News

China and Massachusetts Drive the Market Lower

By Robert Perrego, at 5:15 pm on January 20th, 2010

Mining stocks got hit today as the market took back what was gained Tuesday on the hopes of a Republican win in Massachusetts.  Hardest hit was Silver Standard Resources, Inc. (NSDQ: SSRI), which dropped 8.72% (-$2.02, $21.15).  Yesterday we tacked on 116 points on the hopes of a 41st vote for the Republicans in the U.S. Senate.  Well, the party was last night, the Republican candidate Scott Brown won and today the market posted its worst loss since November.  Hangover.  The party was being all happy about the possibility the Repub’s could block the Dem’s grand spending plans which would keep the debt, spending and taxes down.  The hangover is realizing that if Obama does not print the greenback into oblivion, if all of a sudden the trillion dollar health plan may not pass, then the expectations for a weak dollar will decrease.  Now ask yourself what the carry trade cowboys, who are short the dollar and long stocks and commodities, are going to do?

The Dow Jones Industrial Average dropped 122.28 points today (-1.14%, 10,603.15) with 24 of 30 components finishing lower. The S&P500 lost 12.19 points (-1.06%, 1,138.04) and the Nasdaq 100 led the charge lower as weak tech caused the index to close down 27.53 points (-1.45%, 1,867.95)

International Business Machines (NYSE: IBM) reported after the close yesterday and beat earnings, and also took first place in leading the DJIA lower today losing $3.89 (-2.89%, $130.25).  They sold the Intel Corp. (NSDQ: INTC) earnings after beating estimates and, starting in the after-market yesterday, they sold the IBM earnings beat as well.  Keep an eye on what happens to the eBay Inc. (NSDQ: EBAY) earnings announced after the close today and Google Inc. (NSDQ: GOOG), which reports after the close tomorrow.  If both these companies beat, and they sell the stock off after, this quarters reporting play is to sell tech earnings after the announcement.

The banks were strong today relative to the rest of the market as Bank of America Corp. (NYSE: BAC) reported a loss of 60 cents.  This loss included a one-time charge of $4 billion for a TARP payment spurring an Oppenheimer analyst to raise his rating on the stock.  BofA led the DJIA higher today gaining 17 cents (+1.04%, $16.49).  Bank of New York Mellon Corp. (NYSE: BK) posted a 49 cent per share profit after charges and 60 cents before, which beat the analysts’ estimate of 51 cents, powering the  stock higher by 4.84% (+$1.43, $30.96).  Wells Fargo & Co. (NYSE: WFC) posted an 8 cent per share profit with the analysts expecting a 1 cent loss.  Wells Fargo stock dropped 1.62% (-$0.46, $27.82).  Morgan Stanley (NYSE: MS) posted 29 cents per share profit with the analysts expecting 36 cents, causing the stock to drop 1.70% (-$0.53, $30.63)

Other than a Republican winning the Senate seat long occupied by Ted Kennedy, the big news today was a report that Chinese authorities asked some commercial banks to stop giving loans for the rest of the month of January.  China’s top banking official denied the report, but then again they had nothing to do with the Google hack last week right?  The Shanghai Composite dropped 2.9% on the report and a tightening of the loans in China will slow growth there and here as well.  The more buildings China builds the more Caterpillar, Inc. (NYSE: CAT) tractors they buy.

The combined news of the election in Massachusetts and the loan tightening in China caused the PowerShares DB US Dollar ETF (NYSE: UUP) to gap higher this morning on the open.  The UUP gained 1.22% on the day (+$0.28, $23.12) and broke its short term down trendline.  The stochastics for the UUP are reversed at a low level and heading higher so, with this breaking of a trendline and the stochastics all bullish, the chart points up for the dollar.

As a result of the report that China is slowing down their economic growth and that the dollar might be given a reprieve from death row, commodities got hit hard today.  Steel got hit for 3.11%, coal lost 2.86%, copper down 2.68% and gold down 2.39%.  New York spot gold lost $27.20 an ounce (-2.39%, $1,1140.40, 4:50 p.m.) and Nymex crude was down $1.59 a barrel (-2.00%, $77.73)

UPDATE: eBay earnings came in at 44 cents a share vs. the expected 40.  Revenue was reported to be $2.4 billion with expectations of $2.29.

Selected earnings for Thursday, January 21, 2010:

ACS 0.99 after the close, AXP 0.56 atc, APH 0.49, BNI 1.22 atc, COF 0.45 atc, CMA -0.49 before the open, ED 0.76, CAL -0.07 bmo, ELX 0.16 atc, FCS 0.17 bmo, FITB -0.31 bmo, GS 5.20 bmo, GOOG 6.45 atc, ISRG 1.71, ESI 2.36 bmo, KEY -0.39 bmo, LM 0.31 bmo, PNC 0.77, PPG 0.73 bmo, PCP 1.64 bmo, UNP 1.04 bmo, UNH 0.73 bmo, WDC 1.36 atc, XRX 0.22 bmo

Economic reports for Thursday:

Jobless Claims 8:30 a.m. 440K expected

Leading Indicators 10 a.m. 0.7%

Philadelphia 10 a.m. Fed Survey 18.0

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Wall Street Wrap

Market Rallies and All Eyes On Massachusetts

By Robert Perrego, at 5:15 pm on January 19th, 2010

Over the past month, Massachusetts State Senator Scott Brown, has made up 30 points in the polls to make the race for Ted Kennedy’s U.S. Senate seat too close to call.  What makes all this a game-changer is that if Brown wins, the Republicans will have 41 votes in the Senate, ending the Democrats super-majority, filibuster proof 60 votes.  Health care stocks split over the news with HMO’s up and hospitals down.  Humana Inc. (NYSE: HUM) shot up $3.43 (+7.07%, $51.94) and closed at its highest level since March 2008.  Coventry Health Care Inc. (NYSE: CVH) gained $1.51 (+5.99%, $26.71) and Aetna Inc. (NYSE: AET) was up $1.30 (+4.14%, $32.66).  On the downside, if no new health care legislation gets passed, there will be more people with no insurance walking into hospitals so Tenet Healthcare Corp. (NYSE: THC) got hit for 3.45% (-$0.21, $5.86) and Community Health Systems Inc. (NYSE: CYH) lost 2.66% (-$1.02, $37.31).

The Massachusetts election could impact not only the current health care reform bill, but any future ‘cap-and-trade’ bills (read – utilities and coal companies – up), immigration, finance reform (read – no $120 billion bank tax or onerous legislation – banks and broker/dealers up), etc…  The market loves gridlock in Washington D.C. as there is less uncertainty when politicians can get nothing done so nothing changes and you know what you can plan on.  Seeing as most the country thinks not getting anything done is the natural state of affairs with politicians, this all makes sense.  Now, if Brown wins we can expect them to get even less done.  Isn’t that great?  Nice job posting – Senator wanted to get less done, apply within.

The Dow Jones Industrial Average had 26 of 30 stocks up with Merck & Co. Inc. (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) leading the way up 2.91% and 2.61% as both companies made new 52 week highs.  The DJIA itself tacked on 115.78 points (+1.09%, 10,725.43), the S&P 500 added 14.20 points (+1.25%, 1,150.23) and the Nasdaq 100 rose 31.96 points (+1.66%, 1,895.48).  All three of these indexes closed at 15 month highs.

International Business Machines (NYSE: IBM) reported after the close today and beat earnings estimates ($3.59 vs. $3.47), beat revenue estimates ($27.2 billion vs. $27 billion), guided higher ($11/share vs. $10.88 expected in 2010) and promptly sold off in the after-market.  IBM closed at $134.14 and was trading down to $131.38 at 5:44 p.m.  We saw this happen last week when Intel beat by 33% and got hit the next day.

With the DJIA, S&P 500 and Nasdaq all at 15 month highs, 10% unemployment and a battered consumer, you could make the argument stocks are getting a bit expensive up here.  Combine this with the trend that is emerging of companies reporting good earnings and then getting sold off, and it is possible that large holders are unloading into the strength of an earnings beat.  As the old saying goes; “feed the ducks when they are quacking,” and the earnings beat gets them quacking.  On the other hand (yes, I have an economics degree) we are at 15 month highs and another old Wall Street saying is; “The trend is your friend.”

The dollar, stocks, oil and gold rose today as they were buying just about everything.  Nymex crude is up 92 cents a barrel to $78.92 (+1.18%, 4:46 p.m.) and New York spot gold gained $4.80 an ounce to $1,137.50 (+0.42%, 4:57 p.m.)

Earnings season gets into full swing this week with the following major companies reporting tomorrow:

DOX $0.53 after the close, AMR -$1.20, BAC -$0.52, BK $0.51 before market open, EAT $0.22, COH $0.72 bmo, COV $0.75 bmo, EBAY $0.40 atc, JEF $0.35 bmo, KMP $0.49 atc, MS $0.36 bmo, NTRS $0.66 bmo, RJF $0.37 atc, STX $0.65 atc, SBUX $0.27 atc, STT $0.99 bmo, USB $0.29 bmo, WFC -$0.01 bmo, XLNX $0.35 atc.

Economic reports due out tomorrow are the MBA Purchase Applications at 7 a.m., the ICSC-Goldman Store sales at 7:45 a,m, Housing Starts (0.579M expected) and Producer Price Index (0.0%, 0.1% exp) at 8:30 a.m. and the Redbook is released at 8:55 a.m.

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Wall Street Wrap

Large Cap Tech Strong, IBM Highest Close Since 2000

By Robert Perrego, at 4:37 pm on January 14th, 2010

Large capitalization tech stocks filled 4 of the 5 largest percentage gainer slots in the Dow Jones Industrial Average today.  Intel Corp. (NSDQ: INTC), Microsoft Corp. (NSDQ: MSFT), International Business Machines (NYSE: IBM) and Cisco Systems Inc. (NSDQ: CSCO) placed 2 through 5 with yesterday’s star, Merck & Co., Inc. (NYSE: MRK) leading the pack again.  Merck had follow through strength after gaining 3.67% yesterday on an upgrade, as mentioned in this column yesterday.  IBM (+$2.08, +1.59%, $132.31), the old-school tech and business services company, has been in a sustained uptrend for 14 months now and is less than $6 from its all-time high of $138.  IBM is exhibiting incredible relative strength here in what is supposedly a ‘bad’ economy.

The DJIA was up 29.78 points today (+0.27%, 10,710.55) with Merck up 2.72%, Intel up 2.48%, Microsoft up 2.00% and Cisco up 1.25%.  The S&P 500 gained 2.78 points (+0.24%, 1,148.46) and the Nasdaq 100 rose 1.29 points (+0.08%, 1,887.38)

All eyes are on Intel as they are expected to report 30 cents a share today ($10.2 billion revenue expected) for Q4 2009 after the close today.  This is 2 cents higher than Q3 2009 and only 13 cents less than what Intel has earned over their last 4 quarters combined.  Intel is up over 75% from its bottom in February 2009 and traded heavy volume today of over 130 million shares.  It looks like a lot of people believe in the Intel rebound in earnings, and they must see the stock going higher as with that much volume trading and the stock moving higher the buyers have to be believers.  No one buys a stock to see it go down.

The DJIA broke 10,700 and the US dollar future spot price (.DXY) traded it’s lowest level since December 8th as it looks like the carry trade cowboys may be back in business.  The PowerShares DB US Dollar ETF (NYSE: UUP) has now spent its fourth consecutive day below its 50 day exponential moving average (-0.26%, -$0.06, $22.64) and looks to be going lower.  Seeing this, the cowboys figure; “Hey, the Fed’s not raising rates anytime soon and that dollar looks like its going lower.  Throw some shorts on that doggie and let’s buy some stocks!”

UPDATE: Intel reports $10.6 billion in revenues and 40 cents a share.  The stock is trading higher by 50 cents in the after-market ($21.97, 4:19 p.m.)  Tech should be strong tomorrow.

Oil dropped again.  I also did not freeze on the way to work today.  Warmer weather is causing a pullback from the spike higher the energy sector saw last week.  The weak jobless claims and retail sales reports this morning show a weak economy and less economic activity, and therefore less oil demanded.  Nymex crude dropped 50 cents a barrel (-0.57%, 4:15 p.m.) to $79.20.

Gold gained $5.40 an ounce as it tries to rebound from a $25 slide two days ago on the Chinese interest rate hike.  The daily stochastics for gold look to be peaking here and this second peak, which is lower than the all time high peak set back on December 3, 2008, will be the first two points a downtrend line can be drawn through.  The technical picture for gold is looking weak in the short term.  New York spot gold was last seen trading at $1,141.70 an ounce (+0.40%, 4:40 p.m.)

Tomorrow we get the Consumer Price Index (0.1%, 0.1% expected) and the Empire State Manufacturing Survey (13.0) at 8:30 a.m.  At 9:15 a.m. Industrial Production (0.6%, 71.9%) numbers are announced and at 9:55 a.m. Consumer Sentiment (74.0) is released.

Major Earnings Reports for Friday: JPM 0.62 expected, before the open.

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News

Wall Street Wrap – Dow 10,000 and Beyond!

By Robert Perrego, at 4:54 pm on October 14th, 2009

Deja vu – the experience of thinking that a new situation had occurred before.  JP Morgan Chase & Co. (NYSE: JPM) blew their numbers away this morning, and this coupled with a favorable Retail Sales number caused the Dow futures to climb to over 100 prior to the market open.  Yesterday the Dow closed at 9871, so tacking on the futures up 100 points and the chatter started about Dow 10,000.  Some traders, in the spirit of being ‘green’, recycled the Dow 10,000 hats the NYSE gave away when the market first eclipsed the five digit milestone on March 29, 1999.  Today new Dow 10,000 2.0 hats were also seen on the floor, as the market celebrates rallying back from the dismal lows of earlier this year.

The Dow closed up 144.80 points (+1.46%, 10,015.86) while the S&P 500 gained 18.83 points (+1.75%, 1092.02) as it creeps ever closer to 1100.  The Nasdaq 100 rose 23.99 points (+1.38%, 1754.26). The strongest sector today was finance, climbing 3.01% on the JP Morgan beat.  Also strong was the industrial sector rising 2.72% and energy up 1.81%.

Expecting earnings of 52 cents a share, the market was thrilled to see JPM’s monster number put on the board at 82 cents.  In one of the first major top line beats, JP Morgan posted revenues of $26.6 billion, well above expectations of $25 billion.  Morgan stock closed up $1.50 (+3.28%, $47.19) and is now up 197% from its low close of $15.90 set on March 9, 2009.

Also contributing to the up-market was a Retail Sales number that came in better than expected.  With as many job losses as this past recession has caused, the purchasing power of the consumer has been hit hard and this is what is causing many companies to miss their top line number.  Retail Sales were expected to decline 2.1% month-over-month but came in down only 1.5%.  Ex-autos, sales were expected to increase 0.3% and they were up 0.5%.  Yes, sales ex-autos INCREASED.

The dollar got hammered, gapping down on the open and weak all day.  The PowerShares Dollar ETF (NYSE: UUP) gapped lower on the open and attempting to regain some of its losses, rallied in the morning trading session.  At about 1 p.m. this all changed and the UUP rolled over and for the day, lost 0.75% (-$0.17, $22.40), the lowest close since July 21, 2008.

Dollar weakness usually means an up day for gold, but try as it might, gold could not stay in the green.  New York Spot Gold was down $2.00 (-0.19%, $1,062.10) at 4:25 p.m.  Usually the dollar is negatively correlated to gold.  In the past a 0.75% drop in the dollar would cause a larger upside percentage move in gold.  0.75% of $1,064 = $7.98 and gold logged a $2 loss today.  The correlation was, at the minimum, $10 out of whack today and this could be a sign the recent run up to this all-time high level is getting tired.

The dollar weakness did energize oil as it usually does.  Nymex crude gained $1.03 a barrel (+1.39%, $75.10, 4:20 p.m.) with $75 having been an upper limit on oil’s trading range for three months now.  This is not a break out as a mere ten cents above $75 is not enough to signal the strength you want to see in a break out.  On the other hand, oil is right there and any bullish news could spark a run higher.

The big release tomorrow is going to be the Jobless Claims.  Expectations are for a loss of 520,000 jobs.  Also, released at the same time, 8:30 a.m., will be the Consumer Price Index (+0.1%) and The Empire State Manufacturing Survey (17.5).  The Philadelphia Fed Survey will be released at 10 a.m. (12.5).

Major company earnings releases will include;   (AMD, -0.42, after the close), (APH, 0.43), (BAX, 0.97), (C, -0.38, before the open), (CY, 0.06, bto), (FCS, 0.07, bto), (GS, 4.24, bto), (HOG, 0.21, bto), (IBM, 2.38), (NoK, 0.18, bto), (PPG, 0.89, bto), (SWY, 0.29) and (LUV, 0.01).

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News

Wall Street Wrap – The NFL stays with IBM, Another 2009 high for The Dow and Google

By Robert Perrego, at 5:13 pm on October 12th, 2009

International Business Machines (NYSE: IBM) renewed its marketing and services agreement with the National Football League and their shares continued higher to close at a new 2009 high.  Google Inc. (NSDQ: GOOG) was upgraded last week by Oppenheimer and today Goldman Sachs, J.P. Morgan, Deutsche Bank, Thomas Weisel and Kaufman Bros. got on the bandwagon by either raising their price targets or overall rating.  With all these analysts pushing all this positive news, sparked by Google CEO Eric Schmidt stating he sees the end of the slowdown in Internet advertising, the stock jumped $7.79 today (+1.50%, $524.04).  Google has an all time closing high price of $741.79 from back in November of 2007 and is still $217 below.  IBM’s all time high close of $130 is less than $3 above today’s close (+$1.11, +0.88%, $12.04) so this might make you wonder who may be the king of tech.  Would it be the more volatile Internet search and advertising behemoth or the IT services and management king?

Many stocks traded or closed at 2009 highs as the Dow Jones jumped up early, trading as high as 9931, before fading and closing up 20.89 points at 988.80 (+0.21%).  The S&P 500 also closed at a new 2009 high adding 4.7 points (+0.43%, 1076.19) with the Nasdaq 100 still just points away from making new highs (+1.81, +0.10%, 1729.63).  The energy sector was tops today adding 1.28% with no other sectors up more than fractionally.

The dollar was weak and this propelled gold and oil to strong days.  The energy sector was strong as Nymex crude jumped $1.50 a barrel (+2.09%, $73.14, 4:21 p.m.)  Oil has been in a trading range of $65 to $75 since June but recent dollar weakness may break oil out to the upside, just as gold broke out to new all time highs last week.

New York Spot Gold traded up $6.40/ounce to $1,055.30 (+0.61%) leaving the precious metal less than 0.7% from its all time high trade.  Kitco.com reports that $2.65 of today’s gold rise was due to dollar weakness while the remaining $3.75 of appreciation is a result of ‘predominant buying’.

Everyone likes a winner so now momentum buyers are jumping into gold, and this also brings the inevitable ‘wall-of-worry’ of a sudden sell-off.  Looking at the chart of the SPDR Gold Shares ETF (NYSE: GLD), I see a stock that has traded sideways and consolidated for seven months now, between $87 and $98.  It is common to see a stock breaking out of a sideways channel rise the height of the channel. The consolidation trading range channel that the GLD has been in for the last seven months is targeting:  ($98-$87) + $98 = $109.  The GLD trades roughly equal to 1/10th the price of New York Spot minus $2 for fees, thus the trend channel is calling for gold at $1,110 an ounce.

There were no economic releases today as the Government was shut down for Columbus Day, the banks and the bond market were closed and trading volume in the stock market was light.

Tomorrow we get earnings from Intel (NSDQ: INTC), Johnson & Johnson (NYSE: JNJ) and CSX Corporation (NYSE: CSX).  While Intel and J&J are Dow components and will give us more insight into their respective sectors, CSX should be watched closely.  What CSX has to say about the level of commerce and the amount of product being shipped is a very good bell-weather of how the overall economy is performing.

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