Wall Street Wrap

Market Edges Higher as Bonds, Finance and Commodities Strong

By Robert Perrego, at 5:06 pm on February 26th, 2010

The stock market tried to be bullish today but only managed a 4 point gain for the Dow Jones Industrial Average.  I say it was trying as the stocks posting gains were the names you would buy in a bull market.  Leading the DJIA was JP Morgan & Chase Co. (NYSE: JPM) which gained $1.38 (+3.25%, $41.97).  Looking at the components of the DJIA that were down today and it seemed as if they were selling the defensive names; Kraft Foods Inc. (NYSE: KFT) -1.35%, McDonalds Corp. (NYSE: MCD) -0.69%, Procter & Gamble Co. (NYSE: PG) -0.42%, Coca~Cola Co. (NYSE: KO) -0.35%, Johnson & Johnson (NYSE: JNJ) -0.21% and Wal-Mart Inc. (NYSE: WMT) -0.09%.

The Dow Jones Industrial Average edged up 4.23 points to 10,325.26.  The S&P 500 tacked on a small 1.51 point gain (+0.13%, 1,104.49) and the Nasdaq 100 was up 5.77 points (+0.31%, 1,818.68).  On the month the DJIA added 257 points (+2.55%), the S&P 500 climbed 30.71 points (+2.86%) and the Nasdaq 100 showed that the place to be in February was in technology, gaining 77.75 points (+4.47%).

Across all markets, bonds and commodities did the best with interest rates dropping in 14 of 17 major economies worldwide.  EVEN the Greek 10-year was lower by 30 basis points as bond prices rose on news the German Government might buy Greek debt through a state owned bank.  This strengthened the euro against the dollar causing commodities to rise.

Yesterday, I mentioned the CurrencyShares Euro Trust (NYSE: FXE) was something to keep your eye on thinking that the news in Greece has got to get better sometime.  The timing was spot-on (better to be lucky than good sometimes, but being right gets paid) as the FXE closed higher today than all but one day in the last two weeks of trading.  If the bad news has washed itself out, any further positive developments about the Greek Tragedy of 2010 will be bullish for the euro, commodities and stocks.

On the flip side of this, the PowerShares DB US Dollar Index (NYSE: UUP) closed lower than all days but one in the past two trading weeks.  Looks like the dollar is a bit high here, and with the possibility of Washington D.C. passing the $1 trillion health care bill next week via ‘reconciliation’, the path of least resistance for the greenback is down.  If the carry trade cowboys get involved here, shorting the dollar and buying stocks, March may indeed come in like a lion.

New York spot gold rose $10.00 an ounce to $1,116.60 (+0.90%, 4:22 p.m.).  A break out here would be at about the $1,130 level with support at $1,060.  The SPDR Gold Shares (NYSE: GLD) chart is starting to look very interesting with resistance at $111.  The only thing I do not like about the chart is the stochastics are too high, but a close (2 closes even better) through $111 and I am a buyer.  The GLD closed up $1.12 (+1.03%, $109.43).

Nymex crude is pushing $80 again up $1.51 today to $79.68 a barrel (+1.93%, 4:26 p.m.).  Analysts think that crude will trade more off of supply and demand fundamentals and less as a reaction to the dollar in the future.  This sounds like it means that oil will trade on the premise of a better functioning economy and not on gloom and doom and fiscal nightmares.

Existing Home Sales were reported this morning at down 7.2% (January) to a seven month low (5.05M vs. 5.5M expected).  Last month sales dropped off a cliff (-16.7%) and analysts did not have to think too hard as to why.  NO JOBS.  An economy can turn up or down on simple expectations.  You have a job and things are good, but then a friend gets the axe and your brother calls to tell you his company just shut down.  You may still have a good job, but you are not dying to go buy a new house at this point.

The federal tax credit for new home buyers seems to not have helped as much lately and I have a theory – all the new home buyers that were going to buy a home already did.  I do not think they are going to squeeze a lot more out of that program.  Also, in December you go Christmas shopping not house shopping and it is cold in January.  Hopefully, sales pick up in the coming months but with all this snow in February I would not bet on a strong number.

I saved this for last to go out on a good note: The USA Men’s Hockey Team beat Finland 6 -1 in the semifinals today and will play the winner of tonight’s Canada-Slovakia game for the Gold.  Team USA vs. Canada will be a great game to watch.  Win or lose that one, Team USA is cranking out the medals faster than Freeport-McMoran (NYSE: FCX) and this has been a great Winter Olympics for our athletes and for us.

Have a great weekend.

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Tracked.com Topics

Tracked.Com Topics: Did You Hear The One About Tiger Woods?

By Taryn Cooper, at 10:30 am on December 11th, 2009

I’m sure at this point, mostly everyone — whether you like it or not — has heard about Tiger Woods, his suspicious car accident and his alleged extra-marital affairs fall-out.  Unlike Time Warner’s Sports Illustrated, CNN and People brands, however, I’m not going to dwell on his personal life and sensationalize activities he participates in that do NOT pay his bills.

I’m going to talk about sponsorship.  Tiger Woods is the proverbial “Cash Cow” to many brands and corporations, with Nike, Accenture, Gillette, PepsiCo and the PGA Tour just to name a few.  Just how are these sensationalistic stories affecting his brand name?  According to one article, the last we saw Woods in any advertisement was “was a 30-second spot for Gillette on November 29, two days after the Florida car crash.”

Earlier this week, Gatorade (owned by PepsiCo) announced it was discontinuing it’s “Tiger Focus” drink.  Gatorade said that this decision was due to “low sales,” this was decided “months ago,” and had nothing to do with his recent media coverage.  Call me crazy but if this was determined months ago, why is this news coming out now, when everyone is wondering if  it is the time to back out of any Tiger Woods-endorsed products?  (Bear in mind PepsiCo also famously paid Madonna after breaking their contract and having her not hawk their product after she released a controversial video in the late-1980s, and a similar story with R&B artist Ludacris in the early-2000s).

Adweek did a study where they discussed adjectives to describe Tiger Woods and his public perceptions.  In a week, descriptors changed from “great, good and best” to “voicemail, mistress and affair,” nowhere mentioning a car accident where he was injured.

Even the PGA Tour website was in on the act this week.  A site redesign left Woods’ image nowhere to be seen.  According to an executive,  the website undergoes changes and is not static.  Tiger Woods, easily one of the most recognizable names in sports let alone golf, cannot be found on the site.  Again, merely a “coincidence,” according to the PR people who run the site.

Tiger Woods’ has a contract in place with Nike and Gillette, two of the many sponsors  publicly supporting him throughout his ordeal.   According to an article entitled “Goodwill Crashing,” estimates of his true value are “between $2.50 and $4 for every dollar spent on endorsements. This would mean in Tiger’s case that all 10 companies could expect a combined $420 million in annual revenues from their association with the golfing great. For most, including Nike, it’s a drop in the bucket.“  Even if dropped, Tiger Woods would not be hurting financially, but it is a mathematical certainty that what puts on food on the table for him is partially his pro golfing career…it’s also the endorsements, silly!

Prior to the suspicious car accident on his front lawn in early morning hours and now salacious affairs coming out of the woodwork, Tiger Woods was an immensely introspective public figure who valued his privacy more than anything, even naming his yacht after that abstract ideal.  What he seems to not have grasped is that the media LOVES guys like him: guys who have a sudden fall from grace in an effort to simply sell newspapers, get web clicks and who can outscoop who with the next story to shock-shock-shock.

Is Tiger Woods still valuable?  Heck yes — to the newspapers reporting on this!  Visit the Tiger Woods page on Tracked.com and see just how many articles have come up in the past month on Tiger, and let me give you a hint, most of them weren’t about sports.

It’s up to his sponsors who stick by him in the end.  History has told us that although the media tends to build people up to ultimately tear them down (Britney Spears, Madonna and Kobe Bryant come to mind as recent figures), Tiger Woods will be the phoenix to rise from the ashes of this debacle.  He’s not going anywhere as long as he has his talent.  In the meantime though, gossip columns are thriving on him.

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News

Wall Street Wrap – Dollar Up, Just About Everything Else Down

By Robert Perrego, at 5:10 pm on September 24th, 2009

The companies in the Dow that were up the most today were McDonald’s Corporation (NYSE: MCD) +1.04%, and Proctor & Gamble Co. (NYSE: PG) +1.03%, with P&G trading up to within 35 cents of its 2009 highs.  McDonald’s and P&G are considered consumer non-cyclical plays and safer stocks to shift into if you think there could be weakness ahead in the market.

After weeks of getting pummeled, the dollar bounced back sharply today with the dollar index future, the DXY,  gaining 82 cents or 1.08% to $76.88.  This dollar strength drove commodity stocks down across the board.  The Dow Jones most economically sensitive commodity stock, aluminum producer Alcoa Inc. (NYSE: AA) was the biggest loser today, dropping 4.45% or 63 cents to close at $13.51.

The dollar has had a negative 0.32 correlation with the market over the last 120 days meaning that they move in different directions.  As the interest rates in the U.S. are now the lowest of all major currencies, the dollar is now being used to source the ‘carry-trade’, as opposed to the yen, which the world has used for decades.  This selling of the dollar is what is forcing it down and some of that money is being put to use in the stock market.  When the dollar starts to rally and the people that put the carry-trade on need to cover their dollar short, they sell stocks to buy the dollar causing the inverse relationship.

As the dollar and commodities (and commodity stocks) have a strong inverse correlation, when the mindset gets widespread and whole groups of traders short the dollar and buy oil, coal, copper, gold stocks, etc… these trades being put on employ a little more leverage in moving the trades in the desired directions.  The problem here is that when it becomes a ‘crowded trade’, as many people are thinking the same thing, last one out is a rotten egg.  This will cause more volatility as traders basically play chicken with each other.

The Dow has now broken its most recent uptrend line and is looking weak, losing 41.11 points today or 0.42% to close at 9707.44.  The S&P 500 got hit a lot harder dropping 10.09 points or 0.95% to close at 1050.78 with the Nasdaq 100 dropping 14.51 points or 0.84% to 1709.76.  The next two support levels for the Dow are at 9580 and 9380.  The S&P 500 has strong support at about 1030 with a top support level intersecting its still unbroken uptrend line.  The next support level after this one is 1010, which has a top support here and is approximately where its 50 day exponential moving average is right now.

New York Spot Gold was hit on the dollar strength losing $15 an ounce and dropping below the $1,000 level to trade at $993.20 at 4:36 p.m.  Black gold, or crude Nymex oil, got clocked for $3.08 or 4.45% to trade $66.10 a barrel, a 2 month low.  Keep an eye on Exxon Mobil Corp. (NYSE: XOM) as it is just breaking down out of a symmetrical triangle, which is indicating another $6 to $8 loss in the stock.

Finance led the losers in the sector race dropping 2.07% with energy a close second dropping 2.05%.  The industrial sector was also weak, dropping 1.48%, with all three of these sectors dropping more than any of the big three market indexes.

Tomorrow’s economic numbers include Durable Goods orders at 8:30 a.m. (1.0% exp.), Consumer Sentiment at 9:55 a.m. (70.2 exp.) and New Home sales at 10:00 a.m. (445K exp.)

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News

Wall Street Wrap – Proctor and Gamble, E-Trade catch Upgrades

By Robert Perrego, at 5:27 pm on September 18th, 2009

E-Trade Financial Corp. (NSDQ: ETFC) caught an upgrade from Goldman Sachs Group Inc. (NYSE: GS) today and Citigroup Inc. (NYSE: C) upgraded Proctor & Gamble Co. (NYSE: PG) stock and raised its price target to $66 from $54.

E-Trade has been having a solid few weeks as in late August a large debt-for-equity swap caused S&P to upgrade the companies debt.  Two days later, Citadel, E-Trades largest shareholder, canceled plans to sell up to 120 million shares of the company, causing the stock to jump from $1.44 to $1.76 and trade as high as $1.94.  On Monday, Citigroup upgraded E-Trade to buy from hold.  Tuesday, E-Trade reported their August trading volume was up 18.3% from July and up 37% year over year.  It did not take long for more upgrades after that.  Give Citigroup credit for getting out in front of the trading update and today Goldman Sachs not only upgraded E-Trade to a buy, but they recommended selling one of their largest competitors, Charles Schwab Corp. (NSDQ: SCHW).  All in, E-Trade is up 26.8% since the debt for equity swap and was up 8.23% today, adding 14 cents a share and closing at $1.84.

Proctor & Gamble gapped up this morning on their own Citigroup upgrade rising $1.79 today (+3.22%, $57.32).  P&G is a member of the Dow Jones Industrial 30 and approximately each $1 move in a Dow component translates into about 7 points on the index.  The Dow closed up 36.28 points today and P&G chipped in for about 12.5 points, or one third of today’s market move.

The Dow gained 36.28 (+0.37%, 9820.20) and closed above 9,800 for the first time since October 10, 2008.  The S&P 500 rose 2.81 points (+0.26%, 1068.30) while the Nasdaq 100 added 4.15 points (+0.24, 1725.24).

Consumer cyclicals were up 0.92% followed by finance up 0.72%.  Energy fell 0.37% as oil dropped dropped 43 cents a barrel or 0.6% ($71.80, 4:37 p.m.).

New York Spot Gold is still hovering just above the $1,000 watermark after losing $5.90 an ounce today.  The yellow metal was last seen trading $1,006.40 (4:53 p.m.) after trading as high as $1,018.70.  While many may be afraid of buying into gold at this ‘high’ level, the question is whether it is in a consolidation or distribution phase.  As gold has risen to approximately this level multiple times in the past, a break higher from here would provide technical chart support at $1,000, setting up a  move many analysts see to as high as $1,250.

Natural gas had a strong day with the United States Natural Gas ETF (NYSE: UNG) jumping 3.19% (+$0.36, $11.64).  UNG has been in hot water lately as it has traded at a premium to its net asset value as a result of the options and futures strategies the fund employs.  The confusion about how these ETFs affect the actual trading of their commodities and the complicated strategies that are needed to model the price action of the underlying index or commodity, have attracted the eyes of the SEC and CFTC, only making potential investors less likely to buy.  Well, UNG has popped from $9.01 to $11.64 in the past two weeks (29%) so an iron stomach and taking on risk has paid off for anyone that got in recently.

Next Wednesday there is a meeting of the Federal Reserve Open Market Committee with a rate decision announcement at 2:15 p.m.  There is no expectation of a rate raise as most economists agree that the tepid economic recovery should not be subjected to rising rates.  Other than The Fed meeting, we have Jobless Claims and Existing Home Sales on Thursday with Consumer Sentiment, Durable Goods and New Home Sales on Friday.

Have a great weekend.

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