commodities Strong

By Robert Perrego, at 5:06 pm on February 26th, 2010

The stock market tried to be bullish today but only managed a 4 point gain for the Dow Jones Industrial Average.  I say it was trying as the stocks posting gains were the names you would buy in a bull market.  Leading the DJIA was JP Morgan & Chase Co. (NYSE: JPM) which gained $1.38 (+3.25%, $41.97).  Looking at the components of the DJIA that were down today and it seemed as if they were selling the defensive names; Kraft Foods Inc. (NYSE: KFT) -1.35%, McDonalds Corp. (NYSE: MCD) -0.69%, Procter & Gamble Co. (NYSE: PG) -0.42%, Coca~Cola Co. (NYSE: KO) -0.35%, Johnson & Johnson (NYSE: JNJ) -0.21% and Wal-Mart Inc. (NYSE: WMT) -0.09%.

The Dow Jones Industrial Average edged up 4.23 points to 10,325.26.  The S&P 500 tacked on a small 1.51 point gain (+0.13%, 1,104.49) and the Nasdaq 100 was up 5.77 points (+0.31%, 1,818.68).  On the month the DJIA added 257 points (+2.55%), the S&P 500 climbed 30.71 points (+2.86%) and the Nasdaq 100 showed that the place to be in February was in technology, gaining 77.75 points (+4.47%).

Across all markets, bonds and commodities did the best with interest rates dropping in 14 of 17 major economies worldwide.  EVEN the Greek 10-year was lower by 30 basis points as bond prices rose on news the German Government might buy Greek debt through a state owned bank.  This strengthened the euro against the dollar causing commodities to rise.

Yesterday, I mentioned the CurrencyShares Euro Trust (NYSE: FXE) was something to keep your eye on thinking that the news in Greece has got to get better sometime.  The timing was spot-on (better to be lucky than good sometimes, but being right gets paid) as the FXE closed higher today than all but one day in the last two weeks of trading.  If the bad news has washed itself out, any further positive developments about the Greek Tragedy of 2010 will be bullish for the euro, commodities and stocks.

On the flip side of this, the PowerShares DB US Dollar Index (NYSE: UUP) closed lower than all days but one in the past two trading weeks.  Looks like the dollar is a bit high here, and with the possibility of Washington D.C. passing the $1 trillion health care bill next week via ‘reconciliation’, the path of least resistance for the greenback is down.  If the carry trade cowboys get involved here, shorting the dollar and buying stocks, March may indeed come in like a lion.

New York spot gold rose $10.00 an ounce to $1,116.60 (+0.90%, 4:22 p.m.).  A break out here would be at about the $1,130 level with support at $1,060.  The SPDR Gold Shares (NYSE: GLD) chart is starting to look very interesting with resistance at $111.  The only thing I do not like about the chart is the stochastics are too high, but a close (2 closes even better) through $111 and I am a buyer.  The GLD closed up $1.12 (+1.03%, $109.43).

Nymex crude is pushing $80 again up $1.51 today to $79.68 a barrel (+1.93%, 4:26 p.m.).  Analysts think that crude will trade more off of supply and demand fundamentals and less as a reaction to the dollar in the future.  This sounds like it means that oil will trade on the premise of a better functioning economy and not on gloom and doom and fiscal nightmares.

Existing Home Sales were reported this morning at down 7.2% (January) to a seven month low (5.05M vs. 5.5M expected).  Last month sales dropped off a cliff (-16.7%) and analysts did not have to think too hard as to why.  NO JOBS.  An economy can turn up or down on simple expectations.  You have a job and things are good, but then a friend gets the axe and your brother calls to tell you his company just shut down.  You may still have a good job, but you are not dying to go buy a new house at this point.

The federal tax credit for new home buyers seems to not have helped as much lately and I have a theory – all the new home buyers that were going to buy a home already did.  I do not think they are going to squeeze a lot more out of that program.  Also, in December you go Christmas shopping not house shopping and it is cold in January.  Hopefully, sales pick up in the coming months but with all this snow in February I would not bet on a strong number.

I saved this for last to go out on a good note: The USA Men’s Hockey Team beat Finland 6 -1 in the semifinals today and will play the winner of tonight’s Canada-Slovakia game for the Gold.  Team USA vs. Canada will be a great game to watch.  Win or lose that one, Team USA is cranking out the medals faster than Freeport-McMoran (NYSE: FCX) and this has been a great Winter Olympics for our athletes and for us.

Have a great weekend.

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Wall Street Wrap

Afternoon Rally Keeps Stocks From a Big Loss

By Robert Perrego, at 5:10 pm on February 25th, 2010

Over the past two weeks, workers filing for first time Jobless Claims have jumped 12% and stocks reacted by dropping steeply off the open this morning.  After the close yesterday, rumors flew that Coca-Cola Co. (NYSE: KO) was near striking a deal to buy their bottler’s North American business.  The official announcement came out this morning and this sent the shares of Coca-Cola Enterprises (NYSE: CCE) up by a whopping 32.84% (+$6.30, $25.48).  The cost of the acquisition dropped the shares of Coke down by $2.04 (-3.69%, $53.12), lopping about 14 points off the Dow Jones Industrial Average on its own.

The Dow Jones Industrial Average traded as low as 10,185 (-188, -1.82%) before staging an impressive 137 point rally off the lows to finish with a loss of only 53.13 points on the day (-0.51%, 10,321.03).  The S&P 500 dropped 2.30 points (-0.20%, 1,102.94) and the Nasdaq 100 showed some relative strength, closing in the green fractionally (+0.40, +0.02%, 1,812.91)

The ‘non-partisan’ politicians were at it again in Washington D.C. as top Republicans and Democrats got together for a televised health care summit.  If you watched this it was an exercise in people talking and not listening.  While this is not unusual with our hot-air oversupplied elected officials, the ‘discussion’ turned a bit hostile at times with Obama interrupting McCain, McCain snapping back with ‘let me finish’ and other unpleasantness.  My favorite part had to be when Obama criticized Cantor for bringing all 2,400 pages of the bill to the meeting discussing that bill.  I never knew how thick a document that is 2,400 pages was until today and it seemed Obama did not want the rest of the country to see it either.

At the $1 trillion price tag put on the health care bill, each page is worth (spends) about $417 billion.  Maybe the U.S. Treasury should just start printing copies of the health care bill and forget about printing dollars.  We could pay off the national debt in no time but just try carrying the change home when you go buy a six-pack of Coke.

Goldman Sachs Group Inc. (NYSE: GS) is in hot water over the role they played in structuring a large loan to Greece in 2001 such that it looked like a currency transaction.  Greece no doubt did this to hide the debt from the European Union and Goldman did it for a very large commission.  Goldman stock dropped $1.89 to $156.44.

Apple Inc. (NSDQ: AAPL) CEO Steve Jobs told shareholders the company was going to sit tight on its $40 billion cash hoard as having that kind of money in the bank provides “tremendous security and flexibility.”  Apple has never been too active in buying other companies, preferring to develop their own technology, rarely buys stock back and does not pay a dividend.  With economic times like these sitting on a mountain of cash is a great idea but just try keeping track of the 160,000 accounts you need to keep $250,000 or less in for FDIC protection.

New York spot gold bounced back for a gain today for the first time in three days.  The precious yellow metal added $8.20 to $1,105.40 (+0.75%, 4:39 p.m.).  Over the past few days I have seen a lot of stories and heard chatter on the financial TV shows about the coming demise of gold.  With central banks worldwide being net buyers, a $1.56 trillion budget deficit and U.S. national debt skyrocketing I don’t believe it for a second.  Want to see gold go through the roof?  If that health care plan gets passed or that massively deficient budget gets ratified hang on tight – we are going for a wild upside ride.

I commented yesterday to keep a close eye on the SPDR Gold Shares ETF (NYSE: GLD) and a support level of $104.  The GLD closed slightly above its 50 day exponential moving average today ($108.31 vs. $108.15) and this is a positive sign.  The numbers to watch on the GLD are $104 and $111.  A close above $111 would be signaling a possible break out and a close below $104 a possible break down.

Nymex crude does not seem to be able to hold the $80 level as the barrel dropped $1.74 today on weaker economic expectations (-2.18%, $78.26, 4:44 p.m.).

The PowerShares DB US Dollar Index (NYSE: UUP) gapped up on the open but traded lower all day long losing 0.21% (-$0.05, $23.71).  If you think this Greek tragedy is blowing over keep an eye on the CurrencyShares Euro Trust (NYSE: FXE).  A very large volume spike last Friday could have marked this as a reversal low and it has pretty much been trading sideways all week.  If it rises above $136 I would get very interested.  Besides, how many more days can they strike in Greece anyway?  All the bad news could be out.

Tomorrow we have GDP at 8:30 a.m. (5.7%, 0.6%), Chicago PMI at 9:45 a.m. (60.0), Consumer sentiment at 9:55 a.m. (73.7) and Existing Home Sales at 10 a.m. (5.5M)

Fed Presidents Naranyana Kocherlakota (Minneapolis), William Dudley (New York), Charles Evans (Chicago) and Fed Gov. Daniel Tarullo speak at the annual U.S. Monetary Policy Forum in New York tomorrow.

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Wall Street Wrap

Yo-Yo Market Back Down on China and Greece

By Robert Perrego, at 4:34 pm on February 12th, 2010

Remember the days when the U.S. stock market was about the U.S. economy and companies?  If not for a Chinese credit tightening and the Germans deciding the Greeks need to get their own house in order, I might be writing about Warren Buffet and the fact that Berkshire Hathaway closed the Burlington Northern Santa Fe deal.  Instead, the topics du jour are China raising their bank reserve requirements and that the deal out of Europe everyone was expecting might be falling apart.  The bottom line is that your portfolio most likely dropped in value today as the stock market closed lower on news from two OTHER continents.

The Dow Jones Industrial Average lost 45.05 points (-0.44%, 10,099.14) today and the S&P 500 gave up 2.95 points (-0.27%, 1,075.51).  The Nasdaq 100, the strongest of the three over the past two days, closed up 3.37 points (+0.18%, 1,779.11)

After the credit markets fell apart last year the Federal Reserve dropped interest rates to near zero making the dollar a shiny new candidate for the carry trade.  China tightened credit, Asian and European stock markets dropped, Merkel caught flak from the German voters not to keen on bailing out another country and the European markets dropped lower.  Then, before our markets even opened, the carry trade cowboys were buying in their dollar short positions and entering sell orders for stocks here at home.

The market opened lower and the DJIA dropped 144 points in the first 10 minutes of trading.  Market players started putting a positive spin on the news as analysts said the gradual tightening in China would be a good thing over time and Blackrock Inc. came out and said they are increasing their Greek bond holdings.

Market players tried to put a positive spin on the China news saying a gradual tightening will keep a bubble from forming.  Another factor cited in the tightening of credit in China is that investment money is flooding in and the reserve raise is trying to sop up some of that extra cash.  It looks like money is chasing investments looking to catch that near vertical phase before the bubble pops.  If that is supposed to be the good news, here is the bad news – 50% of the commercial space in Beijing is vacant.  They are building buildings just to build something and keep the jobs.  This means there is already a bubble in China and that business is not keeping up with the stimulus generated building supply.  No tenants means no rent collected, which means no payment back of the loan taken to build the building.  When that loan comes due – crash.

Surprisingly, Caterpillar Inc. (NYSE: CAT) was up today (+$0.05, $56.20) after my picking it as a proxy trade for China yesterday.  CAT opened over a point lower and spent the rest of the day trading up.  My other China-economic news proxy trade, the iPath Dow Jones-UBS Copper ETN (NYSE: JJC) lost 1.40% (-$0.60, $42.10) but is up nicely this week (+6.91%).  The Chinese markets closed today for two weeks for New Year’s celebrations and the tightening after the close yesterday was a pretty sly move by the government.

The dollar shot up on the news that the German’s were backing away from the deal with Greece.  This caused commodities to drop as New York spot gold traded as low as $1,076.10 an ounce but spent all day recovering as the dollar dropped.  NY spot was last trading down 50 cents at $1,092.10 (4:25 p.m.).  The PowerShares DB US Dollar ETF (NYSE: UUP) gapped up on the market open and traded as high as $23.74 (+$0.19) before closing at $23.63 (+$0.08).  This is the highest close for the UUP, excluding last Friday’s close at $23.65, since July 29, 2008.  Gold holding in here solid while the dollar inches up is showing some very solid relative strength.

Nymex crude dropped $1.15 a barrel to $74.13 (-1.53%, 4:14 p.m.).  A slower China means less oil demanded and possibly the two week New Years vacation over there will also crimp demand as factories are shut down.

Next week the markets are shut for Presidents’ Day so that means a THREE DAY WEEKEND!  Hope you have the day off Monday and have a great weekend.

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News

Germany and France step up to the plate for Greece – Market Rallies

By Robert Perrego, at 5:02 pm on February 11th, 2010

The yo-yo we call the stock market went back up today as news came out of Europe that will help Greece get back on track handling their debt load.  While the European Central Bank itself is prohibited from lending Greece money, individual countries can and finance ministers are working on setting up a lending facility with each country chipping in according to their percentage of EU GDP.  This is more important just as a political and structural statement that the EU will keep its economic house in order and the framework being set up for Greece can be used for other problem economies.  Currently, Ireland, Spain and Portugal are on economic life support with large budget deficits and debt loads.  As details were sparse, the euro fell early in the day but rallied as market players gained confidence a solid plan was forming.

The Dow Jones Industrial Average gained 105.81 points (+1.05%, 10,144.19) powered by strong gains in Caterpillar Inc. (NYSE: CAT) which climbed 5.64% (+$3.00, $56.15).  The S&P 500 closed up 10.34 points (+0.97%, 1,078.47) and the Nasdaq 100 was the strongest of the three adding 25.98 points (+1.48%, 1,775.74)

Two hot Chinese stocks today, JJC and CAT, were strong on news inflation in China eased in January.  Traders were betting the drop in inflation to 1.6% from 1.9% in December would mean that officials may not tighten credit as much allowing the economy to run.  CAT, of course, is Caterpillar and as American a company as you can get, but this stock fires up every time good economic news comes out of China.  Of course the downside to this is that CAT also craters when news of government credit tightening hits the tape.  The iPath Dow Jones-UBS Copper ETF (NYSE: JJC) jumped up 4.58% (+$1.87, $42.70) today as everyone knows China builds everything out of copper – or so the market would have you believe.  The move in copper may have been magnified as the plumbing and wiring staple has been beaten down badly since peaking on January 6th.

The market vectors Gold Miners ETF (NYSE: GDX) gained 4.13% (+$1.64, $43.99) as New York spot gold fired up $22.60 an ounce (+2.11%, $1,093.30, 5:13 p.m.) and the companies that dig the shiny yellow stuff out of the ground usually find a lot of copper right next to it.  NY Spot traded as high as $1,097.60 today and is knocking on the door of $1,100 again.  After backing off to bottom out on support at $1,060, gold looks poised to break out and revisit its highs at $1,214 for a variety of technical reasons.

Looking at the chart of the SPDR Gold ETF (NYSE: GLD) we see that the close today at $107.13 is just 82 cents below its 50 day exponential moving average at $107.95.  At almost the same level is the down trendline gold has been following since its top on December 3rd of last year.  This trendline is a three point ‘confirmed’ trendline, which means when it is broken the computer buy programs will spit out higher probabilities of success associated with a long gold trade and buy more.  If gold closes above $1,100 the GLD will be through the trendline and at the 50 day EMA, and any climb higher from there has breakout written all over it.  Throw in breaking through a round number ($1,100), the fact that the GLD has been forming a descending bullish wedge formation and that the euro might strengthen more against the dollar as more details come out of the Greece deal and you have a recipe for $1,200 gold and $118 or so on the GLD.

Home builders were strong on good housing data and Lennar Corp. (NYSE: LEN) jumped 8.84% (+$1.38, $16.99) and pulled off a great trade by buying into about $1.2 billion of distressed mortgages at 20 cents on the dollar.  As these loans are secured by the homes themselves, Lennar just bought a slug of houses and being a housing company you would think they know how to sell any homes they repossess (if it comes to that).  Lennar stock broke out today through the $16.40 level and has a loosely defined ascending triangle that could be pointing to the stock rising to as high as $21.40.

Nymex crude advanced 85 cents (+1.14%, 5:05 p.m.) to $75.37 a barrel.  Traders figured with all the good economic news out of Europe, China and solid housing data here at home, owning the slippery black stuff that powers the economy is not a bad idea.

On top of all this good news, Washington D.C. took the day off yesterday and this means none of our politicians spent a gazillion dollars on a bridge to nowhere or an airport without passengers.  Now that is great news.  Of course today they got right back into the swing of things and started working on spending another $87 billion on creating jobs.  The Republicans seem to be getting on board as the plan also comes with tax cuts.  When these guys play nice we get spent to death and when they don’t we have to listen to them argue!  We need jobs but even the Administration says the $87 billion would only create jobs on the margin and The Congressional Budget Office estimates that for every $1 million in taxes cut, 8 to 18 jobs will be created.  Assuming that they just cut taxes by the full $87 billion (yeah, I know – fat chance of that with these guys), this creates 696,000 to 1.566 million jobs.  That is not a bad start but leaves me with one question; what happened to the $787 billion we spent last year?  At 8 to 18, that money should have created 6.3 million to 14.1 million jobs and if that had happened we wouldn’t be in this mess in the first place and needing to spend another $87 billion!

This is why I am rooting for about 787 more snowstorms to be headed straight at Washington D.C.

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