Market Update 071206 http://biz.yahoo.com/mu/update.html 4:15 pm : Stocks rallied on Thursday as investors welcomed the White House's subprime mortgage-relief plan.
Stocks traded modestly above the unchanged mark for the majority of the trading day as investors awaited President Bush's speech on housing, and subsequently rallied as market participants embraced the White House's subprime plan.
President Bush laid out three ways for people to get help that can afford their current starter mortgage rate, but would not be able to afford the higher payments when their mortgage rate resets higher: 1) refinancing into a new private loan; 2) moving into a Federal Housing Authority-Secure loan; or 3) by freezing their rate for 5-years.
Treasury Secretary Henry Paulson spoke after Bush. He stated the subprime relief involves "no government money."
On a related note, according to the Mortgage Bankers Association (MBA), third quarter U.S. mortgage delinquencies rose to a 20-year high and foreclosures hit an all-time high. News of the subprime fix outweighed the negative MBA report, as indicated by the strong performance in the homebuilding (13.4%) and thrifts & mortgages (6.7%) group.
The plan will indeed help some people keep their home who otherwise would have lost it. Their ability to stay in their homes means fewer homes will be pushed on the market through foreclosure, and hence, it creates a modicum of relief for a housing market already afflicted by bloated inventory levels. On the margin, then, this is a favorable development for the economy and, by extension, for the stock market.
In economic news, new claims for unemployment for the week ended Dec. 1 fell to 338,000 from 353,000 the week before. This is actually fairly important as it shows last week's rise is not a part of an uptrend that typically precedes a recession.
Retailers were in the spotlight today following their November same-store sales results. Readings can be characterized as mixed, discount retailers and department stores put up some of the best numbers while the specialty retailers were hit and miss.
Target (TGT 55.57, -4.56) warned sales trends would need to improve meaningfully in December in order to achieve its fourth quarter EPS growth, which mitigated much of the enthusiasm for the strength seen at some retailers. The S&P 500 Retailing Index (+0.1%) spent most of the day in the red, but managed to post a small gain thanks to the late-day White House induced rally.
Nine of the ten economic sectors traded higher with financials (+2.6%) and energy (+2.4%) pacing the way. Only the utilities sector (-0.1%) ended the day with a loss.
Crude oil rallied $2.74 at $90.23 per barrel. Yesterday, crude prices actually declined despite a large draw in inventories and OPEC deciding to not increase output. DJ30 +174.93 NASDAQ +42.67 NQ100 +1.4% R2K +2.8% SP400 +2.1% SP500 +22.33 NASDAQ Dec/Adv/Vol 853/2135/1.88 bln NYSE Dec/Adv/Vol 707/2493/1.17 bln
3:30 pm : In the past half-hour, the stock market trekked higher, but has since taken a bit of a breather as the major indices hold slightly below their best levels of the session. The rally in equities has caused bonds to slump. The 10-year note is now down 17 ticks to yield 4.02%.
The potentially market-moving November Employment report is due out tomorrow morning at 8:30AM ET. Briefing.com expects payrolls to be 110k, unemployment at 4.8%, 0.4% hourly earnings and a 33.8 hour work week. The market consensus is for payrolls of 70k, 4.8% unemployment, 0.3% hourly earnings and 33.8 hour workweek. DJ30 +152.90 NASDAQ +35.71 SP500 +18.68 NASDAQ Dec/Adv/Vol 846/2113/1.55 bln NYSE Dec/Adv/Vol 766/2404/944 mln
2:55 pm : Stocks are marching upward as investors continue to digest the White House's subprime mortgage fix. The energy sector (+2.5%) continues to extend its gains as it follows crude higher.
Crude oil, now up 3.5% to $90.54 per barrel, continues to rally. Bloomberg reports that Nigeria has halted about 900,000 barrels a day of crude output due to unrest in the Niger Delta. Yesterday, OPEC decided to stand pat on oil output, and inventories showed a much larger decline than expected, yet crude prices still finished the day lower. DJ30 +128.76 NASDAQ +32.79 SP500 +15.50 NASDAQ Dec/Adv/Vol 860/2074/1.40 bln NYSE Dec/Adv/Vol 830/2337/842 mln
2:30 pm : The major indices hit fresh session highs with eight of the ten major economic sectors in positive territory. This recent move was supported by relative strength in homebuilding (+9.5%) and energy (+2.2%).
Secretary Paulson is currently answering questions regarding the subprime plan.
The Russell 2000 Index, which tracks small-cap stocks, is handily outperforming the S&P 500 (+0.8%). The S&P 400 Mid-Cap Index is also outperforming, but by a smaller margin. DJ30 +86.82 NASDAQ +25.85 R2K +2.2% SP400 +1.5% SP500 +11.80 NASDAQ Dec/Adv/Vol 949/1972/1.27 bln NYSE Dec/Adv/Vol 918/2230/785 mln
2:00 pm : The stock market dips off its best levels of the session, but remains in the green, shortly after the President's speech.
President Bush said that under the new plan, people that can't afford the higher payments of a mortgage rate resets but can afford the current starter rates can get relief in three ways: 1) refinancing into a new private loan; 2) moving into an Federal Housing Authority-Secure loan; or 3) by freezing their rate for 5-years.
Bush also calls on Congress to pass legislation to reform Fannie Mae (FNM 37.24, +1.11) and Freddie Mac (FRE 35.81, +1.14).
Treasury Secretary Henry Paulson spoke after Bush. He stated the subprime relief involves "no government money." DJ30 +44.79 NASDAQ +14.32 SP500 +5.64 NASDAQ Dec/Adv/Vol 995/1910/1.14 bln NYSE Dec/Adv/Vol 932/2211/699 mln
1:30 pm : Stocks are holding onto their gains as President Bush speaks on the housing industry. More information will be posted regarding his plan once his speech, which started at 13:25 ET, concludes.
The Nasdaq 100 is almost spilt down the middle with 53 stocks posting a gain, and 47 posting a loss. Apple (AAPL 188.92, +3.44) is leading the way after its shares saw renewed buying interest following CNBC comments on rumored new Apple products.
eBay (EBAY 33.74, +0.39) is also providing leadership after its fourth quarter earnings estimate was raised at Citigroup. The firm stated the stock's recent 20% rise is not reflected in the current earnings estimate. DJ30 +68.69 NASDAQ +18.67 SP500 +7.56 NASDAQ Dec/Adv/Vol 949/1921/1.03 bln NYSE Dec/Adv/Vol 845/2272/643 mln
12:55 pm : The major indices hover near their best levels of the session as the Nasdaq continues to outpace its blue-chip counterparts.
Two of the best performing groups are homebuilding (+9.1%) and thrifts & mortgages (+4.4%), clearly demonstrating the market's belief that the President's subprime bailout plan will give the flagging groups some relief.
The plan will indeed help some people keep their home who otherwise would have lost it. Their ability to stay in their homes means fewer homes will be pushed on the market through foreclosure, and hence, it creates a modicum of relief for a housing market already afflicted by bloated inventory levels. On the margin, then, this is a favorable development for the economy and, by extension, for the stock market.DJ30 +58.77 NASDAQ +17.55 SP500 +7.70 NASDAQ Dec/Adv/Vol 956/1884/925 mln NYSE Dec/Adv/Vol 894/2181/573 mln
12:30 pm : Range-bound trading persists as the afternoon session gets underway. The stock market is holding modestly above yesterday's closing price, near its best level of the session.
Challenging market conditions continue to weigh on Toll Brothers (TOL 22.14, +1.43), as excess inventory levels, defaults in subprime mortgages, and tighter lending standards led the luxury homebuilder to a loss in its fiscal fourth quarter. With no signs of stabilization in the housing market, and continued poor operating performance, we remain cautious on the company and the overall industry.
Specifically for the period, Toll Brothers posted a net loss of $81.8 million, or $0.52 per share, compared with a year ago profit of $173.8 million, or $1.07 per share. The results, which included write-downs, were not as bad as expected, however. Analysts on average were looking for a wider loss of $0.77 per share. DJ30 +46.01 NASDAQ +15.72 SP500 +6.14 NASDAQ Dec/Adv/Vol 967/1862/835 mln NYSE Dec/Adv/Vol 934/2134/503 mln
12:00 pm : The stock market posted modest gains at the East Coast lunch hour as investors anticipate the White House's subprime bailout plan.
President Bush is expected today to announce a plan that will help certain subprime borrowers avoid the risk of defaulting on their mortgage loans and facing foreclosure proceedings.
According to reports, the main provision of the plan is a 5-year freeze on the low teaser rates for subprime loans that were originated between January 1, 2005, and July 31, 2007, and which are due to reset to higher rates between January 1, 2008, and July 31, 2010.
On a related note, according to the Mortgage Bankers Association, third quarter U.S. mortgage delinquencies rose to a 20-year high and foreclosures hit an all-time high. The President's plan, which was in the works well before this release, will attempt to decrease delinquencies and foreclosures.
In economic news, new claims for unemployment for the week ended Dec. 1 fell to 338,000 from 353,000 the week before. This is actually fairly important.
The increase in new claims the prior week from 329,000 to an initially reported 352,000 was seen as a possible sign of an uptrend in new claims (layoffs) that typically precedes a slowdown in economic growth or recession.
This drop in claims suggests that the prior week's jump was not the start of a new, much higher trend. The trend in claims is consistent with a slowdown in the economy, but remains nowhere near recessionary levels.
November retail chain same-store sales were mixed, but expectations were low. Target (TGT 55.56, -4.55) met its expectations, but is a drag on the S&P 500 Retailing Index (-1.3%) after it warned sales trends would need to meaningfully improve in December in order to achieve its fourth quarter earnings per share growth.
Of the six sectors trading higher, financials (+0.8%) and energy (+1.4%), which make up roughly 30% of the S&P 500, are providing leadership. Telecom (-0.8%) and Utilities (-0.8%) are the main laggards. DJ30 +55.36 NASDAQ +15.07 SP500 +6.61 NASDAQ Dec/Adv/Vol 985/1797/722 mln NYSE Dec/Adv/Vol 957/2080/439 mln
11:30 am : The stock market is ticking higher due to continued leadership from financials (+1.0%) and energy (+1.1%).
Despite the rise in crude oil prices (+1.2% to $88.49), the Dow Jones Transportation Average is outperforming the broader market. Ryder (R 46.35, +2.47) is giving the average a boost after being upgraded to Outperform from Market Perform at Morgan Keegan.
On a related note, the Amex Airline Index (+1.2%) is also outperforming.DJ30 +50.72 DJTA +1.1% NASDAQ +15.67 SP500 +6.21 NASDAQ Dec/Adv/Vol 959/1740/588 mln NYSE Dec/Adv/Vol 1031/1966/365 mln
11:00 am : The stock market is trading in a tight manner, modestly above the unchanged mark. The major indices have remained in the green this morning, with the exception of the first few minutes following the opening bell.
The Mortgage Bankers Association reports that U.S. mortgage delinquencies rose to a twenty-year high, according to Bloomberg.com. Despite the negative report, many lenders, such as Countrywide (CFC 11.36, +0.94), are up sharply in anticipation of President Bush's speech on the subprime bailout plan.DJ30 +31.46 NASDAQ +10.22 SP500 +3.80 NASDAQ Dec/Adv/Vol 967/1671/439 mln NYSE Dec/Adv/Vol 995/1940/263 mln
10:30 am : The major indices are trading slightly above yesterday's closing price.
Dow component Coca-Cola (KO 62.62, -0.43) announced this morning its board has approved the company's executive succession plan. As of July 1, 2008 company president and chief operating officer Muhtar Kent will succeed Neville Isdell as chief executive officer. Isdell will maintain his position as chairman of the board until April 2009.
Oil prices have reversed course. Crude for January delivery is up 1.0% to $88.38 per barrel.DJ30 +24.96 NASDAQ +10.13 SP500 +2.17 NASDAQ Dec/Adv/Vol 773/1774/297 mln NYSE Dec/Adv/Vol 904/1902/127 mln
10:00 am : The stock market is posting modest gains with five out of ten sectors in the green. Like yesterday, some of the most influential sectors, including financials (+0.7%), energy (+0.4%), and tech (+0.6%), are providing leadership.
One notable area of weakness is the S&P 500 Retailing Index (-0.9%), in part due to Target (TGT 56.36, -3.75). Target is under pressure after it said sales trends would need to meaningfully improve in December in order to achieve fourth quarter EPS growth.DJ30 +22.92 NASDAQ +13.50 SP500 +3.16 NASDAQ Dec/Adv/Vol 867/1459/126 mln
09:45 am : Stocks open on a slightly lower note, but recover into the green after gaining some ground. The indices are holding near the unchanged mark as neither buyers nor sellers are showing a concerted interest.
The Bank of England decided to cut its lending rate 25 basis points to 5.50%, while the European Central Bank decided to leave its rates unchanged. Bloomberg reports that European Central Bank President Trichet says that some council members were actually in favor of a rate hike.
Meanwhile, reports state that President Bush will unveil a plan to help subprime borrowers later today.DJ30 +8.53 NASDAQ +7.23 SP500 +0.03
09:15 am : S&P futures vs fair value: -4.8. Nasdaq futures vs fair value: -3.0.
09:00 am : S&P futures vs fair value: -5.2. Nasdaq futures vs fair value: -1.0. Futures slip a bit and now point to a lower open. November retail chain same-store sales are decent. Expectations were low and the numbers aren't great, but all the stock market wants is data that don't show recession.
08:30 am : S&P futures vs fair value: +1.3. Nasdaq futures vs fair value: +5.3. Weekly initial jobless claims came in at 338K. Economists expected claims to drop to 335K from 353K last week. Futures reaction was mostly muted to the data, and still point to a slightly higher start to the trading day.
08:01 am : S&P futures vs fair value: +2.1. Nasdaq futures vs fair value: +7.3. Futures are off their best levels, but still suggest a slightly higher open. Reports that President Bush will unveil a plan that includes rate freezes for as long as five years to help certain subprime borrowers, the continued slide in oil prices (-1.1% to $86.56), and news that the Bank of England has cut its key lending rate 25 basis points to 5.50% are primary factors driving the buying interest. On a related note, the European Central Bank decided to leave rates unchanged at 4.00%. Merrill Lynch’s downgrade of several banks is holding back further gains.
06:21 am : S&P futures vs fair value: +3.9. Nasdaq futures vs fair value: +8.8.
06:20 am : FTSE...6550.30...+56.50...+0.9%. DAX...7984.01...+39.24...+0.5%.
06:20 am : Nikkei...15874.08...+265.20...+1.7%. Hang Seng...29558.92...+213.47...+0.7%.
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