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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News

Reading the Open – Crazy AIG and Is the Dollar controlling the Market?

By Robert Perrego, at 10:18 am on August 28th, 2009

The 8:30 a.m. release on Personal Income and Outlays showed that the month-over-month change to personal income did not rise 0.1% as forecast and that it went unchanged at 0.0%.  Consumer spending rose 0.2%, below the 0.3% expected increase and this number is important as the U.S. economy is 70% driven by the consumer.  Even though this number missed, any increase is a good sign.  The PCE core index (personal consumption expenditures) was flat at 0.0% which is good news to all of us since this means our personal prices did not rise.

American International Group (NYSE: AIG) once again jumped and is seen trading up $6.37 at $54.21 at 10:14 a.m.  An interesting note about AIG is that while everyone sees this as the short squeeze of the year, AIG traded over 148 million shares yesterday with only 134 million shares outstanding.  Already at 10:14 a.m. AIG traded another 32 million shares.  How many shares were short prior to this ’squeeze’, and how many days this action continues as the shorts supposedly scramble to cover is unknown.  Was EVERYONE short the entire company?  I think this is technically impossible so how much more there is to cover cannot be much.  It looks like this means the stock has basically become the Las Vegas of stocks for traders looking for some volatility.  Momentum traders, day traders, scalpers, and adrenaline junkies during a the slow August weeks all have AIG on their screens to roll the dice and hopefully make a fast buck.

QUESTION:  As the U.S. Government owns a fair share of this company, and the short squeeze and current speculation has driven the price higher, will Obama come out and demonize these ’speculators’ while they are making the stock jump higher and making the U.S. of A. money?  Prior to now the term ’speculator’ has been a four letter word for this Administration.

E-Trade Financial group (NSDQ: ETFC) is up 10% on an S&P upgrade of their bonds from CC junk to CCC junk.  E-Trade issued $1.76 billion of convertible debt as part of a debt swap with Chicago-based hedge fund Citadel Investment Group LLC, E*Trade’s biggest debt and equity holder, getting in on at least $1.2 billion of this action.  Citadel has been doubling and tripling down on E-Trade for over a year and now and owns a very large percentage of this company.  E-Trade comes back from the dead here and gets acquired by a rival and Citadel could make a very large amount of money.

Gold was up over $10 an ounce before the 9:55 a.m. release of the University of Michigan Consumer sentiment number.  The number came in above expected, 65.7 vs. 64, but looking at the charts show that the Dow and Gold reversed at that time.  The Dow was trading at 9597 at 9:54 and dropped to 9556 by 10:00 a.m.  The SPDR Gold ETF (NYSE: GLD) traded $94.04 at 9:54 a.m. and then by 10 a.m. was trading $93.73.  The GLD trades at approximately 1/10th the price per ounce of Gold so that is about a $3.10 drop per ounce.

Looking at the dollar we see a slight jump up after the Consumer Sentiment release and this explains the drop in gold.  The United States Oil Fund (NYSE: USO) chart is similar to gold as it shows a drop that correlates with the jump in the dollar.  Has the dollar and commodity stocks, on another light volume trading day, taken over the market as a push in any direction by the commodity stocks are the plays that are basically moving the indexes?

It is Friday, and as we have had a pretty much directionless week, my best guess is the market trades off today and in particular watch the 2:30 to 4 p.m. trading session as traders will not want to hold larger positions over the weekend.

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