News

Market Posts Gains on Economic Data, No Bad News from Greece

By Robert Perrego, at 4:49 pm on February 17th, 2010

Housing Starts came in above expectations and the Industrial Production number was also higher than expected today, and so was the stock market.  Home Depot Inc. (NYSE: HD) was one of the stronger stocks in the Dow Jones Industrial Average, rising 1.97% (+$0.58, $30.02), as the home improvement retailer’s stock broke out to its highest level in over 17 months.  The Federal Reserve released the minutes from their last meeting, shedding more light on the end of the quantitative easing program and the $1.425 trillion of toxic mortgage and Fannie and Freddie debt they have accumulated over the past year.

The Dow Jones Industrial Average gained 40.43 points (+0.39%, 10,309.24) with 20 of 30 stocks up on the day.  The broader S&P 500 added 4.38 points (+0.38%, 1,099.24) with biotech (+1.63%) leading the way.  The tech heavy Nasdaq 100 closed up 8.80 points (+0.48%, 1,810.86).  DJIA component Home Depot broke out of a small bullish head and shoulders pattern yesterday and, with today’s move, is most of the way to the $30.68 target price level of the pattern.

Philadelphia Fed President Charles Plosser has been the dissenting voice on interest rate policy (he voted to raise rates this past meeting) and he is not a big fan of the fact that The Fed owns more toxic mortgage related paper than anyone else.  Both these stands on issues may be working towards the same goal, as when the Fed stops buying toxic mortgage securities soon AND if they started to sell them to decrease their holdings, the most likely result would be rising mortgage rates.  The Treasury market fell today (rising interest rates) with the 30-year rising by 7 basis points to 4.71%.  The 30-year fixed mortgage is currently at 5.08% and if you are thinking about refinancing or buying a home, the sooner the better.

There was a lot of news out about gold as George Soros, John Paulson and pension funds are reported to be buyers.  Soros commented last month that gold was in a bubble and turned around and bought so much of the SPDR Gold Trust (NYSE: GLD) he became the fourth largest holder.  I don’t think I will believe what he has to say too much anymore.  Paulson upped his exposure to gold by 10% and was buying the banks, as was Soros.  Yesterday, the euro strengthened against the dollar and gold was up over $16 an ounce.  Today the euro dropped back down to its lowest level against the dollar since May of 2009, giving up all of yesterdays gains, and New York spot gold dropped $3.80 an ounce.  This leaves the dollar-euro relationship right where it was last Friday with gold up $12+ an ounce.

Breaking News – 4:54 p.m. EST – New York spot gold drops another $8 an ounce ($1,106) as the IMF announces they will be selling the remaining 191.3 tonnes of gold in the open market.  Last fall India bought 200 tonnes from the IMF out of an allocated 400 tonnes to be sold.

Nymex crude was up again, rising 43 cents (+0.53%, 4:12 p.m.) to $77.44 a barrel.  Since October, oil has risen to over $80 a barrel twice and then retraced to $70.  The latest move back above $75 looks like another inevitable move to $80+.

Tomorrow’s economic reports are the Producer Price Index (0.8%, 0.1%) and Jobless Claims (440k) at 8:30 a.m., Leading Indicators (0.5%) and the Philadelphia Fed Survey (17.0) at 10 a.m. and a whole lot of bond auctions for the 3-Month, 6-Month, 2-Year, 5-Year, 7-Year and 30-Year TIPS maturities.  Two Fed Presidents and one Fed Governor will be speaking Thursday as Elizabeth Duke speak at 5 p.m., Dennis Lockhart at 7 p.m. and James Bullard at 9 p.m.

Selected earnings estimates for February 18, 2010:

AEE 0.27 before market open, APA 1.96 bmo, ABX 0.57 bmo, CBS 0.25, DAI 0.02, DDR 0.32 after the close, HRL 0.52 atc, IM 0.52 atc, KEG -0.13, PDE 0.17 bmo, PEG 0.60 bmo, RS 1.02 bmo, SFY 0.28 bmo, WMT 1.12 bmo, WCG 0.44 bmo, WMB 0.34 bmo.

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Wall Street Wrap

Yo-Yo Market Back Down on China and Greece

By Robert Perrego, at 4:34 pm on February 12th, 2010

Remember the days when the U.S. stock market was about the U.S. economy and companies?  If not for a Chinese credit tightening and the Germans deciding the Greeks need to get their own house in order, I might be writing about Warren Buffet and the fact that Berkshire Hathaway closed the Burlington Northern Santa Fe deal.  Instead, the topics du jour are China raising their bank reserve requirements and that the deal out of Europe everyone was expecting might be falling apart.  The bottom line is that your portfolio most likely dropped in value today as the stock market closed lower on news from two OTHER continents.

The Dow Jones Industrial Average lost 45.05 points (-0.44%, 10,099.14) today and the S&P 500 gave up 2.95 points (-0.27%, 1,075.51).  The Nasdaq 100, the strongest of the three over the past two days, closed up 3.37 points (+0.18%, 1,779.11)

After the credit markets fell apart last year the Federal Reserve dropped interest rates to near zero making the dollar a shiny new candidate for the carry trade.  China tightened credit, Asian and European stock markets dropped, Merkel caught flak from the German voters not to keen on bailing out another country and the European markets dropped lower.  Then, before our markets even opened, the carry trade cowboys were buying in their dollar short positions and entering sell orders for stocks here at home.

The market opened lower and the DJIA dropped 144 points in the first 10 minutes of trading.  Market players started putting a positive spin on the news as analysts said the gradual tightening in China would be a good thing over time and Blackrock Inc. came out and said they are increasing their Greek bond holdings.

Market players tried to put a positive spin on the China news saying a gradual tightening will keep a bubble from forming.  Another factor cited in the tightening of credit in China is that investment money is flooding in and the reserve raise is trying to sop up some of that extra cash.  It looks like money is chasing investments looking to catch that near vertical phase before the bubble pops.  If that is supposed to be the good news, here is the bad news – 50% of the commercial space in Beijing is vacant.  They are building buildings just to build something and keep the jobs.  This means there is already a bubble in China and that business is not keeping up with the stimulus generated building supply.  No tenants means no rent collected, which means no payment back of the loan taken to build the building.  When that loan comes due – crash.

Surprisingly, Caterpillar Inc. (NYSE: CAT) was up today (+$0.05, $56.20) after my picking it as a proxy trade for China yesterday.  CAT opened over a point lower and spent the rest of the day trading up.  My other China-economic news proxy trade, the iPath Dow Jones-UBS Copper ETN (NYSE: JJC) lost 1.40% (-$0.60, $42.10) but is up nicely this week (+6.91%).  The Chinese markets closed today for two weeks for New Year’s celebrations and the tightening after the close yesterday was a pretty sly move by the government.

The dollar shot up on the news that the German’s were backing away from the deal with Greece.  This caused commodities to drop as New York spot gold traded as low as $1,076.10 an ounce but spent all day recovering as the dollar dropped.  NY spot was last trading down 50 cents at $1,092.10 (4:25 p.m.).  The PowerShares DB US Dollar ETF (NYSE: UUP) gapped up on the market open and traded as high as $23.74 (+$0.19) before closing at $23.63 (+$0.08).  This is the highest close for the UUP, excluding last Friday’s close at $23.65, since July 29, 2008.  Gold holding in here solid while the dollar inches up is showing some very solid relative strength.

Nymex crude dropped $1.15 a barrel to $74.13 (-1.53%, 4:14 p.m.).  A slower China means less oil demanded and possibly the two week New Years vacation over there will also crimp demand as factories are shut down.

Next week the markets are shut for Presidents’ Day so that means a THREE DAY WEEKEND!  Hope you have the day off Monday and have a great weekend.

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Wall Street Wrap

The Greece No-Bailout-Bailout Waiting Game, Market Drops and Pops

By Robert Perrego, at 4:37 pm on February 10th, 2010

The Dow Jones Industrial Average dropped almost 100 points off the open this morning as no bailout for Greece had materialized overnight.  Then, as rumors circulated across trading desks that a plan was forming, the DJIA popped back up to go positive for a short time before selling off moderately into the close as the Greece watching no-bailout-bailout speculation game resumed.

The Dow Jones Industrial Average closed down 20.26 points (-0.20%, 10,0.38.38) with its ETF, “The Diamonds” (NYSE: DIA) losing $0.13 (-0.12%, $100.52).  For the S&P 500 (-2.39, -0.22%, 1,068.13) the ETF is called “The Spiders”, which dropped $0.21 (-0.19%, $107.01).  The Nasdaq 100 lost 4.08 points (-0.23%, 1,749.76) and the tech index’s ETF, “The Q’s” (NSDQ: QQQQ) lost $0.09 (-0.20%, $43.02)

There are rules in place that bar the ECB or other member governments from bailing out Greece by buying their bonds or extending credit, and now that a dire situation is up against these rules it looks like politicians are scrambling to find a loophole.   As strikes and protests loom, Greek Prime Minister George Papandreou stated that they have not asked for aid and market players are either of the belief help is on the way or the bottom is going to drop out.  You can place your bets on any stock exchange in the world by just buying or shorting stocks because if no substantial aid package comes through soon, there will be “blood on the walls” in the credit markets according to one strategist.  You can bet that bleeding in the credit markets turns stock traders screens red as equity markets will drop like they did at the end of last week without these politicians doing something besides holding a lot of lunch meetings.

Federal Reserve Chairman Ben Bernanke testified in front of the House Financial Services Committee today, contrary to reports it was canceled due to the weather, and stated that the central bank is considering raising the discount rate (not the federal funds rate) soon.  This rate usually follows the federal funds rate and is seen by Bernanke as one way to tighten without having to raise the more economically sensitive federal funds rate.  Many past statements by Bernanke have been that the federal funds rate will remain low for ‘an extended period of time.’

American International Group Inc. (NYSE: AIG) was up 16.33% (+$3.78, $26.92) on news they were selling their Alico subsidiary to MetLife Inc. (NYSE: MET) for $15 billion in stock and cash.  Last August AIG’s share price rocketed on speculation of the sale of a different subsidiary, a short squeeze and news founder Hank Greenberg was back in the fold.  While that rip in the stock took it up to over $55, the unit was never sold due to lack of interest.  This stock move, while not as large as the move to $55, seems to be real even though officers from both firms refused to comment on the situation.

Baidu, Inc. (NSDQ: BIDU) jumped $47.12 (+10.83%, $482.13) to a new all time on above average volume after reporting earnings after the bell yesterday.  BIDU also stands to gain market share as a result of statements by Google Inc. (NSDQ: GOOG) that they might be pulling out of China.  Google currently only has a 17% share of the search market in China, but 17% more is 17% more and the Chinese market is huge.

New York spot gold dropped over $10 an ounce this morning but recovered and was last seen trading at $1,071.90 (-$5.70, -0.53%, 4:30 p.m.).  Nymex crude gained 71 cents to $74.43 a barrel (+0.92%, 4:23 p.m.).  The dollar strengthened on the comments by Bernanke regarding raising the discount rate.  The PowerShares DB US Dollar ETF (NYSE: UUP) finished up 0.29% (+$0.07, $23.56)

Economic reports out of Washington D.C. are being delayed as a result of the federal government being shut down.  When President Obama mentioned a spending freeze for the national budget during his recent State of the Union speech, my reaction was I will believe it when I see it.  I am not sure this is what he meant, but one government official stated that having the Government shut down costs the taxpayers $100 million a day.  If you ask me, the less time these guys have to vote on raising my taxes the more money it saves me, so three cheers for Mother Nature!

Selected earnings estimates for Thursday, February 11:

ASF 0.15 before market open, A 0.32 after the close, ALU 0.08 bmo, AN 0.27 bmo, BEC 1.26, BWA 0.22, CEPH 1.58 atc, CS bmo, DVA 1.06, EXPE 0.28 bmo, BGC 0.24 atc, GPI 0.44 bmo, JASO 0.11, LH 1.15 bmo, CLI 0.76 bmo, MFC 0.57, MAR 0.25 bmo, MFE 0.64, MOH -0.16, PEP 0.91 bmo, PM 0.79, PGN 0.50 bmo, RNWK -0.06 atc, RTP, STRA 2.30 bmo, CAKE 0.24, VFC 1.47, VIA 0.87 bmo, WWE 0.18 bmo.

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Wall Street Wrap

Market Runs up on Greece Bailout Speculation

By Robert Perrego, at 4:49 pm on February 9th, 2010

European Central Bank President Jean-Claude Trichet left a summit in Sydney a day early, sparking speculation that a deal was afoot to help Greece get back on their feet and in control of their debt problem.  With the euro dropping last week on worries that Greece, Portugal and Spain were in trouble financially, world stock exchanges sold off as money flew to the relative safety of the dollar and U.S. Treasuries.  At 11:30 a.m. est, rumors circulated that a deal involving Germany was imminent and the S&P 500 took off as the dollar got hammered.  Within 50 minutes the S&P 500 jumped over 17 points as the PowerShares DB US Dollar ETF (NYSE: UUP) dropped almost a full percentage point in the same time period.  Twenty minutes after the market run-up, a sharp drop of 8 S&P points occurred as all those involved denied there was any deal in place, but the fact that the wheels were seen to be in motion kept the market strong all day.

The Dow Jones Industrial Average closed up 150.25 points (+1.51%, 10,058.64) and regained the 5-digit, 10,000 level with 27 of 30 components finishing higher.  The S&P 500 climbed 13.78 points (+1.30%, 1,070.52) and the high tech Nasdaq 100 gained 18.96 points (+1.09%, 1,753.84) but was the weakest of the three indexes as low tech airlines +8.49%, metals +3.23% and materials +3.01% led the market higher.

The airlines were very strong as United Airlines reported unit revenues in January that blew away Wall Street estimates.  UAL Corp. (NSDQ: UAUA), the holding company for United Airlines, saw its stock rise by 17.52% (+$2.29, $15.36) and logged their strongest single day in the market since August of 2009.  UAUA bottomed at $3.07 on July 10th of last year and has since performed fantastically rising 400% in just over 6 months.  AMR Corporation (NYSE: AMR), the parent of American Airlines and American Eagle, closed up 13.79% (+$1.01, $8.33) and they are up 247% from their low trade of $2.40 last March.  Airlines, once commonly referred to as flying holes in the sky for money, can be a nice investment but just like with everything in life, it is all about timing.

Commodities stocks and commodities were especially strong today as not only do they gain on a rising market, but they get supercharged by the fact that they are denominated in dollars.  The dollar fell relative to the euro, but it would be more appropriate to say the euro gained against the dollar, as last week’s relative jump in the dollar had more to do with euro weakness on worries the Greek economy was sliding south.

The Market Vectors Junior Gold Miners (NSDQ: GDXJ) jumped 5.35% (+$1.19, $23.41) as the major miner index (NYSE: GDX) climbed 4.38% (+$1.79, $42.57).  Hard commodity ETF’s easily outperformed even a strong day in the broader market as the falling dollar provided extra fuel for a bigger move.

SLX – Market Vectors Steel +4.35%

KOL – Market Vectors Coal +3.33%

JJC – iPath Dow Jones – UBS Copper +3.21%

USO – United States Oil Fund +3.07%

DBA – PowerShares DB Agriculture Fund +0.19%

New York spot gold was last seen trading at $1,075.50, up $14.10 an ounce (+1.33%, 4:09 p.m.).  Gold is performing very logically according to the charts as it now has tested the support level at $1,060 and seems headed higher.  The SPDR Gold Shares ETF (NYSE: GLD) is experiencing the same bounce (+$1.37, +1.31%, $105.41) and now has its 50 day exponential moving average over head at $108.10 as resistance.  The rules of technical analysis say two closes above this level is a breakout, so if you did not buy the bottom on support another buy signal showing even more strength may be coming soon.

Nymex crude added $2.03 a barrel and was trading $73.95 (+2.84%) at 4:07 p.m.  If oil makes another run at $80 it will continue the sideways trend channel ($67 to $80) it has been bouncing up and down inside in since last July.  The USO has fluctuated between $35 and $41 a few times now and looks headed back up again.

Tomorrow we get the MBA Purchase Applications report at 7 a.m., International Trade numbers (-$35.7B) at 8:30 a.m. and the Treasury Budget (-$46B) at 2 p.m.  Bernanke’s appearance in front of the House Financial Services Committee has been postponed due to severe weather.  Left to guess I would say severe global warming with all the hot air in D.C., but they are due to get another major snowstorm.  Philly Fed President Charles Plosser gives a speech to the World Affairs Council of Philadelphia at 12:45 p.m. and I guess people in Philly drive better in the snow because it is not canceled.  Strangely, Fed Governor Daniel Tarullo’s testimony in front of the Senate Banking Committee in D.C. at 9:30 a.m. is not canceled, proving that either senators are better drivers than congressmen or they are full of more hot air.

Selected earnings estimates for Wednesday, February 10:

A quick look show it is ‘insurance day’ as quite a few insurance and reinsurance companies report tomorrow: RE, MMC, PRE, PL, PRU, ALL and TRH.

MT 0.27 before market open, BHP, BSX 0.13 after the close, CCE 0.21 bmo, CSC 1.23 bmo, CLB 1.20 atc, DF 0.37 bmo, ELN -0.08 bmo, RE 3.38 atc, ICE 1.14 bmo, LVLT -0.10 bmo, LPX -0.19 bmo, MMC 0.37 bmo, MICC, PRE 2.81 atc, PL 1.02, PRU 1.11 atc, SIAL 0.72, SON 0.50 bmo, S -0.19 bmo, ALL 1.01 atc, NYT 0.38 bmo, TRH 1.83 atc, VALE 0.32 atc, WYN 0.37 bmo.

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Wall Street Wrap

Weak Jobs Number Puts Market on the Edge, Obama’s Bank Plan Pushes it Over

By Robert Perrego, at 5:17 pm on January 21st, 2010

Yesterday, the Dow Jones Industrial Average dropped 208 points before recovering to post a 122 point loss on the day.  The S&P 500 also experienced the same deeper drop and recovery into the close.  Looking at the charts for the Dow and the S&P 500 shows that where the two market Indexes closed yesterday, was right on the support of short term uptrend lines that have been in effect since December 17th of last year.  All the market needed to drop was a little push…

This morning before the open, the Jobless Claims came in weaker than expected by 42,000 jobs (482K vs. 440K), and the market dropped a bit off the open.  The 10 a.m. release of a weak Philly Fed survey and a brief released by the White House with details about new banking regulations President Obama had a press conference scheduled for, was enough to push the market over the edge.  In 17 minutes the DJIA dropped 105 points as selling, and possibly the cascading of protective sell stops, took the market on a one way trip lower.  An hour later Obama was on TV, and as he announced his plans a second wave of selling drove the market to its day low at down 229 points.

The Dow Jones Industrial Average lost 213.27 points (-2.01%, 10,389.88) on the day making the drop of the last two days total 335 points, which is the biggest two day loss since June of last year.  The S&P 500 dropped 21.56 points (-1.89%, 1,116.48) and the Nasdaq 100 was off 17.38 points (-0.93%, 1,850.57)

There seems to be a difference of opinion about how Goldman Sachs Group, Inc. (NYSE: GS) will fare under the newly proposed legislation.  Dick Bove of Rochdale Securities LLC says you should buy Goldman on the dip, but Michael Hecht at JMP Secutities and Matt Albrecht at Standard and Poor’s disagree, saying the bank will get hit harder than their brethren.  Goldman announced earnings this morning before the opening bell and crushed the analysts estimates of $5.20 a share by a full $3.00 ($8.20).  With a weak and slowly trending lower market, Goldman stock was off about a dollar when the first market slide hit.  This first slide only took the stock down three more dollars and when Obama got on TV, Goldman was trading at about $164.  Fifteen minutes later, as Obama gave details of his plan, 7 points evaporated off of Goldman’s stock as it traded as low as $156.77.  Calls to Goldman and other banks all got pretty much the same answer of “we don’t really know until we see all the details” which sounds to me like; “It is only proposed legislation and let’s just see what they get signed into law after we pay our lobbyists a small fortune to go talk to some politicians in D.C.”  Goldman stock rebounded to close the day down $6.92 (-4.12%, $160.87).

The newly proposed regulation has at its heart a ban on commercial banks engaging in proprietary trading.  Obama seems to believe that this type of law would be a safeguard against a future financial meltdown similar to that which occurred over the last 18 months.  Never mind the fact that proprietary trading did not have much to do with financial crisis, or that American International Group, Inc. (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) did not engage in any proprietary trading at all, were at the epicenter of the crisis and together cost the TARP well over $200 billion.  Never mind the fact that Goldman and every other large bank that did engage in proprietary trading have paid back, with interest, every dime the Government loaned them.  The question is, is this type of legislation motivated by actually trying to regulate and make the markets safer, or is it politically expedient to attack the big banks to score a victory after the election in Massachusetts earlier in the week?

Google Inc. (NSDQ: GOOG) reported after the close today, with some of the bigger market players anticipating a large beat.  The analysts estimate for earnings was $6.50 a share and one player I spoke with cited the fact that Google’s numbers were never taken lower during the past year, and that, with the economic pick up the reported earnings beat should be sizable.  In today’s down market, Google closed up $2.57 at $582.57.  The search engine giant reported earnings of $6.79 a share, beating the $6.50, but only by 4.4%.  The stock immediately dropped in after hours trading as it seems others anticipated a larger earnings beat and started to sell.  The stock is currently down 25 points in the after market at 557 (5:00 p.m.).  This pattern seems to be keeping form with selling the tech earnings after the beat expectations (see Intel and IBM earlier in the week).

New York spot gold dropped $17.80 to $1,093.50 and Nymex crude lost $1.92 a barrel to $75.82 as just about everything got hit today.

Selected earnings for Friday:

BBT 0.21 before the open, EXC 0.85, GE 0.26 bmo, HOG -0.32 bmo, JCI 0.29, KMB 1.25, MCD 1.02 bmo, SLB 0.64 bmo, STI -0.75 bmo.

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