Market Update 071210 http://biz.yahoo.com/mu/update.html 4:25 pm : The market started the week on a bullish note, aided by a financial sector (+2.1%) that rallied again on the back of news about capital infusions.
Swiss bank UBS (UBS 51.66, +1.18) and bond insurer MBIA (MBI 33.95, +3.95) were the headliners on this front, with each company providing a disappointing update on their actual operations that the market all but dismissed in favor of capital infusion announcements that engendered a belief that the bottom was in for their stocks.
In the case of UBS, it announced before the start of trading that it expects to record a $10 billion write-down for its subprime holdings and anticipates reporting a net loss for the fourth quarter versus its prior expectation that it would record a profit. UBS added that it was possible it could report a net loss for the full year.
The news that drove the stock, though, was the indication that two strategic investors, one of which is the Government of Singapore Investment Corp., will be providing nearly $12 billion of new capital. The other investor wasn't named, though there was some speculation it could be Abu Dhabi Investment Authority, which recently provided Citigroup (C 34.77, +0.46) with $7.5 billion in new capital.
MBIA for its part warned that its mark-to-market losses will be greater in the fourth quarter than in the third quarter. Investors concentrated on the indication that private equity firm Warburg Pincus is going to bolster the company's capital position with a $1 billion investment.
The involvement of these large investors in both situations was deemed to be a value-based signal for the distressed financial sector. Accordingly, many stocks rallied on the reports and garnered further help from the belief that the FOMC will cut the fed funds rate at Tuesday's meeting by at least 25 basis points.
The rate cut outlook permeated the market throughout the day's trading and kept most sellers at bay.
Also helping today's buyers was the recognition that bad news in the financial sector didn't undercut the stocks. Bank of America (BAC 46.64, +1.27), for example, said it is closing a $12 billion enhanced cash fund for institutional investors after losses on holdings dropped the net asset value of the fund below $1.00. A few weeks ago this news wouldn't have been met with such aplomb by the market.
Outside of the financial sector, the materials sector (+1.3%) enjoyed a nice gain that was aided by some takeover activity/speculation that included news of Lafarge (LFRGY 39.15) buying Orascom Cement for approximately $12.9 billion.
Separately, McDonald's (MCD 61.90, +1.74) posted a handsome gain after the company reported an 8.2% increase in global comparable sales that exceeded the consensus estimate which called for a 4.9% increase.
McDonald's and the homebuilders helped drive gains in the consumer discretionary sector (+0.3%). The homebuilders (+4.49%), in fact, comprised the best-performing S&P industry group, having gotten a needed jolt from a better than expected pending home sales report that showed a 0.6% jump in October versus an expectation for a 1.0% decline. The report also showed an upward revision to the September data from 0.2% to 1.4%.
While today's gains were on the healthy side, participation was on the light side. NYSE volume didn't top 1.0 billion shares until late in the session, which underscores a wait-and see attitude on the part of many investors going into Tuesday's FOMC meeting.DJ30 +101.45 NASDAQ +12.79 NQ100 +0.2% R2K +0.7% SP400 +0.8% SP500 +11.30 NASDAQ Dec/Adv/Vol 1333/1675/1.81 bln NYSE Dec/Adv/Vol 1144/2032/1.13 bln
3:30 pm : The stock market ticks upward again, but remains below its intraday high. Nine of the ten economic sectors are in the green, with the telecom sector (-0.5%) in negative territory. Financials (+1.9%) continue to provide leadership.
Tomorrow, the market will be focused on the FOMC policy statement (2:15 PM ET). Economists expect a 25 basis point cut in the fed funds rate, dropping the rate to 4.25% from 4.50%.DJ30 +88.20 NASDAQ +10.64 SP500 +9.37 NASDAQ Dec/Adv/Vol 1394/1586/1.46 bln NYSE Dec/Adv/Vol 1246/1891/846 mln
3:00 pm : The major indices tick upward, then fall sharply back to afternoon lows. Action has been somewhat choppy in afternoon trading. The indices are still posting gains, but are well off their session highs.
MGI Pharmaceuticals (MOGN 40.05, +6.60) is being acquired for some $3.9 billion in cash by Japanese rival Eisai Co. Eisai's offer of $41 per share represents a 23% premium to this past Friday's closing price and a 39% premium to the company's closing price at the end of November, when it began seeking strategic alternatives.
The deal has been approved by both companies' boards and is expected to be completed by the end of the first quarter 2008. DJ30 +73.25 NASDAQ +7.94 SP500 +7.02 NASDAQ Dec/Adv/Vol 1368/1594/1.35 bln NYSE Dec/Adv/Vol 1194/1945/775 bln
2:30 pm : Selling pressure has eased, but there has not been much of a pickup in buying interest either. News has slowed down as we head into the final hours of trading.
In commodity trading, the CRB Index is up 0.3% led by the 2.0% gain in precious metals. Gold is up 1.7% and silver is up 2.4%.
In currency trading, the DXY Index is down 0.28%. The euro is up 0.36%, while the yen is down 0.03% DJ30 +85.52 NASDAQ +9.32 SP500 +8.81 NASDAQ Dec/Adv/Vol 1344/1609/1.23 bln NYSE Dec/Adv/Vol 1184/1951/700 mln
2:00 pm : A pickup in selling interest pushes the indices lower, although they are still posting decent-sized gains. Currently, the stock market is trading in the middle of its intraday range.
Citigroup (C 34.84, +0.53), which has been at the epicenter of the subprime fallout, is reportedly looking at Vikram Pandit, its head of investment banking and alternative investments, as the frontrunner for the CEO position.DJ30 +72.68 NASDAQ +9.93 SP500 +8.02 NASDAQ Dec/Adv/Vol 1204/1740/1.14 bln NYSE Dec/Adv/Vol 1031/2083/651 mln
1:30 pm : The stock market hits a fresh intraday high and then stalls. The small-cap Russell 2000 Index also hit a fresh high, which pushes the index into positive territory for the year.
The breadth of the market is bullish. Advancers outpace decliners by a 2-to-1 margin on the NYSE, while the Nasdaq comes in at 1.5-to-1. Volume is on the lighter side, which is usually the case the day before a FOMC meeting.
1:00 pm : The major indices are hovering slightly below their best levels of the session. Stocks making new 52-week highs outpace those making new lows by 11-to-8 today.
23 of the 30 Dow Jones Industrial Average components are trading higher, led by Caterpillar (CAT 77.01, +2.81) and McDonald's (MCD 61.72, +1.56). Boeing (BA 92.68, -0.47) and AT&T (T 38.05, -0.42) are the main laggards.
AT&T is also a drag on the telecom sector (-0.4%), as it accounts for roughly 50% of the sector.DJ30 +99.42 NASDAQ +15.99 SP500 +10.22 NASDAQ Dec/Adv/Vol 941/1698/941 mln NYSE Dec/Adv/Vol 1010/2055/539 mln
12:30 pm : The stock market is back on the rise, but is off its intraday high. The major indices are posting gains in excess of 0.6%.
Bonds are trading lower in thin trade after the pending home sales number was better than expected. The 10-year note is down 16 ticks, pushing its yield up to 4.17%
Crude oil is trading in a choppy manner, as it is now down 0.8% to 87.49 per barrel. DJ30 +109.42 NASDAQ +16.98 SP500 +11.23 NASDAQ Dec/Adv/Vol 1200/1654/861 bln NYSE Dec/Adv/Vol 1070/1983/492 mln
12:00 pm : Stocks have traded higher throughout the session ahead of tomorrow's FOMC meeting. Some corporate news out of the financial sector, and a better than expected pending home sales report has lifted the market.
Fed funds futures currently price in a 72% chance of a 25 basis point cut in the fed funds rate on Dec. 11, and a 28% chance of a 50 basis point cut. Investors pared their expectations of a 50 basis point cut following Friday's stronger than expected jobs data. One week ago, futures implied a 40% chance for a 50 basis point cut.
If the Fed cuts rates tomorrow, it will mark the third consecutive rate cut. The fed funds rate was cut by 50 basis points on Sept. 11 and cut 25 basis points on Oct. 31, which brought the rate to its current level of 4.5%.
In corporate news, Swiss bank UBS (UBS 51.45, +0.97) announced it will write-down $10 billion in losses on subprime lending, and expects to post a net loss in the fourth quarter. The stock is actually trading higher, though, after the company said it will receive an injection of nearly $12 billion from two strategic investors. Because UBS is not a U.S. based company it is not included in the S&P 500, however, it is having an indirect effect on the index as U.S. banks rise in conjunction with UBS.
On a related item, shares of mortgage insurer MBIA (MBI 34.82, +4.82) are trading sharply higher on news that the company is raising $1 billion in capital from Warburg Pincus. Last week MBIA's stock got pummeled after Moody's reported the company may be facing capital shortfalls. MBIA then responded that it has been pursuing capital contingency plans.
Meanwhile, Dow component McDonald's (MCD 61.28, +1.12) is a standout after the company reported that November same-store sales rose 8.2%, beating the consensus estimate that called for sales to rise 4.9%.
On the economic front, October pending home sales rose 0.6%, topping the consensus estimate that called for a drop of 1.0%. The prior reading was revised to +1.4% from +0.2%. Pending sales are down 18% year-over-year.
Eight sectors are trading higher. Financials (+1.8) are providing leadership, although the sector is off its intraday high of +2.6% after CNBC reported Bank of America (BAC 46.20, +0.83) froze a money market fund for institutional investors. Bank of America has since confirmed it is winding the "money market like fund", but said it is not actually a money market fund, because of illiquid investments.
The defensive oriented telecom (-0.3%) and healthcare (-0.1%) sectors are underperforming on a relative basis, although losses are slight. DJ30 +94.62 NASDAQ +15.05 SP500 +9.76 NASDAQ Dec/Adv/Vol 1156/1689/756 mln NYSE Dec/Adv/Vol 976/2063/427 mln
11:30 am : Stocks take a dip after CNBC reports that Bank of America (BAC 45.81, +0.44) has frozen a money market fund for institutional investors. CNBC says the fund is called Columbia Strategic Cash Portfolio, and holds $12 billion in assets.
The financial sector slid from its high of 2.6% to its current level of 1.9% following the report.
Separately, crude has lost most of its gains and is now only trading up 0.2% to $88.46.DJ30 +89.42 NASDAQ +14.90 SP500 +10.06 NASDAQ Dec/Adv/Vol 1067/1721/635 mln NYSE Dec/Adv/Vol 882/2129/344 mln
11:00 am : The major indices hit fresh intraday highs as buying interest continues to gain momentum. Only the healthcare sector (-0.2%) remains in the red.
As expected, MBIA (MBI 30.14, +0.14) announced it is raising $1 billion in capital from Warburg Pincus. The stock is still halted.
Meanwhile, Morgan Stanley revised downward U.S. growth outlook and says a "mild" economic recession is likely, according to Reuters DJ30 109.61 NASDAQ +19.06 SP500 +12.41 NASDAQ Dec/Adv/Vol 1071/1658/496 mln NYSE Dec/Adv/Vol 947/2002/247 mln
10:30 am : Since the last update, the major indices climbed higher, but buying interest has tapered off as they hold near their best levels of the session.
The financial sector (+2.0%) is leading the way, with all 19 of its industry groups in the green. Diversified banks (+2.9%) are a notable pocket of strength.
Shares of mortgage insurer MBIA (MBI 30.14, +0.14) are halted, news pending. The company is widely expected to announce it is raising new capital. Last week MBIA's stock got pummeled after Moody's reported the company may be facing capital shortfalls. MBIA then responded that it has been pursuing capital contingency plans.DJ30 +87.23 NASDAQ +11.03 SP500 +9.99 NASDAQ Dec/Adv/Vol 1017/1634/337 mln NYSE Dec/Adv/Vol 1196/1562/103 mln
10:05 am : Stocks extend their gains as a better than expected economic release hits the wires. Just reported, October pending home sales rose 0.6% compared to the consensus estimate that called for a drop of 1.0%. The prior reading was revised to +1.4% from +0.2%.
Eight of the ten economic sectors are trading higher. The Financial sector (+1.1%) has assumed the leadership post, which follows the sector's 1% decline last Friday. There is also relative strength in the energy sector (+0.5%) as it follows crude oil higher (+1.5% to $89.64).
Healthcare (-0.3%) is the main laggard, although losses are only slight. DJ30 +63.33 NASDAQ +8.22 SP500 +7.21 NASDAQ Dec/Adv/Vol 1064/1392/179 mln NYSE Dec/Adv/Vol 1286/1389/72 mln
09:45 am : Stocks open modestly higher as investors anticipate tomorrow's FOMC announcement.
Fed funds futures currently price in a 76% chance of a 25 basis point cut in the fed funds rate, and a 24% chance of a 50 basis point cut. The expectation of a 50 basis point cut is down from last week, when futures implied a 60% chance of a 25 basis point cut and a 40% chance of a 50 basis point cut.
In corporate news, UBS (UBS) announced it will write-down $10 billion in losses on subprime lending, and expects to post a net loss in the fourth quarter. The company also said it will receive an injection of nearly $12 billion from two strategic investors.
Meanwhile, Dow component McDonald's (MCD) reported November same-store sales rose 8.2%, topping the consensus estimate that called for sales to rise 4.9%.DJ30 +32.84 NASDAQ +5.14 SP500 +2.49
09:15 am : S&P futures vs fair value: +3.7. Nasdaq futures vs fair value: +2.0.
09:00 am : S&P futures vs fair value: +4.3. Nasdaq futures vs fair value: +3.0. Futures take a slight dip, but a positive opening is still expected. Crude oil for January delivery is up 0.3% to $88.44 per barrel.
08:29 am : S&P futures vs fair value: +5.6. Nasdaq futures vs fair value: +4.5. Futures continue to point to a modestly higher opening. McDonald’s reported November same-store sales rose 8.2%, topping the consensus estimate that called for sales to rise 4.9%. The pending home sales report for October is the only item on today's economic calendar. It will be released at 10:00 ET.
08:00 am : S&P futures vs fair value: +5.3. Nasdaq futures vs fair value: +5.8. The futures market suggests a slightly higher start as investors await tomorrow’s FOMC meeting. Swiss bank UBS (UBS) is topping the headlines this morning, having announced a $10 billion write-down related to subprime losses and the injection of nearly $12 billion of capital from two strategic investors, one of which is known to be the Government of Singapore Investment. Separately, LaFarge (LFRGY) has made a $12.9 billion bid to acquire Orascom Cement while Eisai has offered $3.9 billion, or $41 per share in cash, to buy MGI Pharmaceuticals (MOGN).
06:19 am : S&P futures vs fair value: +2.5. Nasdaq futures vs fair value: +1.3.
06:19 am : FTSE...6549.60...-5.30...-0.1%. DAX...8017.54...-23.47...+0.3%.
06:19 am : Nikkei...15924.39...-31.98...-0.2%. Hang Seng...28501.10...-341.37...-1.2%.
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