Wall Street Wrap

Fed Says Job Losses Abating, Leaves Rates Unchanged

By Robert Perrego, at 4:48 pm on December 16th, 2009

Well the good news is job losses are slowing down but the bad news is we are still losing jobs.  In the last meeting for 2009, the Federal Open Market Committee voted to keep interest rates “exceptionally low” for “an extended period of time” while noting that they are seeing some improvement in household spending.  This meetings statement was very similar to the past few except some comments were made on slowly improving areas of the economy such as household spending and decreasing job losses.  These statements strengthened the dollar with the US Dollar Index Future spot price trading up on the announcement.  You do not hear ‘The Fed’ without hearing ‘exit strategy’ these days and as it is widely thought that raising interest rates with 10% unemployment would not be greeted favorably by the Obama Administration, the first step towards the ‘exit’ would be to stop their quantitative easing programs.  So, The Fed also stated they will continue to purchase agency mortgage-backed securities through February 1, 2010 but after that ‘the store is closed.’

After The Fed announcement at 2:15 p.m., the Dow Jones Industrial Average dropped about 30 points net into the close to finish down 10.88 points (-0.10%, 10,441.12) while the S&P 500 dropped about 5 points on the announcement and finished up 1.25 points (+0.11%, 1109.18).  The Nasdaq 100 rose 2.61 points (+0.14%, 1,800.82).

The dollar traded up on the announcement and basically closed unchanged on the day.  Earlier in the day the usual relationships were acting as expected with the dollar down and stocks and commodities up.  Interestingly, the dollar rallied into the end of the day and erased its losses while gold and oil also closed near their highs on the day.  New York Spot Gold added $13.60 an ounce (+1.21%, $1,136.60, 4:14 p.m.) and the SPDR Gold Shares (NYSE: GLD) bounced off support and broke higher by $1.36 (+1.25%, $111.59).  The GLD’s chart looks very nice for more upside movement as the latest gold pullback may have seen its lows.  Paulson, Einhorn and most every other gold bull was saying they would be buying on dips and I wonder just how much they were able to add to their positions over the past 3 or 4 days.

Nymex crude added $2.03 a barrel (+2.87%, $72.72, 4:09 p.m.) as it seems the pullback in oil may be over with too.  We were below $70 a barrel on Monday but a nice run over the last two days has changed all that.  Copper, steel, coal and agricultural commodities were all up as well.

Another federal agency was in the news today as the Federal Trade Commission filed a lawsuit against Intel Corp. (NSDQ: INTC) for anti-competitive behavior.  I think the legal community founded Intel and they didn’t do it for semiconductor chips as this company generates lawsuits about every other day.  The lawsuit cites bundling practices and even a secretly redesigned compiler software that makes their competitors chips run a little slower.  Intel finished lower by 42 cents (-2.12%, $19.38).

Nvidia Corp. (NSDQ: NVDA) jumped higher as they are one of the firms that Intel is supposedly squeezing out of the chip market as the graphics chip company added $1.26 (+8.05%, $16.91).

Housing companies were strong today as Housing Starts were up 46k over last month and Permits were up 32k.  Beezer Homes USA Inc. (NYSE: BZH) gained 13.36% (+$0.60, $5.09), Pulte Homes Inc. (NYSE: PHM) gained 5.06% (+$0.45, $9.34), D. R. Horton (NYSE: DHI) gained 4.89% (+$0.48, $10.29) and Lennar Corp. (NYSE: LEN) was up 4.73% (+$0.57, $12.62).

The big economic news of the week was the FOMC meeting and with that out of the way we have Jobless Claims tomorrow at 8:30 a.m. with the expectations being 465k with a range from 460 to 470.  Friday is a quaruple witching day in the options market.

Tiger Woods name was only mentioned 232,000 times on CNBC today as something really important to all of our lives probably did not happen or have anything at all to do with Tiger Woods but CNBC was there to cover it.

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Week on Wall Street

Weak Week for Commodities on Dollar Strength, Stocks see less Action

By Robert Perrego, at 10:07 am on December 12th, 2009

With the end of the calendar year so close it looks like a few of the players have gone to the sidelines and are thinking more about gifts to buy for the holiday season than stocks.  The Dow Jones Industrial Average gained 83 points on the week while the S&P 500 and the Nasdaq 100 had net movement of less than one point.  In percentage terms, the PowerShares DB US Dollar Index (NYSE: UUP) climbed 0.88% while gold dropped 3.9%.  Oil began the week above $74 and finished out below $70 for the first time in since September,

The year has been a wild ride with the stock market dropping to below 7,000, bottoming out in March and then commencing a huge rally to the 10,000+ level we are at today.  This movement gave traders plenty of action to build their performance on, but that is only if you are on the right side of the trade.  With three trading weeks to go before 2010, funds that have hit their numbers for the year have packed it in and this could be responsible for the decreases in volume and volatility the market has experienced.

Monday saw the DJIA experience a net movement of less than 2 points and gold lost a few dollars.  The market must have had the cross-hairs on oil as the slippery black gold dropped over 2%.  CNBC was ripe with traders, economists and pundits debating the future of gold.  The Friday before saw a $48 an ounce drop in the price of gold as the Dubai World problems became public.  Fed Chairman Ben Bernanke gave a speech that watchers interpreted to mean no rate hikes would be coming anytime soon.  Again.  Intel Corp. (NYSE: INTC) dropped plans to produce a stand alone graphics chip and Advanced Micro Devices (NYSE: AMD) and Nvidia Corp. (NSDQ: NVDA) rallied on this news.

Tuesday brought a little action as the dollar rallied and the DJIA dropped 104 points.  The close Tuesday would mark the low close for the market for the week.  The financial news flow slowed but that was made up for by the news out of Washington D.C.  Obama stated in a speech he wanted to use repaid TARP funds to generate more jobs.  Theoretically, some think government spending generates zero jobs as taking $60,000 out of the economy via taxes and spending that same amount to pay someone a $60,000 salary leaves a net zero economic effect.  If there is any waste or frivolous spending (everyone knows the government would not do that) then you end up with a net negative economic effect.  As it may be politically unpopular to pass ‘Stimulus, The Sequel”, Obama seems to be looking around for any available funds, TARP, as a viable source for more spending.

Wednesdays big news was Citigroup Inc. (NYSE: C) stating they wanted to repay the funds they received from TARP.  Bank of America Corp. (NYSE: BAC) did it the week before by issuing a massive secondary offering that raised $19.3 billion.  Analysts estimate that Citigroup would dilute their stock by as much as 20% by doing this.  Fed Secretary Tim  Geithner extended the TARP program by a year, possibly to keep the program open so Obama could tap the fund for other spending.  Commodities were weak across the board.  Gold traded higher, then lower and then back to where it started and oil got hit for another 2.68% down to $70.69 a barrel.

The biggest moves Thursday were in health care stocks as the Senate Democrats backed off their plans to require a public option in health care reform.  UnitedHealth Care (NYSE: UNH) and Cigna Corp. (NYSE: CI) jumped up over 6%.  Some very positive news surfaced that household wealth increased by $2.7 trillion in the third quarter as housing prices actually rose and the run up in the stock market put more dollars into trading and retirement accounts.

Friday gave us strong Retail Sales data and showed Consumer Confidence was on the rise propelling the stock market higher.  This bodes well for the economy as the consumer and consumption drives our economy.  The DJIA climbed 66 points which turned out to be most of its weekly gain.  The dollar was strong again and commodities weak with oil closing below $70.  Regulatory reform moved along as the House passed their latest attempt to avert another financial problem via more regulation.  The problem here is, historically such attempts only seem to fix a past problem and have seemed to only cause the next one.

So, with three trading weeks to go to finish out 2010 we are still above Dow 10,000, oil is below $70 and hopefully the consumer is getting stronger.

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Week on Wall Street

Gold Moves Higher, Tech Dips

By Robert Perrego, at 10:44 am on November 21st, 2009

Last week saw gold trade another all time high while the overall market inched higher.  The tech sector, as represented by the Nasdaq 100, performed the worst with a weak day on Thursday accounting for most of the loss.  A downgrade of eight stocks in the semiconductor industry, which affected $126 billion in market cap, caused leader Intel Corp. (NSDQ: INTC) to lose over 4%.  The downgrade came on a day that saw the Mortgage Bankers Association report that 14.4% of all homes with a mortgage were either at least one month delinquent on their mortgage payments or in foreclosure, an all time high.

The Dow Jones industrial Average gained 0.46% this week while the S&P 500 lost 0.19%.  The Nasdaq 100 moved the most, but in the wrong direction, slipping 1.35%.  Gold continued its march higher with a 2.9% gain for the week and an all time high close on Friday.

The week started with Fed Chairman Ben Bernanke speaking to the Economic Club of New York.  The dollar peaked this year as the stock market bottomed in March, but has been dropping steadily ever since.  Bernanke controls short term interest rates and this interest rate has a lot to do with the strength of the dollar as denominated in other currencies.  The Fed is in a tight spot here as unemployment is above 10% and if you have noticed an ‘economic recovery’ you are one of the few.  The stock market has rebounded enough to be put in the same sentence as ‘bubble‘, and GDP stopped dropping like a stone, but for most the country times are tough.  The dollar is inherently political too.  If Bernanke defended the dollar by raising rates with the 2010 elections a year out, any negative effect this could have on the ‘economic recovery’ might get him fired.

Bernanke gave the all clear signal to people shorting the dollar, stating that interest rates were to remain low for the foreseeable future.  The dovish interest rate stance Bernanke gave fired up the bulls and they started shorting the dollar and buying stocks.  The Dow Jones rose 136 points and the market broke out to new 2009 highs.

Tuesday and Wednesday saw little movement in the market indexes as San Francisco Fed President Janet Yellen commented to her audience in Hong Kong about whether or not The Fed should get involved with the financial markets.  Obama’s visit to China, and his pledge to ask that the yuan be appreciated, centers on the dollar again.  There are more than a few Chinese officials that are blaming the very low interest rates here in the U.S. with creating bubbles in real estate and the market IN CHINA!

On Wednesday the Mortgage Bankers Association came knocking with their first set of bad numbers.  Purchase Applications came in below expectations as no houses being sold means no mortgages applied for.  New York Spot Gold traded an all time high of $1,153.90 an ounce.

Before the open on Thursday, Merrill Lynch downgraded the semiconductor sector and the Mortgage Bankers were back with that huge 14.4% number.  The market plunged off the open and by 11 a.m. the Dow Jones Industrial Average was trading 10,256, down over 150 points.  The market crept back and with a spike up at the end of the trading day losses were cut to less than 100 points.  Microsoft came out with an update on Windows 7, stating that sales were at a record pace.  Then something strange happened… on Thursday the dollar rose AND so did gold.

Thursday after the close Dell Inc. (NSDQ: DELL) reported weak earnings.  This added more selling  pressure to the tech sector after Thursday’s semiconductor rout and Friday opened with a gap down in the market.  The market traded lower until about 11 a.m. but then trended upwards for the rest of the day.  By the close of the day the Dow Jones Industrial Index had pared its loss to 14 points .  The dollar rose again on Friday and the PowerShares DB US Dollar Index (NYSE: UUP) gained 0.54% on the week.

This gave gold a 2.9% gain on the week and the dollar tacked on 0.54%.  For the most part, the dollar and gold are inversely related as gold is traded in dollars.  The dollar carry trade has linked gold to the market as the carry trade cowboys are shorting the dollar to buy the market, and to buy gold.  These days if the market is up so is gold and if the market is up the dollar is down.

This week the dollar was up, gold was up and the Dow Jones Industrial Average was up.  The broader S&P 500 was down slightly so the inverse dollar-market relationship held.  Gold moved higher on two days that the dollar moved higher.  Strange things like this can happen when you reach an all time high as it sometimes seems all everyone says is ‘gold, gold, gold’.  While a mania might be building around gold and one of the other things you hear with gold is ‘bubble’ bubble, bubble’, the fact that central bankers from Russia to Mauritania to Chile are buyers tells me all I need to know.  Gold is going higher.

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Wall Street Wrap

Dell Earnings Weigh on Tech, Market Drops Marginally

By Robert Perrego, at 5:59 pm on November 20th, 2009

Merrill Lynch downgraded the semiconductor sector yesterday, causing chip giant Intel Corp. (NSDQ: INTC) to take a 4% hit.  Today it was the computer maker that boasts “Intel Inside” turn to get hit as after the close yesterday, Dell Inc. (NSDQ: DELL) reported earnings that were five cents below expectations ($0.23 vs. $0.28).  Dell also missed their top line revenue number by $300 million ($12.9 billion vs. $13.2 billion) and the stock got hit for 9.95% today, dropping $1.58 to $14.29.  The market was down most of the day but staged a late  rally, turning the Dow Jones Industrial Average positive briefly.  However, the tech heavy Nasdaq 100 opened in negative territory and stayed there all day.

The Nasdaq 100 dropped 8.80 points (-0.49%, 1,764.39) and was the weakest of the three major indexes.  The Dow Jones Industrial Average lost 14.28 points and was in positive territory fifteen minutes before the closing bell, but slid into the weekend.  The S&P 500 lost 3.52 points (-0.32%, 1,091.38).

The strongest news of the week probably came from Microsoft (NSDQ: MSFT) as they reported ‘Windows 7′ sales are very strong.  Mr. Softy went out at $29.62 this week and this stock has not seen these levels since June 2008.  I recall some of the talking heads on TV recommending buying Dell a month ago or so, on the premise that the whole computer upgrade cycle sparked by ‘7′ would benefit the computer maker.  We got the answer to that thesis today.  Try again.

D.R. Horton Inc. (NYSE: DHI) released earnings today and lost $0.73 a share which was much better than a loss of $2.53 a year ago.  Analysts expected a loss of $0.30 and this miss brought a fresh wave of selling into the home builders.  Yesterday home builders were hit on a Mortgage Bankers Association report saying that 14.4% of all homes with a mortgage were at least one month delinquent on their payment or in foreclosure.  D.R. Horton got hit for 15.34% today (-$1.88, $10.37) with most the other home builders losing about 3 to 3.5%.

The SPDR Gold Trust (NYSE: GLD) went into the weekend with an all time high close.  Gold has been strong all week, with the GLD closing on its high for the day at $112.94, just 15 cents below its highest trade from Wednesday at $113.09.  New York Spot Gold was up $5.10 an ounce at $1,149.70 (+0.45%, 4:51 p.m.).  Everyday the financial media devotes much attention to gold, and while there are a few gold bears out there such as Nouriel Roubini, the majority of the pundits and financial professionals are very bullish on gold.  There are many arguments to be made about why you should be a bull on gold, ranging from inflation to deflation, declining gold production, the weak dollar, etc… but the only one I need to know is that central banks have flipped from being net sellers of gold to being net buyers.

Nymex crude dropped 74 cents a barrel today and finished the week at $76.72, after trading above $80 a barrel briefly Wednesday.  As oil peaked at just over $80 at about noon on Wednesday, the dollar was trading its low of the week.  The dollar traded higher both Thursday and today and all the carry trade cowboys that are short must be getting nervous.  We could see a spike higher in the dollar if some event triggers a short squeeze as this carry trade is very, very crowded.  The longer term direction for the dollar is most likely lower, but these squeezes can be brutal to sit tight through if you get caught short.

We have a short trading week next week as Thanksgiving Thursday gives the U.S. markets the day off.  Usually Friday is marked by light volume as many traders take the four-day weekend.  We get a GDP report on Tuesday but the week is light on other economic reports, which might be a good thing.  I don’t know how many more housing numbers the market can take like the ones we got yesterday.  It’s Friday and lets worry about that next week.

Have a great weekend!

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Wall Street Wrap

Wall Street Wrap – Intel and AMD Settle, Wal-Mart Digs In

By Robert Perrego, at 4:57 pm on November 12th, 2009

Up and down chip maker Advanced Micro Devices (NYSE: AMD) struck a settlement with Intel Corp. (NSDQ: INTC) for $1.25 billion.  In return AMD drops all the outstanding legal disputes it has against Intel and the two chip manufacturers agreed to a new five-year cross-licensing deal.  Back in the fall of 2002, AMD was a sub $4 stock but they were just about to leapfrog Intel with their new generation of 64-bit chips.  AMD stock went from a low of $3.10 to a high of $42.70 in 41 months as the underdog started giving Intel a real battle.  In March of 2006 the top for the stock was in, and from there AMD’s stock and sales dropped until a new low was put in at $1.62 one year ago.  On the news today, AMD’s stock closed up $1.17 or $21.80% at $6.48.  Intel traded down 16 cents to $19.68.

Possibly the last AMD decline had something to do with Intel’s business practices, which have raised the eyebrows of various regulators and governmental agencies from The European Union to The New York State Attorney General, both of whom have filed suits against the company.  This settlement helps AMD out with their $3 billion in debt while possibly helping Intel get some leeway with antitrust regulators.  European regulators levied a $1.4 billion fine against Intel recently and Intel appealed the fine.  If this settlement gets that fine reduced, or eliminated, this settlement pays for itself.

Wal-Mart Stores Inc. (NYSE: WMT) reported earnings of 84 cents a share against analyst expectations of 81.  The world largest retailer also raised its fourth quarter forecast but issued a warning of sorts.  In comments on their customers, Wal-Mart warned that unemployment and concerns about the economy may cause shoppers to become cautious heading into the very important holiday shopping season.  Wal-mart traded as high as $53.74 before settling lower and closing up 27 cents at $53.24 (+0.50%).

Overall the market took it on the chin today with the Dow Jones Industrial index dropping 93.79 points (-0.91%, 10,197.47) while the S&P 500 lost 11.27 points (-1.02%, 1,087.24).  The Nasdaq 100 performed best by losing only 9.81 points (-0.55%, 1,773.14).

The dollar turned in a strong performance today with the PowerShares DB US Dollar Bull ETF (NYSE: UUP) gaining 1.42% or 32 cents to $22.80.  The U.S. Dollar Index Future spot price (the ‘dixie’ or DXY) was only up 0.70%, which is strange as the UUP usually trades very closely, but did not today.  The UUP has become very popular as a dollar trading vehicle.  The demand for shares in this ETF is so high that a registration was filed for an additional 100,000,000 shares which will not be available until sometime in the future.  Until this registration is approved, the ETF managers have decided not to issue additonal shares, and this has caused a change in supply and demand for the ETF’s shares and is probably what has knocked it out of whack with the DXY.  You might want to stay away from the UUP until this all sorts itself out.

Of course this dollar strength caused commodities and commodity based stocks to drop and contributed to the selling pressure which brought the market lower.

New York Spot Gold cooled off after a 9 day hot streak that added $70 per ounce and ticked all time highs.  At 4:20 p.m. the cool yellow metal was down $13.40 an ounce (-1.20%, $1,103.40).   The iShares Gold ETF (NYSE: GLD) chart shows that it is back to trading inside the uptrend channel and the stochastic oscillators have peaked and are cycling lower.  The chart shows support at $105 for the GLD (about $1,070 for gold spot) and a pullback is expected here.

Nymex Crude dropped $2.34 a barrel (-2.96%, 4:30 p.m.) to $76.68 on a strong dollar and slightly higher inventory levels.  This rise in inventories and a decrease in demand for gasoline were cited as causes for the move lower.

The big number tomorrow is Consumer Confidence at 9:55 a.m. (71.0 expected).

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