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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News

Market Jumps in the Afternoon, Fed Raises Rates after the Close

By Robert Perrego, at 5:03 pm on February 18th, 2010

The Dow Jones Industrial Average jumped about 50 points within 15 minutes at 2:15 p.m. this afternoon, adding to slight gains earlier in the day to finish up a solid 83.66 points (+0.81%, 10.392.90).  Travelers Companies Inc. (NYSE: TRV) led the Dow higher gaining 1.91% (+$0.99, $52.).  Wal-Mart Stores Inc. (NYSE: WMT) reported $1.17 per share in earnings before the open this morning, with analysts expecting $1.12.  The world’s largest retailer missed on revenues though ($113.65 billion vs. 114.56) and the market sent the stock into the penalty box, dropping it 1.09% (-$0.59, $53.47).

The S&P 500 gained 7.24 points (+0.85%, 1,106.75) on the day with gains in most all industries except transportation and finance.  The Nasdaq 100 climbed 12.53 points (+0.51%, 1,823.39).

The market traded slightly higher early in the day but with no volatility or major movements.  At 2:15 p.m. there was a jump that one market player attributed to possible short covering.  A software engineer in Texas flew a small plane into a building containing an IRS office, and with the market these days, there were short positions put on in the event a terrorist connection was found.  It turns out that the pilot was more than a little frustrated with the IRS (what a surprise) and left a seven page online rant describing what was (or was not) going on in his head.  As soon as it was apparent that the plane crash was not a hidden terrorist cell or something more sinister, the market pop could have been a short squeeze as all those speculative short positions ran for the exits.  Who says the IRS and short side traders are bad?  On a down note, the IRS is expected to announce new taxes on software engineers to pay for a new building (just kidding).

Microsoft Corp. (NSDQ: MSFT) and Yahoo Inc. (NSDQ: YHOO) got clearance from regulators in both the United States and Europe to combine their search and advertising mojo in an attempt to mount a real challenge to the Goliath of the space, Google Inc. (NSDQ: GOOG), which controls some 66% of the market.  Microsoft gained $0.38 (+1.32%, $28.97) and Yahoo closed higher by $0.10 (+0.65%, $15.54).  Analysts think this combination could have legs as Microsoft’s ‘Bing’ search seems to deliver the goods and Yahoo can now free up some extra time to figure out why they passed on the $34/share buyout offer from Microsoft in 2008.

With today’s gain, the DJIA has closed significantly higher than its 50 day exponential moving average and has some clear sailing ahead of it to the upside.  There is minor resistance in the 10,430 area, but after that it looks like blue skies back towards the 52 week high at 10,725.  It looks like the U.S. stock market has broken free of the Greek tragedy, finally.

Looking at the gold chart shows it is right up against resistance formed by an island reversal, which involves horizontally lined up gaps.  A close above $1,130 in the spot price or $111 by the SPDR Gold Trust (NYSE: GLD) should signal a breakout and a run at its all time highs.  New York spot gold gained $14.20 an ounce today (+1.28%, $1,121.00, 4:16 p.m.)

Nymex crude jumped $1.85 to $79.18 a barrel (+2.39%, 4:19 p.m.).  It is looking like the February 9 call of trading the trend channel of the United States Oil Fund (NYSE: USO) between $35 and $41 is working out.

**********

BREAKING NEWS – The Federal Reserve just raised the discount rate by 0.25% to 0.75%.  This is not the more important federal funds rate.  To put this in perspective, the federal funds rate is what banks lend to each other at for overnight loans, while the discount rate is what rate the Fed lends to banks at.  While raising the discount rate does increase the cost of money, the fact that the federal funds rate is still at 0.25% still allows depository banks access to the cheaper loan.

The big news here is the surprise jack in rates.  The Fed used to always make these changes after a Fed meeting in order to be more predictable.  With the bottom dropping out of the credit markets in 2008, the Fed cut rates without meeting and now it seems they are going to raise them in the same manner.  This is one tool Bernanke can use to keep market players from getting too juiced up on the all the liquidity that has been injected into the system.  Also, this unexpected rise will put the carry trade cowboys on notice to stop shorting the dollar as now they will be less sure as to when a hike in the federal funds rate will come.  This uncertainty will scare them into lightening up on their dollar shorts.

The bad news is, if these cowboys buy their shorts in as now they are afraid of higher rates (which strengthen the dollar), they will be selling their ‘riskier’ assets – stocks and commodities.

Remember those comments earlier in this article about the clear sailing to the old highs – WHOLE NEW BALLGAME NOW FOLKS.

New York spot gold was at $1,121 before the announcement – now it is trading $1,110.90.  The Dow ‘Diamonds’, the ETF for the Dow Jones Industrial Average closed today at $104.17 and are now trading $103.45 in the after-market – translates to down about 72 points on the DJIA.

Do you think those guys that put the short positions on when they heard a plane hit a building with the IRS in it wish they were still short?

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Wall Street Wrap

4 Good Economic Numbers and The Market STILL Sells Off

By Robert Perrego, at 5:01 pm on January 29th, 2010

If you were still wondering what direction the market was headed in, today should have answered that question for you.  We got a very good GDP number and three other solid economic reports today, but you wouldn’t know it looking at where the market closed.  Apple Inc. (NSDQ: AAPL) got hit again for another $7.23 (-3.62%, $192.06) bringing the two day drop to $15.82 (-7.61%).  Microsoft Corp. (NSDQ: MSFT) reported after the closing bell yesterday and beat analyst expectations, then got sold off all day long after gapping up on the open (-$0.98, -3.36%, $28.18).  Tech has been taken apart over the past two days with the Nasdaq 100 losing 77.86 points (-4.28%)

The Dow Jones industrial Average dropped 53.13 points (-0.52%, 10,067.33) and the S&P 500 closed lower by 10.66 points (1,073.87).  Usually the DJIA and S&P run at about a 10-to-1 ratio, but strength in Home Depot Inc. (NYSE: HD) and a Goldman Sachs upgrade for Wal-Mart Stores Inc. (NYSE: WMT) provided strength to the Dow Average.  Sadly, one of the reasons these stocks were strong and upgraded was they are both firing people, and therefore cutting costs.  About 8 out of 10 stocks on my trading screen finished in the red (lower) today with 12 of the 30 DJIA components finishing in the green (higher).

For the Nasdaq it was a whole different story with the only relative strength of a large cap stock provided by Amazon.com Inc. (NSDQ: AMZN).  Amazon avoided getting sold off too hard by announcing a $2 billion share buyback.  The Nasdaq 100 dropped 30.06 points (-1.69%, 1,741.04) and when the tide goes out, all the ships go down, so Amazon still closed lower by 62 cents (-0.49%, $125.41).  Why would a company announce a multi-billion dollar buyback when their stock is at an all time high, and the market is looking ripe for a retreat?  Maybe the guys running Amazon should go to their website and buy a book or two about technical analysis and trading, because if they started buying today, they stand a good chance of buying too high.

The silver lining to this cloud is that the indexes have all sold off into support levels.  The DJIA closed at 10,063 with 10,090 as support.  Two closes through support are needed to confirm a break and today is only one.  The S&P 500 is right on support at 1,071 and the Nasdaq 100 has support at 1,733.  The first half of next week’s trading will be important to show whether or not this drop is a just a pullback or the beginning of a larger decline.  The fact that the longer term uptrend lines for all three indexes have been broken leads me to believe that the market is done climbing for awhile.  When an uptrend is broken it does not mean the market is going down.  It could mean the market goes into a sideways trend or a downtrend, or it could mean sideways and then a resumed uptrend.  Only time will tell.  I think we go lower from here as it looks like the big boys are selling earnings and unloading stock.

The dollar ripped higher on the strong GDP number (5.7% vs. 4.5%) as the PowerShares DB US Dollar ETF (NYSE: UUP) gapped above its 200 day exponential moving average ($23.32) and traded even higher into its close (+0.77%, $23.45).  Commodities got hit on the dollar strength as copper was off 2.08%, coal dropped 4.56% on bad earnings from Arch Coal Inc. (NYSE: ACI), steel lost 1.62% and the ag’s were weaker by 1.09%.

Surprisingly, gold hung in there tough as now it may be trading as more of a safe haven and a currency than a commodity.  As the money rotates out of equities it looks like some of it is finding a home in the shiny yellow metal.  New York spot gold lost only $5.10 an ounce to $1,080.30, which is a 0.47% drop (4:47 p.m.)  It is unusual that the absolute percentage move in the dollar is greater than the corresponding percentage move in gold.

Oil dropped on the dollar strength as Nymex crude lost 98 cents and last traded at $72.65 a barrel (-1.28%, 4:42 p.m.)

Next week should be interesting, to say the least.  It is Friday now, after the close and high time to close the trading screen and go have a great weekend.

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Wall Street Wrap

Wall Street Bounces Back, A Little

By Robert Perrego, at 5:09 pm on November 30th, 2009

On Friday the markets retreated on news that Dubai World, a government owned investment holding company, was not going to be able to meet payments on their $59 billion in debt.  The company is now asking for a restructuring of $26 billion of that debt.  The bears came out of the woodwork screaming for a market collapse and the Dow Jones Industrial Average dropped 154 points.  Today, world markets firmed as clearer heads prevailed.  First, Bernie Madoff alone beat these guys by $1 billion (U.S. number one again!) and secondly, Dubai is sitting on 80 billion barrels of oil.  Why the markets got scared on this one is beyond me as all those oil dollars should be able to handle this problem without breaking a sweat.

The one question that could be worrying everyone is that there are other cockroaches about to see the light of day and where they will come from and when they are discovered is unknown.  The ripple effects of this problem are not completely known, but Citigroup Inc. (NYSE: C) and the Royal Bank of Scotland have been mentioned as the hardest hit in the U.S. and U.K. respectively.

The Dow Jones Industrial Average regained about a fifth of Friday’s loss or 34.92 points (+0.33%, 10,344.84) and the S&P 500 gained 4.14 points (+0.37%, 1,095.63).  The tech heavy Nasdaq 100 was up 1.97 points (+0.11%, 1,767.43).

Other big news today was all about Black Friday and Cyber Monday.  Depending on the web site or news source you read, sales were up from Black Friday of 2008 or down.  Who to believe?  ShopperTrak had a report that sales were up 0.5 percent and then the National Retail Federation said sales were down 8 percent.  Are these the same guys that gave us “jobs saved and created?”

The one winner everyone seems to agree on is Amazon.com Inc. (NSDQ: AMZN) as the stock closed at a 52 week high at $135.91 today (+$4.17, +3.16%).  Amazon was the most visited site with Wal-Mart pulling a close second.  Yes, that is Wal-Mart online.  While Black Friday is the ‘Super Bowl’ for the brick and mortar retailers, today is supposed to be the day for online retailers.  I have received about 50 Cyber Monday spam e-mails already, and if your Internet is slow tonight it might be your neighbor sucking up bandwidth buying that robot hamster.

New York Spot Gold gapped down on the open, regained ground as the day went on and was up $2.10 an ounce ($1,178.80, +0.18%) at 4:31 p.m.  The SPDR Gold Trust (NYSE: GLD) traded as low as $114.27 before buying pushed the ETF up to close at $115.64 (+$0.58, +0.50%).  Gold gained 13% in November and today closes one of the best months the shiny yellow stuff has seen in 10 years.

Oil spiked on reports that five British sailors aboard a racing yacht had been seized by the Iranian Navy and on a weaker dollar.  I guess these guys could sail fast but navigation was not their strong point as they supposedly wandered into Iranian waters, which I would assume no one does on purpose.  Nymex crude was up $1.23 a barrel (+1.62%, 4:29 p.m.) at $77.26 after trading as high as $78.00 on the news.

We have a full week of trading and on Friday the Employment Situation number is looming.  Expectations are that the current 10.2% unemployment level will either stay flat or even decrease.  While the weekly Jobless Claims numbers have been coming down slowly, I don’t think a decrease is coming as the only stories I see about jobs are about companies cutting more jobs.  Tomorrow we get Motor Vehicle Sales (7.75 million expected) and at 10 a.m. we get ISM Manufacturing Index (55.0) and Construction Spending (-0.4%).  Wednesday brings the ADP Employment Report at 8:15 a.m. with the follow up number for that being Thursday morning’s Jobless Claims (485k) at 8:30 a.m.  Also on Thursday we get the Productivity and Costs report (8.6%, -4.2%) at 8:30 a.m. and the ISM Non-Manufacturing Index (52.0) at a.m.  Friday is the big unemployment number and Factory Orders (0.2%) at 10 a.m.

Fed Governors are going to be speaking with Philly Fed President Charles Plosser on Tuesday at 12:20 p.m. and then again Friday at 10 a.m..  Chairman Bernanke appears before the Senate Banking Committee for reappointment on Thursday, and I am sure CNBC will be airing some of the very entertaining and witty verbal exchanges.  My favorite part is when Senator Blowhard makes a 15 minute speech prior to asking a 4 second question and then does not want to wait for a long detailed answer as he will claim he is running out of time.  St. Louis Fed President James Bullard speaks at 1:15 p.m.

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News

Tracked.com Topics: Retailers’ Time of the Season

By Taryn Cooper, at 4:53 pm on November 18th, 2009

We are a week removed from Thanksgiving here in the States, and with that comes the one day most people have a love/hate relationship with… Black Friday, the Reigning Day of the Retailer.  Everywhere from Wal-Mart Stores to Apple retail stores have some kind of door-opening-bargains in anticipation of the gift-giving season.

Consumers are not the only people to be intrigued with retailer specials this time of the season.  Research analysts are also intrigued with the performance of retailers.  Incidentally, many retailers have reported their 3Q results, some positive, some not so.  An uptick in retailer stocks has to be positive.  After all, they are mostly driven by consumer dollars.  And when consumers spend, spend, spend…that means we back in biz.  Alternatively, if consumers do not spend, that means consumers are putting off large purchases or rather “non-necessity” purchases.

What else screams “non-necessity” impulse purchases but Black Friday?

Wal-Mart Stores, as an example, has confirmed Black Friday deals at their stores, adding to the hype and hysteria that leads to door-busting situations.  Especially noteworthy in that article was the line that Black Friday is considered a “key barometer of shoppers’ willingness to spend for the holiday period.”

In that light, Barron’s has put out its list of retailers expected to do well this holiday season, including the likes of Coach (COH), Nordstrom (JWN), Best Buy (BBY) and Dollar Tree (DLTR).  Talk about eclectic.   The first two are incredibly high-end and borderline luxury specialty retailers, which suggests to me that those who have been unscathed by the whole economic crisis will still be spending money for loved ones.

Best Buy will always do well in the holiday season, catering to the niche market of electronics and gaming junkies, not to mention those who are in the market for the newest hottest gadget. Since its largest competition Circuit City went out of business earlier this year, Best Buy’s stores will be busting at the seams this season.

Dollar Tree stood out for me.  It makes sense though, being on the other side of the luxury scale.  Not only ’tis the season of giving, ’tis the season of regifting.  Who wants to go to their friends’ or families’ homes empty-handed, only to have that gift turned over to someone else or tossed out?  Sometimes, bottles of cheer are not recommended, and Dollar Tree is the only cure for that fever?

Discount-store competitor Dollar General also showed some great promise on the market, having the largest retail initial public offering in more than 12 years. Having been taken private by KKR in 2007, DG’s shares performed well in the market along with other low-priced retailer Rue21.

The retail sector choices remind me of what Mom always used to say to me: spend money on accessories, save money on clothes.  Clothing goes in and out of style quickly, but accessories like a nice watch or handbag (for women, of course) will always stay current.  Sounds like the market is taking that approach this holiday season as well.

Best Buy is not the only Big Box Retailer to have chatter this week in anticipation of the holiday season.  Big Boxers Home Depot (HD) and Lowe’s Companies (LOW) reported Q3 earnings earlier this week.  While both companies beat street estimates, the home-improvement retailers’ respective CEOs both warned about consumer spending or lack thereof.  Namely, while customers are taking care of small do-it-yourself projects, large building projects are being put off until the economic outlook appears better (lumber sales, high-end electrical and wiring equipment).

Lastly, department store J.C. Penney reported a lower profit for Q3 but raised its full-year forecast, possibly topping Wall Street expectations.  Perhaps there is a corner being turned in retail after all.

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