Market Update 071130 http://biz.yahoo.com/mu/update.html 4:20 pm : The stock market got a nice boost Friday morning from a series of positive developments that included a drop in oil prices below $90 per barrel, a report that a bailout plan is in the works for subprime borrowers, and a tacit signal from Federal Reserve Chairman Ben Bernanke that interest rates will likely be cut again at the December 11 FOMC meeting.
That assemblage of good news overshadowed a disappointing third quarter earnings report and outlook from Dell (DELL 24.54, -3.60) and a smattering of economic data that again skewed to the weak side of things.
At their highs of the morning, the Dow, Nasdaq and S&P were up 155, 28 and 19 points, respectively.
The rate cut expectation, which stemmed from Ben Bernanke's acknowledgment in a speech to the Charlotte Chamber of Commerce that renewed turbulence in the financial markets over the past month has affected the economic outlook, was the primary catalyst for the early rally.
Buying efforts, though, soon faded and stock prices followed suit as participants looked to secure some profits from this week's rally that saw the S&P 500 surge 5.9% from its low on Monday to its high on Friday.
Despite the pullback, both the Dow and S&P 500 still finished well above the unchanged mark and even benefited from a late burst of buying activity. The Nasdaq ended with a modest loss as Dell's weakness pulled the tech-heavy composite lower. The Nasdaq still ended the week up 2.5% while the Dow and S&P registered gains of 3.0% and 2.8%.
The financial sector (+2.9%), which rallied on the rate cut expectation and the notion that the reported bailout plan for subprime borrowers will help stabilize the credit market, was the best-performing sector once again. Its leadership was reassuring as every sector traded higher with the exception of the technology sector (-1.0%).
As has been the case throughout the week, today's economic data didn't elicit much enthusiasm as it relates to the economic outlook. Although the Chicago Purchasing Manager's Index was stronger than expected at 52.9 (consensus 50.5), construction spending in October declined 0.8% (consensus -0.3%). Personal spending, meanwhile, rose just 0.2% (consensus +0.3%) and was flat after taking the deflator into account.
Core-PCE, which is a favorite inflation gauge for the Fed, was a bright spot of sorts as it was up 0.2% in October, an increase that translated to a 1.9% jump year-over-year, which is within the Fed's comfort zone of 1.0% to 2.0%.DJ30 +59.99 NASDAQ -7.17 SP500 +11.42 NASDAQ Dec/Adv/Vol 1355/1660/2.56 bln NYSE Dec/Adv/Vol 968/2329/1.89 bln
3:35 pm : A wave of selling pressure sends the major indices to their worst levels of the session, and the Dow into negative territory. No specific news item sparked the selling, but the tech sector (-1.5%) played a large role. The stock market has since bounced off its lows and is attempting to recover. The Dow is back in the green.
At current levels, the financial sector is set to finish the week up 5.0%, which makes it the largest gainer. The only sector set to finish the week in the red is energy, down about 0.5%. The sector has faced selling pressure as oil dropped from $99 a barrel to around $89.
Regarding industry groups, rounding off the top two gainers this week are health care facilities (+38%) and real estate management & development (+20%). The main laggards are drug retail (-6%) and gold (-5%). Four of the ten worst performing groups are oil stocks.DJ30 +27.88 NASDAQ -13.40 SP500 +7.52 NASDAQ Dec/Adv/Vol 1447/1515/1.92 bln NYSE Dec/Adv/Vol 1081/2196/1.11 bln
3:00 pm : The major indices slip as the Nasdaq trades slightly below the unchanged mark. The Dow and S&P are still in the green, but their gains have been cut.
In commodity trading, crude oil's recovery effort was short-lived as it finished down $2.68 to $88.63 per barrel. Commodities as a whole fell, led by a 2.2% decline in energy, and a 1.8% decline in precious metals.
Meanwhile, the dollar strengthened against world currencies, as indicated by the 0.66% rise in the DXY Index. Of note, the dollar is up 0.74% against the euro and 1.06% against the Japanese yen.DJ30 31.86 NASDAQ -7.26 SP500 +8.78 NASDAQ Dec/Adv/Vol 1082/1857/1.70 bln NYSE Dec/Adv/Vol 773/2502/996 mln
2:30 pm : The major indices continue to trade in a choppy manner modestly above their worst levels of the session.
The advancers outpace decliners by a 24-to-8 margin on the NYSE, while the Nasdaq comes in at a slightly smaller 18-to-11 margin.
Google (GOOG 692.83, -4.17) announced today that it will bid for wireless spectrum in a January auction, as the Internet search giant continues to invest in emerging industries outside advertising. Other expected bidders include wireless network operators AT&T (T 38.11, +0.08) and Verizon Wireless. DJ30 +44.62 NASDAQ -1.51 SP500 +9.89 NASDAQ Dec/Adv/Vol 1114/1815/1.47 bln NYSE Dec/Adv/Vol 827/2433/912 mln
2:00 pm : Buying momentum fades as the indices head sideways. The tech sector (-1.0%) continues to be the main drag and the sole sector in negative territory.
Federal Reserve Governor Randall Kroszner said distressed borrowers need "timely relief" and that the solution should not be "one-size-fits-all." Mr. Kroszner did not comment about policy rates or the economy in the speech text.DJ30 +84.62 NASDAQ +1.01 SP500 +13.57 NASDAQ Dec/Adv/Vol 1055/1865/1.44 bln NYSE Dec/Adv/Vol 744/2510/831 mln
1:30 pm : The stock market gets a small boost led by an increase in buying interest in the financial sector (+3.5%). Crude oil has recovered a bit, and is now only down 0.9% this session.
A CNBC commentator says he believes Morgan Stanley (MS 53.39, +1.05) will report a write-down as high as $6 billion, which would be $2 billion larger than the previously announced amount. Morgan Stanley is slated to report earnings on Dec. 17.DJ30 +72.99 NASDAQ +0.60 SP500 +12.94 NASDAQ Dec/Adv/Vol 1133/1779/1.35 bln NYSE Dec/Adv/Vol 856/2384/772 mln
1:00 pm : The major indices continue to trade in mixed fashion, significantly lower than their highs reached in the early-going. The stock market, though, has recovered off its session lows.
Morgan Stanley (MS 52.80, +0.48) Co-President Zoe Cruz, the presumed successor to the company's top job, was expelled from the company yesterday, according to this morning's edition of The Wall Street Journal. Cruz's release came in response to the $3.7 billion mortgage-related losses already incurred during the fourth quarter, losses which are expected to compound. The losses hit one of the businesses that Cruz oversaw.
On a related note, Motorola (MOT 15.79, +0.14) CEO Mr. Zander will step down effective January 1.DJ30 +69.50 NASDAQ -1.22 SP500 +10.89 NASDAQ Dec/Adv/Vol 1136/1758/1.24 bln NYSE Dec/Adv/Vol 865/2359/705 mln
12:30 pm : The major indices dip again as they trade near near their worst levels of the session. The Nasdaq Composite's recovery into the green was short-lived as it falls back into negative territory.
The Amex Airline Index (+2.8%) and the Dow Jones Transportation Average (+1.4%) are handily outperforming the broader market. As is usually the case, they are benefiting from the decline in the price of crude oil. Transports are posting a slight gain year-to-date, while airline stocks are down roughly 30%.
Gold futures are down 1.9% to $787.10, causing the S&P 500 Gold Index (-2.7%) to be the worst performing group.DJ30 +50.48 NASDAQ -6.79 SP500 +8.45 NASDAQ Dec/Adv/Vol 1114/1764/1.21 bln NYSE Dec/Adv/Vol 799/2407/637 mln
12:00 pm : The stock market got off to a very strong start after Federal Reserve Chairman Bernanke indicated a leaning toward lower rates in a speech last night. Currently, the major indices have pulled back a bit as tech stocks falter, but are still managing to post gains.
Among other comments, Bernanke said the Fed needs to be "exceptionally alert and flexible", which has fueled expectations that the FOMC will cut rates at its Dec. 11 meeting. The previous rallies this week were also supported by comments made by Fed officials that hinted at further rate cuts.
Also aiding the advance, are reports that that the U.S. Treasury Secretary Henry Paulson and major financial institutions are close to agreeing on a plan that would temporarily freeze rates on certain subprime loans. The hope is the plan would curtail the recent surge in foreclosures. Bloomberg.com reports that a Treasury spokeswoman would not discuss specifics of the plan, but said "we are encouraged progress is being made.''
Of the nine sectors trading higher, the financial (3.2%) and consumer discretionary (1.3%) sectors are providing leadership. News of the subprime fix has given the thrifts & mortgages (8.6%) and homebuilding (8.3%) groups a huge boost.
The energy sector (+0.3%) is managing to hold minor gains despite a plunge in crude oil (-2.3% to $88.92). Oil has managed to break below $90 on news that three of the four recently damaged pipelines have been reopened, and on further speculation of an increase in OPEC output.
The tech sector (-0.6%) is the main laggard. Dell (DELL 24.40, -3.74) is the worst performing tech stock, as shares plunge 13%. Investors were disappointed after the PC-maker missed earnings expectations by a penny, and provided a disappointing outlook amid ongoing restructuring efforts. Research In Motion (RIMM, 114.23, -7.80) is also a drag on the tech sector. Piper Jaffray reduced its FY08 earnings estimates on RIMM this morning.
There were a few economic reports of note, but they have had a muted effect on the stock market thus far.
The core PCE deflator, a favorite inflation indicator of the Fed, was up 0.2% in October. That left the year-over-year rate at 1.9%, which is tame enough to allow the Fed to lower rates if they so choose. October personal consumption expenditures were up 0.2%, a bit less than the expected 0.3% gain.
The November Chicago PMI survey on regional manufacturing conditions rose to 52.9 from 49.7 in October. This is just a regional survey and not too much emphasis should be placed on this single data point. Nevertheless, it is a hopeful sign that manufacturing is experiencing modest growth into November. (A reading above 50 is intended to reflect growth).
October construction spending fell 0.8%. This was a larger decline than forecast, but not really that surprising. DJ30 +75.60 NASDAQ +2.58 SP500 +11.84 NASDAQ Dec/Adv/Vol 1106/1735/1.01 bln NYSE Dec/Adv/Vol 848/2337/569 mln
11:30 am : The Nasdaq Composite falls into the red as the technology sector (-0.8%) extends its losses. The Dow and S&P also slide, but are managing to hold onto modest gains.
Financials (+2.5%) have also had a notable slide, as the sector is well off its early-going high that surpassed 4%. All 19 of its industry groups, though, remain in the green.
For now, it appears selling pressure has eased, but there has not been a pickup in buying interest as the major indices hold near their intraday lows.DJ30 +69.82 NASDAQ -3.01 SP500 +9.80 NASDAQ Dec/Adv/Vol 925/1857/835 mln NYSE Dec/Adv/Vol 694/2467/472 mln
11:00 am : The major indices are vacillating near the bottom end of their session ranges, but are still substantially above the unchanged mark.
Although off its intraday highs, shares of Countrywide (CFC 10.99, +1.70) have soared on reports of a possible subprime mortgage freeze. Fox Pitt upgraded Countrywide to Outperform from In-Line with a price target of $38 saying the plan being floated by Treasury makes compelling sense. The firm believes this is good news for the sector as a whole, but believe that Countrywide will be prime beneficiary as the nation's largest servicer and top originator.
Crude oil (-2.3% to $88.93) is holding well below the $90 dollar mark. Speculation of an increase in OPEC output, and news that three of the four recently damaged pipelines have reopened are driving the price lower.DJ30 +118.03 NASDAQ +10.52 SP500 +14.20 NASDAQ Dec/Adv/Vol 798/1932/665 mln NYSE Dec/Adv/Vol 579/2527/651 mln
10:30 am : The major indices slip, but are still in positive territory, as the heavily-weighted tech sector (-0.4%) slides into the red. The tech-heavy Nasdaq Composite has given up the most gains, and is underperforming its peers.
Dell (DELL 24.30, -3.84) is the worst performing tech stock, as shares plunge 13.6%. Investors were disappointed after the PC-maker missed earnings expectations by a penny, and provided a disappointing outlook amid ongoing restructuring efforts. Research In Motion (RIMM 117.84, -4.24), the maker of Blackberry devices, is also a laggard.DJ30 +114.02 NASDAQ +11.61 SP500 +14.19 NASDAQ Dec/Adv/Vol 678/1957/465 mln NYSE Dec/Adv/Vol 446/2593/244 mln
10:00 am : The stock market dips off of its opening high, but is still posting substantial gains.
The financial (+3.2%) and consumer discretionary (+1.2%) sectors are pacing the advance. The reports of a White House led plan to curtail foreclosures is giving the sectors a huge boost, as indicated by the 8.7% rise in the thrifts & mortgages group and the 7.0% rise in homebuilding. Presumably, if the plan gets finalized, banks won't get hit as hard due to a decrease in foreclosure costs, and homebuilders will face less pressure as less foreclosures mean there will be less inventory of existing homes for sale.
The Chicago PMI, a regional manufacturing survey, came in at 52.9 compared to the 51.0 consensus estimate. A number above 50 is meant to indicate expansion in manufacturing. The stock market continued to dip off its opening highs, despite the better than expected reading.DJ30 +132.90 NASDAQ +18.58 SP500 +16.15 NASDAQ Dec/Adv/Vol 456/2015/245 mln
09:40 am : As expected, the major indices open significantly higher as they extend their three-day winning streak.
The main factor in the bullish bias is a speech last night from Federal Reserve Chairman Ben Bernanke that indicated the FOMC will be cutting rates at its next meeting on December 11.
Also aiding the positive sentiment is reports that the Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze rates on certain subprime loans.
The economic data today were in-line with expectations. The core PCE deflator, a favorite inflation indicator of the Fed, was up 0.2% in October. DJ30 +143.72 NASDAQ +26.94 SP500 +18.99
09:15 am : S&P futures vs fair value: +17.0. Nasdaq futures vs fair value: +19.0.
09:01 am : S&P futures vs fair value: +15.2. Nasdaq futures vs fair value: +16.0. A strong start is still expected. Oil slips below $90 a barrel as three of the four pipelines that were damaged in an explosion are back online. Also, there is further speculation of an increase in OPEC output. Crude oil for January deliver is down 2.3% to $88.86.
08:30 am : S&P futures vs fair value: +13.9. Nasdaq futures vs fair value: +15.0. Futures gain some ground, and then have a fairly muted reaction following an economic release. Just reported, October personal income came in at +0.2%, spending was +0.3%, and the Core PCE was +1.9% year-over-year. Economists expected income, spending and Core PCE to come in at +0.4%, +0.3% and +1.8%, respectively.
07:59 am : S&P futures vs fair value: +12.7. Nasdaq futures vs fair value: +12.8. Early indications point to a noticeably higher opening. The primary factor in the bullish bias is a speech last night from Fed Chairman Bernanke that validated the market's belief that the FOMC is likely to cut interest rates at its December 11 meeting. Secondly, The Wall Street Journal is reporting that the Bush Administration and major financial institutions are close to agreeing to a plan that would temporarily freeze rates on certain subprime loans. On a negative note, Dell (DELL) missed its earnings expectations.
06:18 am : S&P futures vs fair value: +6.6. Nasdaq futures vs fair value: +6.5.
06:17 am : FTSE...6392.60...+43.50...+0.7%. DAX...5646.42...+48.31...+0.9%.
06:17 am : Nikkei...15680.67...+166.93...+1.1%. Hang Seng...28643.61...+161.07...+0.6%.
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