AI
Tuesday, January 30, 2007 8:10:51 PM
Market Update 070129
http://biz.yahoo.com/mu/update.html
4:20 pm : Considering the breadth of disappointments on the earnings front and soaring prices across the energy complex ahead of a plethora of economic data that also includes an update on monetary policy, stocks actually held up rather well Tuesday.
As evidenced by the S&P 500 turning in a better performance than the Dow and Nasdaq, it's not surprising to see just how big of an impact renewed enthusiasm for beaten-down oil stocks had on the day's action. All of the Energy sector's 33 components closed sharply higher, led by a 1.6% gain in shares of the broader market's most heavily-weighted name -- Exxon Mobil (XOM 74.36 +1.16). Explorers, among the biggest beneficiaries of soaring natural gas prices (+11%), was the day's best performing S&P industry group (+3.4%).
Crude for March delivery surged 5.4%, the biggest one-day move since Hurricane Katrina, to close near $57/bbl. The rally was sparked by reports of below-normal temperatures and news that Saudi Arabia will reduce daily production by another 158,000 barrels beginning Thursday.
It is also worth noting that even as policy makers said at their last meeting (Dec. 12) that "inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices," the front-month crude contract closed that day near $61/bbl. Since that is still 7% higher than where it closed today, it didn't appear investors were too concerned about the Fed tweaking that portion of tomorrow's closely-watched policy directive.
While the market was pricing in the likelihood of a Fed easing in early 2007, there's also an argument that such a rate cut may jeopardize the Fed's credibility and subsequently renew recession worries. Thus, since the Fed needs to talk tough on inflation-fighting, it is Briefing.com's belief that tomorrow's policy statement will connote a continued bias towards tightening and that the market has been getting a little over-anxious about the possibility of the Fed's next move being a rate hike.
Of the 10 sectors closing to the upside, Energy paced the way, more than halving its 4.0% year-to-date decline. Telecom and Health Care ranked second and third, in part due to their defensive characteristics. Some reprieve in the credit markets helped the rate-sensitive Financials sector recoup the 0.5% it lost a day earlier. Technology also provided some influential leadership after Hewlett-Packard (HPQ 43.10 +0.68) tacked a 1.6% gain onto yesterday's 1.9% advance while Motorola (MOT 19.55 +1.24) soared nearly 7% following confirmation of Carl Icahn's 1.4% ownership stake and pursuit of a board seat.
Even Industrials inched into the plus column going into the close, as average gains of about 2% from Caterpillar (CAT 62.89 +1.19), Honeywell (HON 45.13 +0.90) and United Technologies (UTX 66.86 +1.17) helped to offset a 5% sell-off in fellow Dow component 3M Co (MMM 74.89 -4.07). The latter missed Wall Street expectations and said 2007 profits may fall below estimates. UPS (UPS 71.73 -1.92), an even better barometer of the economy, plunged as much as 4.4% intraday after it warned domestic growth could slow in 2007 but closed down 2.6%. BTK +0.5% DJ30 +32.53 DJTA +0.5% DJUA +0.5% DOT +0.3% NASDAQ +7.55 NQ100 +0.2% R2K +0.6% SOX +0.1% SP400 +0.6% SP500 +8.20 XOI +1.9% NASDAQ Dec/Adv/Vol 1245/1789/1.76 bln NYSE Dec/Adv/Vol 1033/2249/1.42 bln
10:00 am : The major averages now trade in split fashion as early buying efforts begin to fade amid the absence of key leadership. Of the six sectors trading higher, Energy is pacing the way (+0.9%) as a rebound in oil prices helps the sector more than recoup yesterday's losses. Health Care is also providing some market support, as a reaffirmed full-year outlook from Merck (MRK 45.76 +0.25) helps investors look past its first earnings shortfall in two years.
Industrials, though, is trading slightly lower. Dow component 3M Co. (MMM 74.86 -4.10) is down 5% after missing expectations and saying 2007 profits may fall below estimates. UPS (UPS 71.30 -2.35), a more influential barometer of the economy, is down 3% after citing economic weakness for its disappointing full-year outlook. DJ30 -11.29 NASDAQ -2.67 SP500 +1.18 NASDAQ Dec/Adv/Vol 1190/1219/142 mln NYSE Dec/Adv/Vol 813/1714/72 mln
09:40 am : Despite sifting through one of the more disappointing days for earnings reports, investors so far appear to be discounting the diminished hopes for a rate cut anytime soon and taking a closer look at the ramifications of a fifth consecutive pause. While the market was pricing in the likelihood of a Fed easing in early 2007, there's also an argument that such a rate cut may jeopardize the Fed's credibility and subsequently renew recession worries. Nonetheless, the lack of conviction on the part of buyers early on also suggests that tomorrow's closely-watched policy directive may still exhibit a more hawkish stance than anticipated just a few weeks ago, leaving stocks in a holding pattern throughout most of the session.DJ30 +8.90 NASDAQ +4.17 SP500 +4.38 NASDAQ Vol 94 mln NYSE Vol 48 mln
09:15 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +4.0.
09:00 am : S&P futures vs fair value: +3.1. Nasdaq futures vs fair value: +5.0. A positive bias persists in pre-market action as further analysis of what now looks to be more disappointments on the earnings front than upside surprises take a back seat to Fed policy. Even though it is a foregone conclusion policy makers are not going to cut rates tomorrow afternoon as hoped for over the last couple of months, leaving rates unchanged for a fifth straight time also suggests that, if the economy is good enough, then corporate profits (albeit slowing) may still be quite healthy. Fourth quarter operating earnings for the S&P 500 are on track for a gain of about 10.5%, which is above the 9.4% average forecast at the start of earnings season.
http://biz.yahoo.com/mu/update.html
4:20 pm : Considering the breadth of disappointments on the earnings front and soaring prices across the energy complex ahead of a plethora of economic data that also includes an update on monetary policy, stocks actually held up rather well Tuesday.
As evidenced by the S&P 500 turning in a better performance than the Dow and Nasdaq, it's not surprising to see just how big of an impact renewed enthusiasm for beaten-down oil stocks had on the day's action. All of the Energy sector's 33 components closed sharply higher, led by a 1.6% gain in shares of the broader market's most heavily-weighted name -- Exxon Mobil (XOM 74.36 +1.16). Explorers, among the biggest beneficiaries of soaring natural gas prices (+11%), was the day's best performing S&P industry group (+3.4%).
Crude for March delivery surged 5.4%, the biggest one-day move since Hurricane Katrina, to close near $57/bbl. The rally was sparked by reports of below-normal temperatures and news that Saudi Arabia will reduce daily production by another 158,000 barrels beginning Thursday.
It is also worth noting that even as policy makers said at their last meeting (Dec. 12) that "inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices," the front-month crude contract closed that day near $61/bbl. Since that is still 7% higher than where it closed today, it didn't appear investors were too concerned about the Fed tweaking that portion of tomorrow's closely-watched policy directive.
While the market was pricing in the likelihood of a Fed easing in early 2007, there's also an argument that such a rate cut may jeopardize the Fed's credibility and subsequently renew recession worries. Thus, since the Fed needs to talk tough on inflation-fighting, it is Briefing.com's belief that tomorrow's policy statement will connote a continued bias towards tightening and that the market has been getting a little over-anxious about the possibility of the Fed's next move being a rate hike.
Of the 10 sectors closing to the upside, Energy paced the way, more than halving its 4.0% year-to-date decline. Telecom and Health Care ranked second and third, in part due to their defensive characteristics. Some reprieve in the credit markets helped the rate-sensitive Financials sector recoup the 0.5% it lost a day earlier. Technology also provided some influential leadership after Hewlett-Packard (HPQ 43.10 +0.68) tacked a 1.6% gain onto yesterday's 1.9% advance while Motorola (MOT 19.55 +1.24) soared nearly 7% following confirmation of Carl Icahn's 1.4% ownership stake and pursuit of a board seat.
Even Industrials inched into the plus column going into the close, as average gains of about 2% from Caterpillar (CAT 62.89 +1.19), Honeywell (HON 45.13 +0.90) and United Technologies (UTX 66.86 +1.17) helped to offset a 5% sell-off in fellow Dow component 3M Co (MMM 74.89 -4.07). The latter missed Wall Street expectations and said 2007 profits may fall below estimates. UPS (UPS 71.73 -1.92), an even better barometer of the economy, plunged as much as 4.4% intraday after it warned domestic growth could slow in 2007 but closed down 2.6%. BTK +0.5% DJ30 +32.53 DJTA +0.5% DJUA +0.5% DOT +0.3% NASDAQ +7.55 NQ100 +0.2% R2K +0.6% SOX +0.1% SP400 +0.6% SP500 +8.20 XOI +1.9% NASDAQ Dec/Adv/Vol 1245/1789/1.76 bln NYSE Dec/Adv/Vol 1033/2249/1.42 bln
10:00 am : The major averages now trade in split fashion as early buying efforts begin to fade amid the absence of key leadership. Of the six sectors trading higher, Energy is pacing the way (+0.9%) as a rebound in oil prices helps the sector more than recoup yesterday's losses. Health Care is also providing some market support, as a reaffirmed full-year outlook from Merck (MRK 45.76 +0.25) helps investors look past its first earnings shortfall in two years.
Industrials, though, is trading slightly lower. Dow component 3M Co. (MMM 74.86 -4.10) is down 5% after missing expectations and saying 2007 profits may fall below estimates. UPS (UPS 71.30 -2.35), a more influential barometer of the economy, is down 3% after citing economic weakness for its disappointing full-year outlook. DJ30 -11.29 NASDAQ -2.67 SP500 +1.18 NASDAQ Dec/Adv/Vol 1190/1219/142 mln NYSE Dec/Adv/Vol 813/1714/72 mln
09:40 am : Despite sifting through one of the more disappointing days for earnings reports, investors so far appear to be discounting the diminished hopes for a rate cut anytime soon and taking a closer look at the ramifications of a fifth consecutive pause. While the market was pricing in the likelihood of a Fed easing in early 2007, there's also an argument that such a rate cut may jeopardize the Fed's credibility and subsequently renew recession worries. Nonetheless, the lack of conviction on the part of buyers early on also suggests that tomorrow's closely-watched policy directive may still exhibit a more hawkish stance than anticipated just a few weeks ago, leaving stocks in a holding pattern throughout most of the session.DJ30 +8.90 NASDAQ +4.17 SP500 +4.38 NASDAQ Vol 94 mln NYSE Vol 48 mln
09:15 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +4.0.
09:00 am : S&P futures vs fair value: +3.1. Nasdaq futures vs fair value: +5.0. A positive bias persists in pre-market action as further analysis of what now looks to be more disappointments on the earnings front than upside surprises take a back seat to Fed policy. Even though it is a foregone conclusion policy makers are not going to cut rates tomorrow afternoon as hoped for over the last couple of months, leaving rates unchanged for a fifth straight time also suggests that, if the economy is good enough, then corporate profits (albeit slowing) may still be quite healthy. Fourth quarter operating earnings for the S&P 500 are on track for a gain of about 10.5%, which is above the 9.4% average forecast at the start of earnings season.
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