Week on Wall Street

Another Slow Week On Wall Street

By Robert Perrego, at 1:20 pm on December 19th, 2009

Stocks went up and down this week on Wall Street as they always do and the net result on the broadest stock index, the S&P 500, was a loss of 0.36% or 3.94 points.  On Monday, the S&P 500 closed at its highest level of 2009 at 1114.11.  On Tuesday the dollar jumped higher and the markets sold off.  The biggest moves of the week were the fossil fuels as inventory data and a cold front sweeping North America drove natural gas higher by 10.97% and crude started the week below $70 and finished above $73 for a 4.73% gain.

For over a month the S&P 500 has been in a narrow sideways trading range between 1087 and 1110, with exception for Monday when a short-lived breakout was attempted.  The S&P 500 closed out Friday near the middle of this range at 1102.  While the S&P 500 is the broadest stock index, the tech heavy Nasdaq 100 closed out the week at 1807, nearer to the high end of its trading range (1767 to 1810) showing that tech is less susceptible to a rising dollar.  The weakest index, relatively, has been the Dow Jones Industrial Average which closed nearest to the lows of its range at 10,328 (10,300 to 10,480).

The connection the dollar has to stocks is via the much talked about carry trade.  With U.S. interest near zero the weak dollar has been shorted by the ‘carry trade cowboys’ and those funds put to work buying stocks and other ‘risky’ assets.  The relative strength of tech stocks shows that when the dollar rises and the shorts need to cover, the stocks they are least willing to sell to replace these funds are technology stocks.

At the start of the week the biggest story was a monster deal in oil and gas with Exxon Mobil Corp. (NYSE: XOM) buying XTO Energy (NYSE: XTO).  Exxon’s fossil fuel portfolio is heavily weighted towards oil and XTO towards natural gas.  This buyout may be a large play to hedge the historically wide spread between the costs on natural gas and oil.  Thus far the 10% rise in natural gas and 4.73% rise in oil has proven this strategy correct.  Monday also saw Citigroup Inc. (NYSE: C) get clearance from the U.S. Treasury to repay their TARP funds.

The Federal Open Market Committee held their last two-day meeting of the year on Tuesday and Wednesday, and announced they were standing pat on interest rate policy.  Comments on the decision to leave rates unchanged indicated that the Fed saw job losses slowing, but jobs were still being lost.  Of most importance in this announcement may have been that they were ending their quantitative easing program (purchases of agency backed mortgage debt) on February 1, 2010.

Wednesday also saw the Federal Trade Commission file a suit against Intel Corp (NSDQ: INTC).  The lawsuit cites bundling practices and even a secretly redesigned compiler software that makes their competitors chips run a little slower.  Intel competitors Nvidia Corp. (NSDQ: NVDA) and Advanced Micro Devices (NYSE: AMD) traded higher on this news.

On Thursday, Standard and Poor’s downgraded the government debt of Greece to BBB- causing investors to flee to the safety of the dollar and dump their riskier assets.  This caused the largest losses of the week for stocks as the DJIA dropped 132 points, which comprised most of its total loss for the week.  Citigroup sold 5.4 billion shares and the Treasury, as the secondary price was too low for its liking, decided not to sell any of their shares.  Gold dropped $40 an ounce on the dollar strength.  The SPDR Gold Trust (NYSE: GLD) closed below its 50 day exponential moving average for the first time since August.

On Friday the dollar traded higher but reversed course and closed flat.  Gold bounced back $15 an ounce and the GLD regained the 50 day EMA, closing just above.  Common technical analysis theory states one of the conditions for a break in a support level to be two consecutive closes below it.  The bounce back in gold saved the technical picture and also, now that the support level has been shown to hold, the bullish picture for gold is a bit stronger.  Beware, this might seem like the bottom of the ‘dip’ that all the gold bulls say you should buy, as the next few days will give a clearer picture as to whether the dip drops or pops.

Friday was a quadruple options expiration day and the action in the last 20 minutes contained more volatility than all day long.  The last 20 minutes saw the stock indexes run up into the close.  Once again, tech was relatively strong as the Nasdaq 100 rose all day long on earnings announcements by Oracle Corp. (NSDQ: ORCL) and Research in Motion Ltd. (NSDQ: RIMM) Thursday after the close.

On the week the action was in the fossil fuels and gold.  Below are some ETF and stock index movements that sum up the week.

Dow Jones Industrial Average  -143 points, -1.36%

S&P 500  -3.94 points, -0.36%

Nasdaq 100  +15.26 points, +0.85%

Gold ETF (GLD) -$0.37, -0.34%

Copper ETN (JJC)  -1.3 cents, -0.03%

Coal ETF (KOL)  +14 cents,  +0.4%

Oil ETF (USO)  +$1.18, +3.33%

Natural Gas ETF (UNG)  +$1.05, +10.97%

Steel ETF (SLX)  -11 cents, -0.18%

Agriculture ETF (DBA)  -1 cent, -0.03%

Dollar ETF (UUP)  +$0.33, +1.45%

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News

Tech Strong, Gold Bounces Back

By Robert Perrego, at 5:09 pm on December 18th, 2009

Oracle Corp. (NSDQ: ORCL) reported after the close yesterday, that earnings rose year-over-year to $1.46 billion or 29 cents a share vs. last years 25 cents a share.  When exchange rate effects were backed out of earnings and revenue, both were flat with last years results, but at least they were not falling.  This announcement powered the stock higher by $1.46 (+6.38%, $24.34) as most companies, tech and non-tech, have seen either their earnings, revenue, or both decline.  Research in Motion Ltd. (NSDQ: RIMM) jumped 10.30% (+$6.54, $70.00) on their earnings announcement as revenues increased 11% while Palm Inc. (NSDQ: PALM) reported a decline of revenues of 59.2%.

Besides the earnings driven technology sector and a bounce back in commodities, the market was flat with the Dow Jones Industrial Average gaining 20 points (+0.19%, 10,328.89), the S&P 500 up 6.31 points (+0.57%, 1,102.47).  Looking at the intra-day charts of both these indexes shows you that the Dow gained 45 points and the S&P 500 rose 4 points, all in the last 20 minutes of trading.  The Nasdaq 100 was up over 29 points (+1.63%, 1,807.32) and strong all day.

Gold and commodities got hit hard yesterday on a strong dollar and today they bounced back while the dollar stayed flat.  New York Spot Gold was down $40+ yesterday but recouped $14.70 an ounce today to $1,111.80 (+1.34%, 4:18 p.m.).  This morning, oil jumped almost $2 a barrel to $74.33 on news that Iranian soldiers took over an Iraqi oil well.  By 4:12 p.m. this rise had traded down to $73.18 (+$0.53, +0.73%) as it seems this  is not an uncommon occurrence.

The carry trade and the recent strength in the dollar has caused much concern that the stock market would get hit if the dollar started to rise.  Over the past few years, ETF’s have made it possible for the common investor to diversify into commodities.  Let’s take a look at what kind of effect this week’s strong dollar had on the stock market and select commodities;

Dow Jones Industrial Average  -143 points, -1.36%

S&P 500  -3.94 points, -0.36%

Nasdaq 100  +15.26 points, +0.85%

Gold ETF (GLD) -$0.37, -0.34%

Copper ETN (JJC)  -1.3 cents, -0.03%

Coal ETF (KOL)  +14 cents,  +0.4%

Oil ETF (USO)  +$1.18, +3.33%

Natural Gas ETF (UNG)  +$1.05, +10.97%

Steel ETF (SLX)  -11 cents, -0.18%

Agriculture ETF (DBA)  -1 cent, -0.03%

Dollar ETF (UUP)  +$0.33, +1.45%

Looking at these numbers you can see that while the DJIA and the S&P 500 maintained their inverse relationship to the dollar, the tech heavy Nasdaq 100 is bucking the trend.  Also, it seems that the dollar strength did not translate into as much commodity weakness as you may have thought.  The worst performer of the above listed commodities is gold down 0.34% while the dollar strengthened over four times as much, up 1.45%.  Natural gas and oil crushed the dollar effect as natural gas actually rose seven times as fast as the dollar dropped and oil was up more than twice the drop.  Completing the fossil fuels sector, coal finished positive on the week and the strength of these three may be attributed to the cold weather sweeping North America.

In the Tracked.com’s ‘Strange-but-true-irony’ category it is freezing and snowing heavily in Copenhagen as politicians gather to discuss ‘global warming’ and Former Vermont Governor and consummate left-winger Howard Dean says he would not vote for the current health-care reform bill.  A little advice for the pro-global warming crowd; start holding your conferences in the desert in August as all the ones we keep seeing are during ice storms, blizzards and cold weather and this hardly makes for the press you want.  Advice for Howard Dean; run for office and win, then we just might care what you would vote for and then you could actually vote.

So up is down, down is up and who cares – the weekend is here.

Have a great weekend.

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News

Market Wrap – IBM gets Analytical with SPSS

By Robert Perrego, at 4:44 pm on July 28th, 2009

Years ago IBM morphed from being a hardware company into a company with tens of billions of dollars of contracts for computer services billed out for decades.  Lenovo now owns their laptop division, they have not made desktops in a long time and it seems the large scale directional moves IBM makes are always one step ahead of their competitors.  Hewlett Packard bought Electronic Data Systems last year in order to get into the information technology and computer services sector playing catch up with IBM after seeing how the contractual revenue streams from this type of business would smooth out earnings cycles.  Basically HP was playing catch up with IBM and now IBM is drilling down into IT buying SPSS Inc. (NSDQ: SPSS) which provides analytics software and solutions and is in the growing field of business intelligence.  Starting to sound like some cloak and dagger stuff right?  Get Smart?

Dare I say it?  Today we saw more evidence of the ‘green shoots’ that were so in vogue recently but seemed to disappear from the tips of tongues of most politicians when the market took its recent down leg.  Fortunately the market has been running up as of late and so I guess we are allowed to discuss the ‘green shoots’ again.  Today, for the first time in three years, the housing market saw prices rise month over month! While the year over year average price of housing still declined, it declined at a slower rate and rose 0.5% since the previous month.  I guess that 0.5% didn’t make all you homeowners out there feel rich as Consumer Confidence dropped from 49.3 to 46.6.

San Francisco Fed President Janet Yellen, speaking in Idaho today, cited seeing the ‘first solid signs’ the economy is emerging from the recession and all day long talking heads on TV were putting the two words ‘housing’ and ‘bottom’ together in the same sentence.

Putting ‘housing’ and ‘bottom’ together should be a pretty powerful force these days but even though the talking heads chirped that all day long we had a split market;  The Dow finished down 11.79 points after being down as much as 90 points during the day.  President Yellen’s comments may have had something to do with a late day recovery.

Dow Jones  -11.79 (-0.12%, 9096.72)  S&P 500 -2.56 points (-0.26%, 979.62)         Nasdaq 100 +6.16 points (+0.38%, 1605.47).

Gold got hit straight out of the gate down $16.60 an ounce to $936.70 at 4:19 p.m. est.  The dollar strengthened today and hearings about commodities trading took their toll on oil as well.  It seems our all knowing politicians in Washington D.C. have now decided to take on regulating just how much money for how much risk people in the market should be paid.  As we all know our elected officials are the best of the best when it comes to finding a culprit to persecute before the altar of the public vote getting machine and today they decided to go with that old reliable bulls-eye they have had painted on Goldman Sachs back ever since Goldman paid the TARP funds off, flipped them the bird and told us all they were going back to business as usual of making their employees rich.  I don’t know if Goldman is crooked or just that good but they weathered the last storm well just in time for this one.  Oil closed down $1.15/barrel (-1.68%, $67.27).

The leading sector to the upside was consumer non-cyclicals (usually a defensive sector) at +0.72% and tech was up 0.25%.  energy was down 1.69% on the falling oil price and finance was the second biggest loser (not a fat loss show) dropping 0.98%.

Speaking of fat people, the Los Angeles Times ran an article about taxing fat peoples’ food as it just came to light the latest culprit reason socialized health care is so expensive (it couldn’t be that government is just ridiculously efficient could it?) is that fat people cost us a lot more money to take care of, especially once they become diabetics.  Now it used to be that taxing food was a complete political no-no as this was a regressive tax which hits poor people the hardest.  Well the way this is going I wouldn’t want to be poor AND fat because it seems if you give anyone in D.C. these days a reason to tax you, it happens.  So remember, if you want to be fat – don’t forget to be rich too.  Last time we saw a tax levied ‘for our own good’ it was driving the cost of cigarettes through the roof.  Next target – soda – if you can believe it.  I think tomorrow we move on to chocolate and jelly beans and after that the Easter Bunny gets his drivers license revoked.

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News

Market Wrap – Which Way Did He Go?

By Robert Perrego, at 4:32 pm on June 24th, 2009

On a day where a Governor did not go hiking up in the mountains and actually went for something else down south of the border… On a day when the political theatre in Albany turned almost comical started by the mess left by the last Governor busted for almost the same thing… On a day when a Politician fires off some serious accusations that could rock The Fed… and… On a day that the markets shot up on a good economic forecast and then dropped back down after The Fed held steady, all you can ask is…

“Which Way Did He Go?”

Governor Sanford’s goose is cooked and Fed Chairman Bernanke’s might be too.  Today’s market was up over 100 points on a favorable economic forecast by the OECD but rolled over and turned negative on two pieces of news; The Fed’s interest rate non-move and The Fed Chief’s supposed move.

Obviously Bernanke does not have an easy job and it could be argued he took steps that saved the nation, and quite possibly the world, from a complete financial meltdown.  Today, Republican Congressman Darrell Issa levied accusations that Bernanke covered up what really happened in the days before Merrill was bought by Bank of America.  Further complicating this issue is that it is no secret Larry Summers is hot for Bernanke’s job and thus far into his Presidency, Obama seems to like controlling not just the Federal Government’s Executive Branch.  These events could have increased the sell-off as traders and players worry that should Summers take Bernanke’s job, the independence of The Fed would be in jeopardy.

The markets finished split today as the S&P 500 was able to regain and hold the all important 900 support level tacking on 5.84 points to 900.94 (+0.65%), but was as high as 910.85.  The Nasdaq added 22.60 points and was the strong index of the day closing at 1447.06 (+1.58%).  The Dow got clocked the hardest and fell 168 points intra-day from its high to its low finally closing down 23 points at 8299.86.

Oracle Corporation (NSDQ: ORCL) was strong all day coming off a solid earnings report after the close yesterday trading as high as $21.75 and closing up $1.39 (+6.99%) at $21.25.  The most prominent gold ETF, the SPDR Gold Trust (NYSE: GLD), fired up $1.43 in the morning on news the European Central Bank pumped $662 billion into the ailing economy but traded off after the Fed announcement to close up a mere 53 cents (+0.58%).  Oil closed down 57 cents at $68.56 a barrel.

Checking to see if, once again, we had the energy and financial sectors leading whichever way, we find that yes – the financial sector once again led to the upside coming in up 1.96% but technology put in a strong showing up 1.29% and communications up 1.09%.

MGM Mirage, Inc. (NYSE: MGM) had a big day gaining 14.55% as the threat of bankruptcy receded.  MGM is ‘for now’ out of the woods.  For now.

SuperValu Inc. (NYSE: SVU) got hit for 12% after they pre-announced they would not be able to meet their earnings estimates.  This seems somewhat surprising as even in recessions people need to eat but I guess they are just eating more Ramen Pride noodles and less steak.

Today was a day of headlines, quantitative easing, accusations and airing of dirty laundry.

Which way Did He Go?  What Did He Say? and Who Did He Say What To?

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