News

Market Posts Gains on Economic Data, No Bad News from Greece

By Robert Perrego, at 4:49 pm on February 17th, 2010

Housing Starts came in above expectations and the Industrial Production number was also higher than expected today, and so was the stock market.  Home Depot Inc. (NYSE: HD) was one of the stronger stocks in the Dow Jones Industrial Average, rising 1.97% (+$0.58, $30.02), as the home improvement retailer’s stock broke out to its highest level in over 17 months.  The Federal Reserve released the minutes from their last meeting, shedding more light on the end of the quantitative easing program and the $1.425 trillion of toxic mortgage and Fannie and Freddie debt they have accumulated over the past year.

The Dow Jones Industrial Average gained 40.43 points (+0.39%, 10,309.24) with 20 of 30 stocks up on the day.  The broader S&P 500 added 4.38 points (+0.38%, 1,099.24) with biotech (+1.63%) leading the way.  The tech heavy Nasdaq 100 closed up 8.80 points (+0.48%, 1,810.86).  DJIA component Home Depot broke out of a small bullish head and shoulders pattern yesterday and, with today’s move, is most of the way to the $30.68 target price level of the pattern.

Philadelphia Fed President Charles Plosser has been the dissenting voice on interest rate policy (he voted to raise rates this past meeting) and he is not a big fan of the fact that The Fed owns more toxic mortgage related paper than anyone else.  Both these stands on issues may be working towards the same goal, as when the Fed stops buying toxic mortgage securities soon AND if they started to sell them to decrease their holdings, the most likely result would be rising mortgage rates.  The Treasury market fell today (rising interest rates) with the 30-year rising by 7 basis points to 4.71%.  The 30-year fixed mortgage is currently at 5.08% and if you are thinking about refinancing or buying a home, the sooner the better.

There was a lot of news out about gold as George Soros, John Paulson and pension funds are reported to be buyers.  Soros commented last month that gold was in a bubble and turned around and bought so much of the SPDR Gold Trust (NYSE: GLD) he became the fourth largest holder.  I don’t think I will believe what he has to say too much anymore.  Paulson upped his exposure to gold by 10% and was buying the banks, as was Soros.  Yesterday, the euro strengthened against the dollar and gold was up over $16 an ounce.  Today the euro dropped back down to its lowest level against the dollar since May of 2009, giving up all of yesterdays gains, and New York spot gold dropped $3.80 an ounce.  This leaves the dollar-euro relationship right where it was last Friday with gold up $12+ an ounce.

Breaking News – 4:54 p.m. EST – New York spot gold drops another $8 an ounce ($1,106) as the IMF announces they will be selling the remaining 191.3 tonnes of gold in the open market.  Last fall India bought 200 tonnes from the IMF out of an allocated 400 tonnes to be sold.

Nymex crude was up again, rising 43 cents (+0.53%, 4:12 p.m.) to $77.44 a barrel.  Since October, oil has risen to over $80 a barrel twice and then retraced to $70.  The latest move back above $75 looks like another inevitable move to $80+.

Tomorrow’s economic reports are the Producer Price Index (0.8%, 0.1%) and Jobless Claims (440k) at 8:30 a.m., Leading Indicators (0.5%) and the Philadelphia Fed Survey (17.0) at 10 a.m. and a whole lot of bond auctions for the 3-Month, 6-Month, 2-Year, 5-Year, 7-Year and 30-Year TIPS maturities.  Two Fed Presidents and one Fed Governor will be speaking Thursday as Elizabeth Duke speak at 5 p.m., Dennis Lockhart at 7 p.m. and James Bullard at 9 p.m.

Selected earnings estimates for February 18, 2010:

AEE 0.27 before market open, APA 1.96 bmo, ABX 0.57 bmo, CBS 0.25, DAI 0.02, DDR 0.32 after the close, HRL 0.52 atc, IM 0.52 atc, KEG -0.13, PDE 0.17 bmo, PEG 0.60 bmo, RS 1.02 bmo, SFY 0.28 bmo, WMT 1.12 bmo, WCG 0.44 bmo, WMB 0.34 bmo.

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Wall Street Wrap

Financials Weak and Dow 10,000 No More

By Robert Perrego, at 5:06 pm on February 8th, 2010

The Dow Jones Industrial Average slid steadily all afternoon closing down 103.84 points today (-1.03%, 9,908.39) and closed below 10,000 for the first time since November 4th of last year.  All but 2 of the 30 components were losers today with the three weakest stocks all being finance related companies.  Bank of America Corp. (NYSE: BAC) dropped 3.46% (-$0.52, $14.48), American Express Co. (NYSE: AXP) lost 2.80% (-$1.06, $36.79) and the Travelers Companies Inc. (NYSE: TRV) finished lower in the red by 2.44% (-$1.23, $49.05).  Home Depot Inc. (NYSE: HD) was the strongest of the Dow components gaining 2.18% and also up were home builders Lennar Corp. (NYSE: LEN) +4.62%, Beazer Homes USA Inc. (NYSE: BZH) +3.64% and Pulte Homes Inc. (NYSE: PHM) +2.29%.

The S&P 500 dropped 9.45 points (-0.89%, 1,056.74) and the Nasdaq 100 was down 11.24 points (-0.64%, 1,734.88) and was the leader by being the smallest loser.

I guess the sky stopped falling over in Europe as the euro stabilized against the dollar and Greece was mentioned by the talking heads on CNBC slightly less than the babbling about former Merrill Lynch & Co. chief John Thain getting a new job over at CIT Group Inc.  Various cures for what ails Greece have been proposed from applying for loans from the International Monetary Fund to getting more on their credit card from other EU members.  I vote the EU members bail the EU members out as we pay into the IMF and the chances of Greece paying that money back anytime soon with a strike or protest every other day does not look to good to me.  The Greeks are proud of the fact they invented democracy and the rest of the world is pretty happy they gave it to us, but constantly striking, protesting and having your voice heard pays less taxes than actually going to work.

The dollar slipped marginally, but stayed up at level it has not seen since August of last year.  With the dollar at this relatively high level and basically scared up a tree by the crisis in Greece (and other countries), commodities are looking like a bargain if you think the dollar will come back down when (if) Europe stabilizes.

New York spot gold lost $2.70 an ounce and last traded at $1,062.30 (-0.25%, 4:24 p.m.) as this percentage loss outperforms the 1%+ the DJIA lost.  CNBC has had gold up all day over $10 an ounce and I am guessing the futures contract they are watching is longer dated than the spot market.  If you are invested in or trading the gold ETF’s you will find that they correlate more closely with the spot market than whatever CNBC decides to display.

Oil gained $0.48 to $71.65 a barrel (+0.65%, 4:27 p.m.) as the steep slide down from last Wednesday’s peak is halted.  Oil reversed in this general neighborhood last December with the United States Oil Fund (NYSE: USO) bottoming at $35.48 on December 11th before running up to $41.17 on January 8th (+16%).  For all you channel and range traders out there, today’s close at $35.09 does hit short term bottoms from last December, September and August.

We have a relatively light economic calendar this week with no speeches or testifying for Timothy Geithner.  Fed Chairman Ben Bernanke testifies in front of the house Financial Services Committee on Wednesday about how he is going to let all the air out of the liquidity balloon without crushing job creation (like that is happening now anyway).  As long as I don’t hear ‘then we pray’, it sounds like a plan to me.  Ben is a pretty smart guy and the fact that our economically challenged politicians are going to quiz him on whatever he decides to do and then possibly even understand his answer is comical.

Tomorrow at 7:45 a.m. we have the ICSC-Goldman Store Sales, at 8:55 a.m. we get the Redbook and Wholesale Trade numbers come out at 10.

Selected earnings estimates for Tuesday, February 9th:

AGU 0.24, AFG 0.98 after the close, BIDU 1.68 atc, BJS 0.04, CAM 0.53, CHD 0.80 before market open, CVH 0.56 bmo, EOG 0.98 atc, IT 0.26 bmo, IFF 0.62 bmo, LGF -0.23 atc, MLM 0.33, TAP 1.10, NYX 0.48 bmo, PCH 0.04 bmo, PHM -0.19 bmo, RNR 2.50 atc, TIN 0.03 bmo, KO 0.67 bmo, VSH 0.12 bmo, VMC -0.01, DIS 0.39 atc, XL 0.70 atc

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Wall Street Wrap

4 Good Economic Numbers and The Market STILL Sells Off

By Robert Perrego, at 5:01 pm on January 29th, 2010

If you were still wondering what direction the market was headed in, today should have answered that question for you.  We got a very good GDP number and three other solid economic reports today, but you wouldn’t know it looking at where the market closed.  Apple Inc. (NSDQ: AAPL) got hit again for another $7.23 (-3.62%, $192.06) bringing the two day drop to $15.82 (-7.61%).  Microsoft Corp. (NSDQ: MSFT) reported after the closing bell yesterday and beat analyst expectations, then got sold off all day long after gapping up on the open (-$0.98, -3.36%, $28.18).  Tech has been taken apart over the past two days with the Nasdaq 100 losing 77.86 points (-4.28%)

The Dow Jones industrial Average dropped 53.13 points (-0.52%, 10,067.33) and the S&P 500 closed lower by 10.66 points (1,073.87).  Usually the DJIA and S&P run at about a 10-to-1 ratio, but strength in Home Depot Inc. (NYSE: HD) and a Goldman Sachs upgrade for Wal-Mart Stores Inc. (NYSE: WMT) provided strength to the Dow Average.  Sadly, one of the reasons these stocks were strong and upgraded was they are both firing people, and therefore cutting costs.  About 8 out of 10 stocks on my trading screen finished in the red (lower) today with 12 of the 30 DJIA components finishing in the green (higher).

For the Nasdaq it was a whole different story with the only relative strength of a large cap stock provided by Amazon.com Inc. (NSDQ: AMZN).  Amazon avoided getting sold off too hard by announcing a $2 billion share buyback.  The Nasdaq 100 dropped 30.06 points (-1.69%, 1,741.04) and when the tide goes out, all the ships go down, so Amazon still closed lower by 62 cents (-0.49%, $125.41).  Why would a company announce a multi-billion dollar buyback when their stock is at an all time high, and the market is looking ripe for a retreat?  Maybe the guys running Amazon should go to their website and buy a book or two about technical analysis and trading, because if they started buying today, they stand a good chance of buying too high.

The silver lining to this cloud is that the indexes have all sold off into support levels.  The DJIA closed at 10,063 with 10,090 as support.  Two closes through support are needed to confirm a break and today is only one.  The S&P 500 is right on support at 1,071 and the Nasdaq 100 has support at 1,733.  The first half of next week’s trading will be important to show whether or not this drop is a just a pullback or the beginning of a larger decline.  The fact that the longer term uptrend lines for all three indexes have been broken leads me to believe that the market is done climbing for awhile.  When an uptrend is broken it does not mean the market is going down.  It could mean the market goes into a sideways trend or a downtrend, or it could mean sideways and then a resumed uptrend.  Only time will tell.  I think we go lower from here as it looks like the big boys are selling earnings and unloading stock.

The dollar ripped higher on the strong GDP number (5.7% vs. 4.5%) as the PowerShares DB US Dollar ETF (NYSE: UUP) gapped above its 200 day exponential moving average ($23.32) and traded even higher into its close (+0.77%, $23.45).  Commodities got hit on the dollar strength as copper was off 2.08%, coal dropped 4.56% on bad earnings from Arch Coal Inc. (NYSE: ACI), steel lost 1.62% and the ag’s were weaker by 1.09%.

Surprisingly, gold hung in there tough as now it may be trading as more of a safe haven and a currency than a commodity.  As the money rotates out of equities it looks like some of it is finding a home in the shiny yellow metal.  New York spot gold lost only $5.10 an ounce to $1,080.30, which is a 0.47% drop (4:47 p.m.)  It is unusual that the absolute percentage move in the dollar is greater than the corresponding percentage move in gold.

Oil dropped on the dollar strength as Nymex crude lost 98 cents and last traded at $72.65 a barrel (-1.28%, 4:42 p.m.)

Next week should be interesting, to say the least.  It is Friday now, after the close and high time to close the trading screen and go have a great weekend.

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News

Tracked.com Topics: Retailers’ Time of the Season

By Taryn Cooper, at 4:53 pm on November 18th, 2009

We are a week removed from Thanksgiving here in the States, and with that comes the one day most people have a love/hate relationship with… Black Friday, the Reigning Day of the Retailer.  Everywhere from Wal-Mart Stores to Apple retail stores have some kind of door-opening-bargains in anticipation of the gift-giving season.

Consumers are not the only people to be intrigued with retailer specials this time of the season.  Research analysts are also intrigued with the performance of retailers.  Incidentally, many retailers have reported their 3Q results, some positive, some not so.  An uptick in retailer stocks has to be positive.  After all, they are mostly driven by consumer dollars.  And when consumers spend, spend, spend…that means we back in biz.  Alternatively, if consumers do not spend, that means consumers are putting off large purchases or rather “non-necessity” purchases.

What else screams “non-necessity” impulse purchases but Black Friday?

Wal-Mart Stores, as an example, has confirmed Black Friday deals at their stores, adding to the hype and hysteria that leads to door-busting situations.  Especially noteworthy in that article was the line that Black Friday is considered a “key barometer of shoppers’ willingness to spend for the holiday period.”

In that light, Barron’s has put out its list of retailers expected to do well this holiday season, including the likes of Coach (COH), Nordstrom (JWN), Best Buy (BBY) and Dollar Tree (DLTR).  Talk about eclectic.   The first two are incredibly high-end and borderline luxury specialty retailers, which suggests to me that those who have been unscathed by the whole economic crisis will still be spending money for loved ones.

Best Buy will always do well in the holiday season, catering to the niche market of electronics and gaming junkies, not to mention those who are in the market for the newest hottest gadget. Since its largest competition Circuit City went out of business earlier this year, Best Buy’s stores will be busting at the seams this season.

Dollar Tree stood out for me.  It makes sense though, being on the other side of the luxury scale.  Not only ’tis the season of giving, ’tis the season of regifting.  Who wants to go to their friends’ or families’ homes empty-handed, only to have that gift turned over to someone else or tossed out?  Sometimes, bottles of cheer are not recommended, and Dollar Tree is the only cure for that fever?

Discount-store competitor Dollar General also showed some great promise on the market, having the largest retail initial public offering in more than 12 years. Having been taken private by KKR in 2007, DG’s shares performed well in the market along with other low-priced retailer Rue21.

The retail sector choices remind me of what Mom always used to say to me: spend money on accessories, save money on clothes.  Clothing goes in and out of style quickly, but accessories like a nice watch or handbag (for women, of course) will always stay current.  Sounds like the market is taking that approach this holiday season as well.

Best Buy is not the only Big Box Retailer to have chatter this week in anticipation of the holiday season.  Big Boxers Home Depot (HD) and Lowe’s Companies (LOW) reported Q3 earnings earlier this week.  While both companies beat street estimates, the home-improvement retailers’ respective CEOs both warned about consumer spending or lack thereof.  Namely, while customers are taking care of small do-it-yourself projects, large building projects are being put off until the economic outlook appears better (lumber sales, high-end electrical and wiring equipment).

Lastly, department store J.C. Penney reported a lower profit for Q3 but raised its full-year forecast, possibly topping Wall Street expectations.  Perhaps there is a corner being turned in retail after all.

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Wall Street Wrap

They Are Calling Everything a Bubble, Except Housing

By Robert Perrego, at 11:11 pm on November 17th, 2009

Home Depot Inc. (NYSE: HD) reported earnings today before the bell and beat estimates by 5 cents ($0.41 vs. $0.36), hit their expected revenue number of $16.26 billion and guided higher for the fourth quarter.  Then the shares went and traded off 2.38% today.  Even though Home Depot guided higher, expectations for the fourth quarter were even higher yet on Wall Street.  Yesterday Lowe’s Companies Inc. (NYSE: LOW) reported and missed by a penny as their profit dropped 30% year-over -year.  In trading action today Home Depot dropped 66 cents (-2.38%, $26.99) and Lowes dropped 26 cents (-1.19%, $21.48)

Home Depot is a Dow Jones Industrial Average component which rose 30.46 points (+0.29%, 10,437.42).  The S&P 500 was up barely adding a point (+0.09%, 1,110.32) and the Nasdaq 100 gained 4.65 points (+0.25%, 1,812.21)

Everyone is talking about bubbles lately, spurring Bernanke to comment on the dollar, which was previously thought to be the playground only for the Treasury.  Worries are becoming so common that it brought San Francisco Fed President Janet Yellen to comment directly on whether or not the Fed should get involved with the markets.  Previously The Fed would stick to its knitting and worry about unemployment and price stability.  Economists and bankers in China are worried we are causing a Chinese real estate and equity bubble by keeping interest rates at practically zero and flooding the world with liquidity.  And to top this all off, just about everyone seems to think commodities are in a bubble.

The concern in the U.S stock market is the ever increasing leverage employed due to the dollar carry trade.  The short dollar position is very crowded now and participants and pundits are becoming more and more worried about such a precarious situation.  Who would have thought everyday discussions would be about bubbles so soon AFTER a bubble popped.

The one thing you won’t hear mentioned in the same sentence with ‘bubble’ is housing here in the U.S.  The only thing that seems to be keeping homes selling at all is the first time buyer tax credit, which was just extended.  We have a ‘Tale of Two Cities’ here for the housing related stocks – the ones that got hammered and the ones that got obliterated.  From the peak of the home building ‘bubble’ (past tense I guess you can get them into the same sentence) to their lows, Beazer Homes USA Inc. (NYSE: BZH) lost 93.7%, Pulte Homes Inc. (NYSE: PHM) lost 80.1% and Lennar Corp. (NYSE: LEN) lost 78.9%.  Beazer is down 93.7% AFTER it bounced 2,005% of its low of $0.24 on March 9th.  Home Depot and Lowe’s are only down 39.1% and 39.9% respectively and the best performing home builder was Toll Brothers Inc. (NYSE: TOL) at down 64.5%.  This makes you wonder where these stocks would be without the first time buyer program.

New York Spot Gold held tough today in the face of a rising dollar gaining marginally up $1.30 an ounce to $1,141.10.  Of note today in gold trading was a single trade in the gold ETF (NYSE: GLD) of 2,525,000 shares at $111.205.  This is a single trade with a dollar amount of $280.7 million.  It looks like some institutional equity salesman made a real nice commission check today.

Nymex crude gained 24 cents to $79.41 a barrel and the dollar gained 0.63% with the Dollar ETF (NYSE: UUP) up 14 cents to $22.36.

So wait a minute!  The dollar goes up and so does gold, oil and stocks?  Methinks this bubble thing could be overblown.  Then again it may not as you only really know a bubble when you are hearing the air whooshing out and you are sell-sell-selling.

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