Market Update 071214 http://biz.yahoo.com/mu/update.html 4:25 pm : The stock market ended the week on a negative note as inflation concerns and further losses in the financial sector (-1.8%) weighed on sentiment.
The major indices, in fact, barely saw the light of day. With the exception of a brief uptick into positive territory for the Nasdaq around 11:00 ET, there were minus signs next to the indices throughout the session. In a reflection of the negative bias, the indices closed near their lows for the day.
Data presented in the Consumer Price Index was at the root of the market's weakness today as total CPI and core-CPI, which excludes food and energy, were higher than expected for November. Specifically, total CPI rose 0.8% (consensus 0.6%), the biggest increase since September 2005, while core-CPI rose 0.3% (consensus 0.2%), translating to a year-over-year increase of 2.3%.
The inflation data fueled concerns that the Fed will be reluctant to cut interest rates much from current levels. That notion lent support to the dollar, which surged against a basket of other major currencies. The dollar index (DXY) jumped 1.1% to 77.436.
Separately, Treasury prices fell on the day as the inflation angst deflated fixed income interest. The 10-year note dipped 7 ticks, lifting its yield to 4.23%.
Weakness was seen across-the-board in the stock market with all 10 economic sectors suffering a loss. The materials sector (-1.99%), which got clipped in part by growth concerns and weakness in commodity prices that stemmed from the dollar's strength, suffered the biggest loss.
The most influential laggard, though, remained the financial sector which suffered in the wake of a CNBC report that Merrill Lynch's (MER 56.84, -0.99) fourth quarter write-down could potentially be $4 billion to $6 billion more than expected. The sector was down early, yet that news simply compounded the selling interest.
Citigroup (C 30.70, -0.31) was the story stock of the day in terms of the financial issues. After Thursday's close, the bank announced that it will be shifting $49 billion worth of assets from its SIVs onto its balance sheet. The news was generally regarded as a positive step, yet Citigroup's stock still languished with its peers as Moody's downgraded Citigroup's rating and investors remained skittish about the credit market turmoil.DJ30 -178.11 NASDAQ -32.75 NQ100 -1.1% R2K -2.0% SP400 -1.6% SP500 -20.46 NASDAQ Dec/Adv/Vol 2201/784/1.96 bln NYSE Dec/Adv/Vol 2454/715/1.31 bln
3:30 pm : Since the last update, the stocks hit fresh intraday lows. The major indices are now all posting a loss in excess of 1% on the day. The selling interest is led by financials (-1.5%), which are again a laggard. The small-cap Russell 2000 Index has also been hit hard.
This has been a volatile week, with a number of massive swings. The stock market is on track to finish down roughly 2.1%.
Only two sectors are slated to post a gain this week. Telecom (+2.4%) leads the way thanks to strength in AT&T (T 41.14, -0.66). Materials (+0.4%) are set to eke out a gain. Financials are set for a 5.6% decline, while consumer discretionary comes in second with a 4.1% decline. DJ30 -150.22 NASDAQ -30.23 R2K -1.9% SP500 -16.81 NASDAQ Dec/Adv/Vol 2153/813/1.51 bln NYSE Dec/Adv/Vol 2395/749/834 mln
3:00 pm : Stocks slip, with the Dow now posting a loss in excess of 100 points. Within the Dow, only seven components trend higher. The laggards are led by IBM (IBM 105.94, -2.24) and DuPont (DD 44.92, -1.30). Microsoft (MSFT 35.83, +0.61) is posting the largest gain.
Market breadth is negative. On the NYSE, decliners outpace advances 3-to-1 on issues, and 2-to1 on the Nasdaq. On volume, decliners outpace advancers by 3.5-to-1 on the NYSE, and by more than 1.5-to-1 on the Nasdaq. Volume is on the light side.DJ30 -139.15 NASDAQ -23.62 SP500 -15.34 NASDAQ Dec/Adv/Vol 2049/890/1.36 bln NYSE Dec/Adv/Vol 2049/823/765 mln
2:30 pm : The major indices hit minor new session lows, but have since recovered a bit. There has been a bearish bias during the trading day.
Online retailers, down 2.5%, are under pressure this session, and are acting as a drag on the S&P 500 Retailing Index (-1.6%). Amazon.com (AMZN 89.65, -2.73) and eBay (EBAY 32.62, 1.47) have had notable losses.
After a conference call with online data company comScore, Bear Stearns notes online retailers are clearly being impacted by the general consumer pullback, with concerns on oil, housing, and the stock market. The firm said many consumers are actively pursuing bargains and may be waiting for further promotions. Bear said the overall eCommerce data points they have seen so far indicate that it could be challenging for eCommerce companies to outperform expectations in fourth quarter.DJ30 -98.77 NASDAQ -14.57 SP500 -11.05 NASDAQ Dec/Adv/Vol 2048/882/1.27 bln NYSE Dec/Adv/Vol 2225/897/684 mln
2:00 pm : The stock market is struggling, as the Dow trades with almost an 100 point loss. Crude oil has recovered off its low. Crude for January delivery is down 0.7% to $91.62
Black & Decker Corp. (BDK 74.65, -5.52) is a laggard after the power tool maker warned that its fourth quarter earnings will fall short of analysts' expectations due to a product recall and continued challenging business conditions in North America.
For the current fourth quarter, Black & Decker expects to earn $3.39 per share, or $1.03 per share excluding the benefit of a tax settlement. That compares to analysts' expectations for earnings of $1.61 per share, excluding items.DJ30 -99.42 NASDAQ -13.79 SP500 -9.89 NASDAQ Dec/Adv/Vol 2000/911/1.18 bln NYSE Dec/Adv/Vol 2173/937/649 mln
1:30 pm : More choppy action, as the stock market again retreats but is now back on the rise. Bonds are also lower, with the 10-year down eight ticks to yield 4.23%
Bloomberg.com is reporting Goldman Sachs Group raised its outlook on the debt of Citigroup (C 31.52, +0.51) saying the company is partially insulated from losses on seven investment funds it's rescuing. Investors holding $2.5 billion in junior notes will absorb the first losses on $49 billion in assets Citigroup is taking on to bail out seven structured investment vehicles hit by the subprime-mortgage crisis, Goldman Sachs credit analyst Louise Pitt wrote in a research note today. She raised the outlook on the debt of Citigroup, the biggest U.S. bank by assets, to Outperform from In-line.
The debt upgrade is what gave Citi, and the financial sector, a boost around 10:40 ET.DJ30 -74.79 NASDAQ -11.54 SP500 -7.58 NASDAQ Dec/Adv/Vol 1948/951/1.09 bln NYSE Dec/Adv/Vol 2152/950/595 mln
12:55 pm : Stocks continue their choppy run. The major indices declined to their intraday lows, and then bounced higher. Corporate news has slowed down in afternoon trade.
Shares of Merrill Lynch (MER 57.38, -0.45) slip, after a CNBC commentator said that the company's write-downs could be much larger, potentially $4 billion to $6 billion more.DJ30 -75.20 NASDAQ -11.97 SP500 -7.24 NASDAQ Dec/Adv/Vol 1997/867/1.00 bln NYSE Dec/Adv/Vol 2202/875/534
12:30 pm : Selling pressure picks up as the indices are back on the decline. There has been a lack of leadership today. Expect for brief moments, the sectors have remained in negative territory.
According to Reuters, the Fed said that the minimum bid rate will be 4.17% for its $20 billion auction of 28-day loans that are part of the plan to increase liquidity.DJ30 -94.70 NASDAQ -14.19 SP500 -10.00 NASDAQ Dec/Adv/Vol 1862/984/901 NYSE Dec/Adv/Vol 2117/949/484 mln
12:00 pm : Stocks are trading lower at midday, but are off their worst levels of the session, as investors address a CPI report that raises inflation concerns, and evaluate more news out of the financial sector.
On the economic front, November core CPI was up 0.3%. That was above an expected 0.2% increase and follows five straight increases of 0.2%.
Total CPI was up 0.8% as energy prices jumped 5.7%. There may be some offset in energy prices the next couple of months but that won't provide much comfort to a jittery market today.
Inflation is not likely to pick up substantially as economic demand is clearly weakening. Nevertheless, even modest pressure could keep the Fed from aggressively lowering interest rates. Fed funds futures dropped to an 83% chance of a 25 basis point cut following the report, from 90%. Higher than expected inflation is never good for the financial markets.
November industrial production rose 0.3%. This is a bit above the expected 0.2% gain. Industrial production is now up 2.1% over the past year. Continued modest increases are likely in the months ahead as strong exports support manufacturing. The best news in the data here is that there is still no sign of recession.
In corporate news, Citigroup (C 31.55, +0.54) said it plans to consolidate $49 billion worth of assets from its seven structured investment vehicles, or SIVs, that have been hurt by the meltdown in subprime lending and tighter credit markets. The plan will give the SIVs more time to reduce assets at reasonable prices.
A SIV typically borrows short-term by issuing commercial paper. It then uses the money it borrowed to invest in longer-term, higher yielding bonds, which are typically asset-backed securities. The SIV earns money on the spread between its short-term borrowing rate and long-term investing rate.
Citi's decision comes in response to the recently announced ratings review and possible downgrade by Moody's and Standard & Poor's of its SIVs. A lower rating would raise short-term borrowing rates forcing the SIVs to sell their long-term assets in a depressed market, also referred as a "fire-sale".
Moody's Investors Service downgraded Citi's credit rating this morning, and lowered the Bank Financial Strength Rating of Citibank to B from A-.The downgrade was prompted by Moody's view that Citigroup's capital ratios will remain low. The decision to downgrade Citi's rating was unrelated to the SIV consolidation plan.
All ten economic sectors are in the red. The financial sector (-0.2%) was the main laggard in the early-going, but is now outperforming on a relative basis after a reversal in investment banks & brokerages (+1.4%). The materials sector (-1.2%) is the main laggard. DJ30 -87.88 NASDAQ -10.46 SP500 -8.74 NASDAQ Dec/Adv/Vol 1748/1047/791 mln NYSE Dec/Adv/Vol 1973/1044/422 mln
11:30 am : The stock market is trading off its best levels of the session, which saw the Nasdaq trade in positive territory. All sectors are in the red, with financials (-0.06%) hovering around the unchanged mark.
In currency trading, the Dollar Index is up a sharp 1.059%. The strength is being attributed to traders paring their bets on a Jan. 30 FOMC rate cut following the higher than expected inflation data. The dollar is up 1.3% against the euro.
The strength in the dollar has spurred some selling interest in commodities, which are down 0.6% as measured by the CRB Index.DJ30 -55.93 NASDAQ -1.28 SP500 -5.44 NASDAQ Dec/Adv/Vol 1656/1087/663 mln NYSE Dec/Adv/Vol 1940/1036/325 mln
11:00 am : Stocks get a nice pop, led by a reversal in the financial sector (+0.2%).
Specifically, the investment banks & brokerages group (+1.6%) is posting a healthy gain after Citigroup (C 31.48, +0.47) reversed into the positive territory. Citi's strength is being attributed to positive comments regarding the company's debt rating.DJ30 -41.14 NASDAQ -1.10 SP500 -4.55 NASDAQ Dec/Adv/Vol 1901/792/485 mln NYSE Dec/Adv/Vol 2218/684/236 mln
10:30 am : There is some choppy action in the early-going. The stock market pares some of its opening losses, but then retreats a bit.
The financial sector (-0.8%) is attempting to recover, and is no longer the main laggard. Three of its 19 industry groups have recovered into the green, led by investment banks & brokerages (+0.6%).
In commodity trading, crude oil is down 0.8% to $91.50. Gold is down 1.1% to $795.20.DJ30 -81.78 NASDAQ -13.53 SP500 -9.13 NASDAQ Dec/Adv/Vol 1877/702/331 mln NYSE Dec/Adv/Vol 2264/555/147 mln
10:00 am : A modest recovery effort was short-lived as the major indices continue to show weakness, with all ten sectors in negative territory.
Financials (-1.5%) are the main laggard for the fourth day in a row. All of its groups are in the red, with regional banks (-2.0%) posting the largest loss.
Defensive oriented consumer staples (-0.4%) are outperforming on a relative basis.DJ30 -98.36 NASDAQ -17.74 SP500 -10.92 NASDAQ Dec/Adv/Vol 1856/539/161 mln
09:40 am : Stocks open a sharply lower note as a Citigroup (C) downgrade, and higher than expected inflation data weigh on the market.
November core CPI was up 0.3%. That was above an expected 0.2% increase and follows five straight increases of 0.2%. Total CPI was up 0.8% as energy prices jumped 5.7%. There may be some offset in energy prices the next couple of months but that won't provide much comfort to a jittery market today.
Moody's Investors Service downgraded the long-term ratings of Citigroup (senior to Aa3 from Aa2) and lowered the Bank Financial Strength Rating of Citibank to B from A-.The downgrade was prompted by Moody's view that Citigroup's capital ratios will remain low. Meanwhile, Citigroup is consolidating $49 bln in SIV assets on its balance sheet to prevent a forced asset sale. DJ30 -109.80 NASDAQ -21.03 SP500 -11.67
09:15 am : S&P futures vs fair value: -13.9. Nasdaq futures vs fair value: -19.8.
09:00 am : S&P futures vs fair value: -14.6. Nasdaq futures vs fair value: -21.0. Stock futures continue to show weakness following the higher than expected CPI data. Citigroup (C) was downgraded to Hold from Buy at Sandler O'Neill. Earlier this morning, Citi had its long term rating and Bank Financial Strength Rating lowered at Moody's.
08:30 am : S&P futures vs fair value: -12.5. Nasdaq futures vs fair value: -15.0. Futures slide on the CPI data. Recently released, November core CPI (ex-food and energy) rose 0.3% month over month (consensus +0.2%). Total CPI rose 0.8% month over month (consensus +0.6%).
08:00 am : S&P futures vs fair value: -5.9. Nasdaq futures vs fair value: -6.5. Futures trade suggests a negative start for the stock market. There isn't a lot of corporate news this morning, but two items garnering increased attention are Citigroup's (C) news that it will bring SIV assets onto its balance sheet and United Technologies (UTX) reaffirming its FY07 EPS guidance of $4.22 to $4.25 (consensus $4.26). The CPI data, released at 08:30 ET, will be the real focal point as yesterday's larger than expected increase in PPI and core-PPI has the market on inflation watch at he consumer level. Consensus estimates stand at a 0.6% increase for CPI and a 0.2% increase for core-CPI, which excludes food and energy.
06:25 am : S&P futures vs fair value: -7.1. Nasdaq futures vs fair value: -11.0.
06:24 am : FTSE...6371.20...+7.00...+0.1%. DAX...7929.29...+0.98...+0.0%.
06:24 am : Nikkei...15514.51...-22.01...-0.1%. Hang Seng...27563.64...-180.81...-0.7%.
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