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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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

Slow Day on the Street

By Robert Perrego, at 4:36 pm on December 23rd, 2009

Two of the four economic releases today showed a weak housing market after yesterday’s market experienced a modest rally off of the Existing Home Sales report.  A confirmation of the Existing Home report with strong numbers from the MBA Purchase Applications or the New Homes report would have been very bullish for the market, but as it is, the lone solid number from yesterday looks like an outlier.  The question is, was yesterday’s number the outlier or today’s?  Reading the reaction of the home-builder stocks, the rise yesterday was more than the drop today, so we can say the market thinks the positive trend illustrated by yesterdays number to be the path.  Over two days Pulte Homes Inc. (NYSE: PHM) is up 64 cents (+6.8%, $10.06), Ryland Group Inc. is up 80 cents (+4.05%, $20.54), D R Horton Inc. (NYSE: DHI) is up 38 cents (+3.54%, $11.12), Toll Brothers Inc. (NYSE: TOL) is up 77 cents (+4.19%, $19.15), Lennar Corp. (NYSE: LEN) is up 41 cents (+3.19%, $13.27) and Beazer Homes USA Inc. (NYSE: BZH) is up 3 cents (+0.60%, $4.99).

The market was very slow today with the biggest action coming at 10 a.m. when the New Home Sales number was released.  That number came out below expectations and the market sold off immediately with the Dow Jones Industrial Average dropping 30 points within the next 24 minutes.    The DJIA has dropped faster and farther many times so even this action, though it was the quickest move today, was not much.  The DJIA finished up 1.51 points (+0.01%, 10,466.44) on a day that probably drove day traders crazy and cost them money.  The S&P 500 added 2.89 points (+0.25%, 1,120.76) and the still outperforming Nasdaq 100 gained a decent 12.48 points (+0.67%, 1,851.99).

The New York Spot price for gold gained $3.80 an ounce ($1,087) after being up more than $12 during the day.  The SPDR Gold Trust (NYSE: GLD) was strong most the day, trading as high as $107.45 before gradually declining into the close at $106.55.  There was a sale of about a half-million shares in the last minute of trading that dropped the stock almost 30 cents.

Nymex crude jumped $2.20 a barrel (+2.96%, $76.60, 4:11 p.m.) on inventory supply data and dollar weakness.  The dollar opened lower today lending to the strength in gold and oil.  The dollar-euro relationship has traded to within 25 cents of its 200 day moving average and some say this may mark the end of the recent dollar rally.

Tomorrow we get Durable Goods Orders (0.5% expected) and Jobless Claims (470,000) at 8:30 a.m. and Natural Gas inventory levels at 10:30 a.m.

Friday the markets are closed for Christmas.

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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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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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