Housing and Auto Data Send the Market Higher
By Robert Perrego, at 5:36 pm on February 2nd, 2010Housing, financial and auto companies blazed the market path lower last year as the poster children for the economic nightmare that took the Dow Jones Industrial Average from its all time high of 14,198 to the low at 6,469. Today, while Paul Volcker continued beating up on the banks, Ford Motor Co. (NYSE: F), General (Government) Motors and D.R. Horton Inc. (NYSE: DHI) released data giving the market optimism and also 117 points. Ford reported their January sales increased 25% and GM was up 14% while Toyota and Chrysler dropped. D. R. Horton actually posted a profit and the Pending Home Sales Index increased by a percentage point on a month-over-month basis, showing a flicker of strength in the housing sector.
The Dow Jones Industrial Average added 111.32 points (+1.09%, 10,296.85) with 28 of 30 companies finishing with gains while the S&P 500 rose 14.13 points (+1.30% ,1103.32). The Nasdaq 100 lagged behind, gaining only 16.20 points or 0.92% (1,776.92)
Treasury Secretary Timothy Geithner defended the largest budget ever proposed in the history of the world, as Senators grilled him on President Obama’s new $3.8 trillion budget, fully loaded with a $1.56 trillion deficit. At the same time, Paul Volcker was defending legislation to limit proprietary trading by banks. Somehow, someone got the idea that proprietary trading caused the credit crisis. Back when professional proprietary equity trading was taking off (prop day-trading), it seemed every evil deed within 50 miles of Wall Street was blamed on ‘proprietary trading’, ‘fast money trading’ and ‘day traders.’ I was a prop trader for six years and from what I remember, the people that knew the least about trading always blamed trading, even when it had absolutely nothing to do with trading. “Deja vu all over again.” (Yogi Berra 1960)
New York spot gold added another $8.30 an ounce (+0.75%, $1,113.90, 4:32 p.m.) after popping up $25 yesterday as the PowerShares DB US Dollar ETF (NYSE: UUP) looks like its recent rally is over. The UUP lost 0.34% today as it closed below its 200 day exponential moving average and also broke below the uptrend line that has been in effect since January 14th. Nothing moves straight up or down in the financial markets so, while the UUP’s medium term trend is still up, the short term picture is down. The UUP closed at $23.27 and the 200 day EMA is at $23.31. The relevant support levels below are $23.16 (top support) and $22.90 (50 day EMA).
Oil is on fire, literally and figuratively, as a cold winter in the United States has propped prices up and Nymex crude gained $2.64 a barrel (+3.55%, $77.07, 4:32 p.m.) for a second straight very strong day. Strength was seen in most commodities and the record $1.56 trillion proposed budget deficit cannot be ignored here. If we start running the dollar printing presses like that budget says, while holding interest rates low to create jobs, some very nasty inflation will not be far behind.
PNC Financial Services Group (NYSE: PNC) is going to offer $3 billion of common stock in order to redeem $7.6 billion of preferred shares it gave the U.S Treasury for a TARP loan. One by one the private firms are paying the TARP back with interest and click here for a great web page that tracks where all the money went. From what I can see Fannie Mae, Freddie Mac, General Motors, Chrysler and AIG have all our tax money. I hope Volcker makes sure the auto companies, government sponsored entities (Fannie and Freddie) and insurance companies are not engaged in proprietary trading to protect us from more economic calamities.
We have MBA Purchase Applications reporting at 7 a.m. tomorrow, the Challenger Job-Cut Report at 7:30 a.m., ADP Unemployment at 8:15 a.m., the ISM Non-Manufacturing Index at 10 a.m. (51.0 expected) and the EIA Petroleum Status Report at 10:30 a.m. Watch the oil market around that EIA report as the 6% gain in crude in the last 2 days will set oil up for a plunge if the numbers do not come in bullish.
Selected earnings estimates for Wednesday, February 3, 2010:
AFFX -0.10 after the close, AKAM 0.43, AMP 0.75 atc, ARW 0.61, AIZ 1.01 atc, BDK 0.77, BRCM 0.44 atc, CSCO 0.35 atc, CMCSA 0.27 before market open, DBD bmo, FNF 0.22 atc, HNT 0.67 bmo, HMC bmo, IP 0.23 bmo, ITT 0.93 bmo, WFR 0.00, MWW -0.01 atc, NOV 0.77 bmo, ONNN 0.14 atc, PFE 0.50, RL 1.01 bmo, RVSN 0.17, R 0.47, SLAB 0.62, SPF 0.02 atc, TMX 0.40 atc, TMO 0.88 bmo, TWX bmo, V 0.91 atc, WWW 0.45 bmo, YUM 0.48 atc.
