Wall Street Wrap

March Comes in Like a Bull – Tech Leads the Way

By Robert Perrego, at 5:07 pm on March 1st, 2010

Technology stocks, and especially semiconductor stocks, were strong as Wall Street started March with a bullish day.  Intel Corp. (NSDQ: INTC) paced the Dow Jones Industrial Average, finishing first with a 1.65% gain (+$0.34, $20.87) and Hewlett Packard Co. (NYSE: HPQ) in second up 1.47% (+$0.75, $51.54).  The PowerShares Dynamic Semiconductor ETF (NYSE: PSI) jumped 2.76% (+$0.36, $13.38) as Entropic Communications Inc. (NSDQ: ENTR) led the broad line semiconductor sector up 7.18% (+$0.26, $3.88) after being up as much as 14.4% earlier in the day.

The Nasdaq 100 turned in the best performance for the month of February among the three major indexes, gaining 4.47% to the second place S&P 500’s 2.86%.  Everyone must have read the summary numbers for February over the weekend and then came in as buyers today as the Nasdaq 100 continued on its winning streak up 1.52% (+27.72, 1,846.40).  The S&P 500 closed up a solid 1.01% (+11.22, 1,115.71) and the Dow Jones Industrial Average gained 0.76% (+78.53, 10,403.79) on the day.

Merger Monday was in full gear as four deals were announced last night and this morning and TrackedInsights Taryn Cooper covered them all earlier today.  Rumors of the biggest deal on the planet, Germany bailing Greece out with loans, prompted the Greek 10-year bond to drop 9 basis points (6.34% to 6.25%, +0.64) and stabilized equity markets around the world.  The Chilean IPSA Index fell 1.7% to 3,761 in reaction to the 8.8 magnitude earthquake Saturday morning, which was the fifth largest recorded since 1900.

When an earthquake hits Chile, what do you buy?  The answer is not peppers, it is copper.  Chile produces 35% of the world’s copper and if any of those mines collapsed this will slow the production and supply of the base metal, sending prices higher.  The iPath Dow Jones-UBS Copper ETN (NYSE: JJC) jumped 2.73% in the first five minutes of trading this morning but faded back, closing up 1.76% (+$0.79, $45.49).

Economists expected Personal Income and Consumer Spending to increase by 0.4% month-over-month, but we got income going up 0.1% and spending up 0.5%.  This means the consumer must have been taking on debt over the last month.  In general, the market likes it when the consumer spends more, even though signs point to them taking on more debt.  If the consumer is out there spending, that means the stocks they trade are doing more business.  Damn the torpedoes!  Who is paying their debts back these days anyways?  There is a problem here though, as Personal Income increased only 0.1% (0.4% expected) with the prior M-o-M increase being 0.4% and before that 0.5%.  The growth trend we have experienced over the past few months is slowing down as workers are receiving less income, which can be attributed to less people working.

The ISM manufacturing Index was reported at 10 a.m. and missed expectations (56.5 vs. 57.4, prior 58.4).  A reading over 50 indicates manufacturing is expanding but the number below that of last month shows it is expanding less quickly.  Construction Spending was also released at the same time and was down 9.3% Year-over-Year and down 0.6% Month-over-Month.  The MoM expectation was -0.8%, so the number was beat, but it is still declining.  While a decline in construction spending means less construction workers on the job, this is probably good in the long run as a contraction in housing supply (or a slower expansion), will mean a lower relative supply of homes in the future and a firming of home prices.

Gold had an uneventful day, gaining marginally, as all the metals action seemed to be in copper today.  The fact that gold did not drop is a story on its own as the dollar traded its highest level since last July, before fading back to gain just 0.38%.  Even the news of Germany buying Greek debt did not hold the euro up as the pound dropped sharply against the dollar with the summer election for Prime Minister in the U.K. is too close to call.  The U.K. has deficit problems of their own, and it seems once you throw in the weak economies of Spain, Portugal and Ireland, the chances of another bailout being needed seems almost certain.  Italy’s budget is always an adventure and it is starting to look like the only decent economy left in Europe is Germany.

Nymex crude dropped 78 cents as the $80 a barrel level is proving to be a difficult fence to jump.  The barrel was trading at $78.88 (-0.98%) at 4:48 p.m.

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Wall Street Wrap

The Market Today – Sell, Sell, Sell! Buy, Buy Buy!

By Robert Perrego, at 5:08 pm on February 5th, 2010

After taking a beating yesterday and closing a mere 4 points off its low, the Dow Jones Industrial Average was looking very weak coming into today’s open.  Worries about the situation in Greece, Portugal and Spain had bubbled over into the U.S. equity markets as money ran to the safety of the dollar causing a sharp sell-off in stocks.  Even with this morning’s unemployment headline number dropping from 10% to 9.7%, the market opened and proceeded to continue selling off.  It looked like the bottom was nowhere in sight as nervous investors started pulling the ripcord on holdings.

Sell, Sell, Sell Mortimer!

And then at 1:59 p.m.

Buy, Buy Buy Randolph!  Buy it all!

The DJIA bottomed at 9835.09 (-167.09, -1.67%) at 1:59 p.m., which just happened to be the exact same minute that the PowerShares DB US Dollar ETF (NYSE: UUP) peaked at $23.77.  For anyone that thinks the carry trade is not a factor, think again.  As the market and the dollar are trading inversely these days, looking at the charts shows you have a hammer in stocks, and a shooting star in the dollar.  The market bottomed at 1:59 but that was not the buy signal unless you cleanly picked the bottom as Randolph and Mortimer might have if they got the real orange juice report.  The buy signal came at about 3:00 p.m., when the DJIA broke up through the intra-day downtrend line that had been putting a lid on stocks since the sell-off began yesterday after the open.

At about 3:00 p.m. the market fired higher and the volume on the S&P 500 ETF (NYSE: SPY) spiked as you could almost see traders hitting the buy button to cover their short positions from yesterday.  The S&P 500 jumped from 1,051 to 1,064 in under 15 minutes and the DJIA ripped from 9,890 to 9,999 – 109 points straight up and the rally was on!

The Dow Jones Industrial Average closed up 10.05 points (+0.10%, 10,012.23) after being off as much as 167 during the day.  This is only 10 points on the day but a victory nonetheless as the sell-off was reversed.  The S&P 500 gained 1.91 points (+0.19%, 1,065.15) and the Nasdaq 100 logged the biggest gain today up 13.13 Mockingbird Lane points (+0.75%, 1,746.12)

Nymex crude traded below $70 and was down $3.64 a barrel before bouncing back with the decline in the dollar and was trading $71.74 (-$1.40, -1.91%) at 4:10 p.m.

Gold finished strong after being weak in the morning.  New York spot gold gained 80 cents ($1,064, 4:21 p.m.) an ounce and once again held support at $1,060.  Gold also put in a nice hammer like stocks did, and this hammer pierced support forming what is called a ‘hammer and spring’, which is a powerful reversal indicator.  One of the guys on Fast Money was saying gold was ‘broke’ yesterday and I completely disagree.  After listening to everyone tell me for years now that gold was ‘over’ or in a ‘bubble’, I stayed put and watched the shiny yellow metal climb from the high $600’s in March of 2006 to the $720 bottoming out in November of 2008 to $1,060 now.  I guess I was wrong and up 55%.  Gold has pulled back from the $1200 peak but there is no direction but up if that $1.56 trillion budget deficit gets passed.  It is all about macroeconomics at this point – the one investing wave that might take awhile to play out, but is virtually unstoppable.

Looking at the Tracked.com Industries page we see that the strongest sector today was Metals, up 3.42%.  In this sector are the gold, copper, iron, aluminum, etc… producing companies and they got supercharged as traders are betting that the intra-day top in the dollar today will be the top for awhile.  When you see the market finish up a quarter of a percent (S&P 500) after being down big, and the metals rip for multiple percentage points, what you are seeing is traders trying to get on the commodities train which means they expect weakness in the dollar.  How much worse can the news get on the euro and in Greece anyway?

By buying the companies that mine and produce gold and copper, you get levered to the price of the commodity and ‘buy it cheap.’  If gold is selling for $1,064 on the commodities exchange and you buy a gold miner that digs it out of the ground for $350 dollars an ounce, you are in effect buying gold a lot cheaper than if you bought gold.

This week the DJIA (-55, -0.55%) finished off better than last week (-129, -1.26%).  Last week finished down but finished off better than the week before that (-437, -4.12%).  We are still losing ground, but the pace of the decline is slowing.  Always try to look at the silver lining. (I have friends that might fall over if they ever heard me say that)

Want more good news?  It is Friday afternoon!  Go have a great weekend!

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Wall Street Wrap

Greece Dropkicks the Euro, Bad Debt is Back!

By Robert Perrego, at 5:38 pm on February 4th, 2010

In 2008 and 2009 we had toxic bundled up mortgage debt and the toxic debt of financial companies and derivatives clobbering the market.  Then we hit a speed bump on the way to the Dow Jones Industrial Average bouncing to 10,729 and that was the toxic debt of a multi-billion dollar real estate company in Dubai.  Now we are getting to the major league of toxic debt – sovereign debt.  Money ran to the safety of the dollar and Treasury bonds today, or it might be more appropriate to say that money was running away from the Euro and the sovereign debt of Greece, Portugal and Spain today.

How does this affect stocks here in the United States?  For almost a year now, as the Federal Reserve slashed interest rates to near zero to prop up our faltering economy, huge dollar carry trades have been made.  The ‘carry trade cowboys’ have been shorting the dollar and buying stocks and commodities.  This is the linkage – as the dollar jumped higher today on money flooding out of Europe, the short positions in the dollar got squeezed and forced to buy in or cover.  When you short a financial instrument, you are selling it to someone and the money they pay for it is given to you.  Now the cowboys to buy their dollar shorts in and in order to do this, they are raising money by selling their stocks and commodities they bought with the short proceeds.

You didn’t think last year’s massive rally was based upon economic fundamentals did you?  Company earnings?  Other than a slightly repaired banking system, the economy is still in deep weeds with 10%+ unemployment.  About the only economic numbers that have been changing for the United States is that unemployment and our debt has been going up.  This has been happening globally and the weaker economic countries like Greece are to the point where no one wants to lend them any more money.  If a lender shows up, they want to oversee how the money is spent and to make sure budgets are adhered to, etc…  You can think of this as an intervention if you like.

Have you ever seen the person an intervention is called for happy?  The people of Greece are not too happy as they see this intervention, or meddling, of the European Union as objectionable.  To be more precise they see the EU/Greek Governments plan of freezing their budgets and no pay raises as objectionable, and as a highly unionized country, they are going on strike.  This certainly does not help tax collection and so on and on it goes, the vicious circle of an economy you certainly don’t want to be lending money to.  So you sell Greek bonds, you sell the Euro as Greece is not the only member country this is happening to, you notice that the other EU countries have loaned Greece a lot of money so you sell them too.

When you sell the euro you buy the dollar, causing the cowboys to sell stocks and commodities driving down stock markets around the world.  Looking around you see that the only market going up is Treasury bonds, the ultimate instrument of investing safety and the port in the storm.  Then you notice Moody’s (the credit rating agency that pretty much missed the entire credit crisis – they went fishing I guess) is warning the United States about their credit rating.  Uh oh.

Crash!  Bang!  Ouch!

The Dow Jones Industrial Average dropped 268.37 points today (-2.61%, 10,002.18) and broke their support level at 10,090 mentioned here in past ‘Wraps’.  Next support level is at 9,820.  The S&P 500 fell 34.17 points (-3.11%, 1,063.11) breaking support at 1,070 with the next support level at 1,046 (200 day EMA).  The Nasdaq 100 closed lower by 51.71 points (-2.88%, 1,732.99) and is right on support at 1,730 with next level down at 1,674 (200 day EMA).

The PowerShares DB US Dollar ETF (NYSE: UUP) made a new high for 2010 gaining 0.64% (+$0.15, $23.55) as the CurrencyShares Euro trust ETF (NYSE: FXE) got hit for 1.11% (-$1.55, $137.16).

Commodities got clobbered as well with New York spot gold dropping $46.90 an ounce (-4.23%, 4:17 p.m.) but held support of $1,060 (mentioned in previous posts).  They are selling everything but Treasuries so covering shorts for gold here is not a bad idea but I would wait until the dust clears a little to establish new long gold positions.  Nymex crude got smoked, dropping $3.97 a barrel (-5.16%, 4:08 p.m.) to $73.01.

The 10-year Treasury rose 30 ticks (30/32) to $98 8/32 with the yield dropping to 3.59%.  The 30-year jumped $1 26/32, almost two handles (2 points), to $97 18/32 as yields dropped 11.5 basis points to 4.52%.  These are big moves for the bond market.

London -2.17%, Paris -2.75%, Frankfurt -2.45%, Tokyo -0.46%, Hong Kong -1.84%, Sydney -0.62%, and India was up 2.06%.  I have no idea why India was up – maybe they shorted Greek bonds.  Asia did not get hit as hard as their exchanges closed before the selling really started.  Most likely, they will catch up going down tomorrow.

Everything got sold.  Bad Debt is back!

Want more bad news?  Tomorrow we get the Employment Situation number at 8:30 a.m. and the consensus estimate is we did not lose any jobs in January.  I will believe that when I see it.  The overall percentage is expected to come in at 10.1%, which is an uptick from the current 10% level.

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Wall Street Wrap

Bad Debt is Back! Greece Dropkicks the Euro

By Robert Perrego, at 5:07 pm on February 4th, 2010

In 2008 and 2009 we had toxic bundled up mortgage debt and the toxic debt of financial companies and derivatives clobbering the market.  Then we hit a speed bump on the way to the Dow Jones Industrial Average’s 2009 bounce back to 10,729, and that was the toxic debt of a multi-billion dollar real estate company in Dubai.  Now we are getting to the major league of toxic debt – sovereign debt.  Money ran to the safety of the dollar and Treasury bonds today, or it might be more appropriate to say that money was running away from the Euro and the sovereign debt of Greece, Portugal and Spain today.

How does this affect stocks here in the United States?  For almost a year now, as the Federal Reserve slashed interest rates to near zero to prop up our faltering economy, huge dollar carry trades have been made.  The ‘carry trade cowboys’ have been shorting the dollar and buying stocks and bonds.  This is the linkage – as the dollar jumped higher today on money flooding out of Europe, the short positions in the dollar got squeezed and forced to buy in or cover.  When you short a financial instrument, you are selling it to someone and the money they pay for it is given to you.  These ‘cowboys’ have been using this money to buy stocks and commodities.  Now they need to buy their dollar shorts in and in order to do this, they are raising money by selling stocks and commodities.

You didn’t think last year’s massive rally was based upon economic fundamentals did you?  Company earnings?  Other than a slightly repaired banking system, the economy is still in deep weeds with 10%+ unemployment.  About the only economic numbers that have been changing for the United States is that unemployment and our debt has been going up.  This has been happening globally and the weaker economic countries like Greece are to the point where no one wants to lend them any more money.  If a lender shows up, they want to oversee how the money is spent and to make sure budgets are adhered to, etc…  You can think of this as an intervention if you like.

Have you ever seen the person an intervention is called for happy?  The people of Greece are not too happy as they see this intervention, or meddling, of the European Union as objectionable.  To be more precise they see the EU/Greek Governments plan of freezing their budgets and no pay raises as objectionable, and as a highly unionized country, they are going on strike.  This certainly does not help tax collection and so on and on it goes, the vicious circle of an economy you certainly don’t want to be lending money to.  So you sell Greek bonds, you sell the Euro as Greece is not the only member country this is happening to, you notice that the other EU countries have loaned Greece a lot of money so you sell them too.

When you sell the euro you buy the dollar, causing the cowboys to sell stocks and commodities driving down stock markets around the world.  Looking around you see that the only market going up is Treasury bonds, the ultimate instrument of investing safety and the port in the storm.  Then you notice Moody’s (the credit rating agency that pretty much missed the entire credit crisis – they went fishing) is warning the United States about their credit rating.  Uh oh.

Crash!  Bang!  Ouch!

The Dow Jones Industrial Average dropped 268.37 points today (-2.61%, 10,002.18) and broke their support level at 10,090 mentioned here in past ‘Wraps’.  Next support level is at 9,820.  The S&P 500 fell 34.17 points (-3.11%, 1,063.11) breaking support at 1,070 with the next support level at 1,046 (200 day EMA).  The Nasdaq 100 closed lower by 51.71 points (-2.88%, 1,732.99) and is right on support at 1,730 with next level down at 1,674 (200 day EMA).

The PowerShares DB US Dollar ETF (NYSE: UUP) made a new high for 2010 gaining 0.64% (+$0.15, $23.55) as the CurrencyShares Euro trust ETF (NYSE: FXE) got hit for 1.11% (-$1.55, $137.16).

Commodities got clobbered as well with New York spot gold dropping $46.90 an ounce (-4.23%, 4:17 p.m.) but held support of $1,060 (mentioned in previous posts).  They are selling everything but Treasuries so covering shorts for gold here is not a bad idea but I would wait until the dust clears a little to establish new long gold positions.  Nymex crude got smoked, dropping $3.97 a barrel (-5.16%, 4:08 p.m.) to $73.01.

The 10-year Treasury rose 30 ticks (30/32) to $98 8/32 with the yield dropping to 3.59%.  The 30-year jumped $1 26/32, almost two handles (2 points), to $97 18/32 as yields dropped 11.5 basis points to 4.52%.  These are big moves for the bond market.

London -2.17%, Paris -2.75%, Frankfurt -2.45%, Tokyo -0.46%, Hong Kong -1.84%, Sydney -0.62%, and India was up 2.06%.  I have no idea why India was up – maybe they shorted Greek bonds.  Asia did not get hit as hard as their exchanges closed before the selling really started.  Most likely, they will catch up going down tomorrow.

Everything got sold.  Bad Debt is back!

Want more bad news?  Tomorrow we get the Employment Situation number at 8:30 a.m. and the consensus estimate is we did not lose any jobs in January.  I will believe that when I see it.  The overall percentage is expected to come in at 10.1%, which is an uptick from 10%.

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