Market Update 080110 http://biz.yahoo.com/mu/update.html 4:20 pm : Thursday was another wild session on Wall Street. Stocks opened on a low note on warnings from a major credit card lender and weak retail sales, but managed to finish with strong gains after a report suggested a major financial deal was in the works. A speech by Fed Chairman Ben Bernanke added to the volatility.
The Dow, Nasdaq and S&P ended up 0.9%, 0.8%, and 0.6%, respectively. The gains are more impressive when considering the Dow, Nasdaq and S&P were down 0.8%, 1.1% and 1.0% respectively, at their lows of the day.
Stocks were in the red in late trade and then soared at 14:30 ET on a Wall Street Journal report that Bank of America (BAC 39.30, +0.56) is in advanced talks to acquire Countrywide (CFC 7.75, +2.63). The report said it is not clear how fast a deal will be struck, and it is possible that an agreement may be delayed or fall apart, according to the Journal's sources. A CNBC reporter said she expected the deal to happen very shortly, with an announcement probably by the end of the week. Neither company has commented on the reports.
Countrywide's stock spiked 51% on the news, and the financial sector (+2.3%) finished as the leader. The 2.3% gain is even more striking, considering financials were down 2% at their lows of the day. The thrifts & mortgages group gained 8.2%.
The Countrywide report overshadowed Fed Chairman's Bernanke's speech on the economy at 13:00 ET, which most thought was going to be Thursday's headliner. Bernanke said additional policy easing may be necessary, and that the Fed stands ready to take "substantive additional action." Stocks spiked as the prepared text hit the wires, but fell back into negative territory by the time the Countrywide news broke.
Fed funds futures indicate an 88% chance of a 50 basis point rate cut, up from the pre-Bernanke speech level of 74%. The increased bets of a rate cut, along with the Bank of England and the European Central Bank standing pat on their rates, caused the dollar to slide 0.67%.
Weighing on early sentiment, Capital One (COF 42.92, -0.43) reduced its profit outlook due to increased loan delinquencies and additional legal reserves established in the fourth quarter. Its stock traded down as much as 10.4%, but managed to pare much of its losses as it rose in conjunction with other financials.
The majority of retailers reported disappointing same-store sales, although a few of the larger companies reported better than expected numbers. Some names that topped expectations include Wal-Mart (WMT 48.32, +1.42), Target (TGT 51.55, +1.63) and Costco (COST 69.86, +2.59). The S&P 500 Retailing Index finished 0.8% higher.
On the economic front, jobless claims for the week ended Jan. 5 unexpectedly slid to 322,000 from 337,000. This data are from a shortened holiday week so some may dismiss it as aberrant. However, it does indicate companies are not laying people off at a rate that is consistent with recessions.
Eight sectors traded higher, led by financials (+2.3%) and telecom (+1.7%). Energy (-0.5%) was a laggard as oil prices fell 1.5% to $94.25 per barrel.DJ30 +117.78 NASDAQ +13.97 NQ100 +0.2% R2K +1.1% SP400 +0.9% SP500 +11.20 NASDAQ Dec/Adv/Vol 1172/1815/2.55 bln NYSE Dec/Adv/Vol 1032/2128/1.82 bln
3:30 pm : Stocks climb to fresh highs and then pullback a bit. Stocks are still holding significant gains near their best levels of the session. Heading into the final half-hour of trade, financials (+3.1%) continue to provide leadership with telecom (+1.9%) coming in second.
In currency trading, the dollar is down 0.64% against a basket of currencies as traders upped their bets on a 50 basis point cut in the fed funds rate. The euro is up 0.90% against the dollar as the European Central Banks decided to hold rates steady earlier today.DJ30 +158.84 NASDAQ +19.91 SP500 +15.39 NASDAQ Dec/Adv/Vol 1057/1912/2.12 bln NYSE Dec/Adv/Vol 1082/2056/1.43 bln
3:00 pm : The major indices are trading at or near their best levels of the session with eight of the ten sectors back in positive territory. Only utilities (-0.6%) and energy (-0.9%) remain in the red. Financials have soared 3.0% on the Countrywide (CFC 32.55, +6.52) merger reports. The sector was down 2% at its session lows.
The Dow Jones Transportation Average (+3.5%) is handily outperforming the broader market. UPS (UPS 70.33, +3.62) is providing leadership after being upgraded to Outperform from Peer Perform at Bear Stearns. The firm also set a price target of $85, citing it believes UPS is well positioned to firm up rates once the freight economy improves. UPS also announced its Board authorized an immediate increase in the funds available for stock repurchases from $2 billion to $10 billion.
Airlines are also providing support, as the Amex Airline Index soars 13%. The strength is due to a Wall Street Journal report that states Delta Air Lines (DAL) is going to pursue formal merger discussions with both Northwest Airlines (NWA 15.00, +2.99) and UAL (UAUA 32.55, +6.52).DJ30 +157.52 NASDAQ +17.35 SP500 +14.60 NASDAQ Dec/Adv/Vol 1240/1720/1.94 bln NYSE Dec/Adv/Vol 1227/1898/1.33 bln
2:30 pm : Stocks spike on news that Bank of America (BAC 29.90, +0.88) is in advanced talks to buy Countrywide (CFC 7.86, +2.74), according to Dow Jones. Countrywide's stock is up 53% on the merger report.
The headline has given a boost to the financial sector (+1.7%), with all 19 of its groups rebounding into positive territory. Thrift & mortgages is posting a 7% gain, while diversified banks is posting a 2.9% gain.DJ30 +81.29 NASDAQ +4.21 SP500 +4.82 NASDAQ Dec/Adv/Vol 1552/1393/1.75 bln NYSE Dec/Adv/Vol 1540/1584/1.21 bln
1:55 pm : The stock market falls back into the red, giving up all of its Bernanke induced gains, as Bernanke's speech and Q&A session ends.
When asked about a U.S. recession, Bernanke responded the Fed is not currently forecasting a recession, and the expectation is for sluggish growth. He did note he sees downside risks to the economy.
Separately, Kansas City Fed President Hoening said if the economy strengthens as he expects , the fed funds rate may be fine where it is now, according to Reuters. Hoening is not a voting FOMC member in 2008.DJ30 -15.04 NASDAQ -13.80 SP500 -5.61 NASDAQ Dec/Adv/Vol 1486/1450/1.58 bln NYSE Dec/Adv/Vol 1382/1727/1.08 bln
1:30 pm : The market trades in a choppy manner as Fed Chairman Bernanke speaks on the economic outlook and monetary policy. Nothing he says should come as much of a surprise, considering his whole speech was already posted on the Fed's website.
In regard to his speech, Bernanke said 21% of subprime ARMs are 90 days or more delinquent, and the foreclosure rate is rising sharply. He said that subprime borrowers and investors are the most affected by the collapse of the market, but consequences are being felt more broadly. He noted there is considerably evidence that banks have become more restrictive in their lending to firms and households.
The major indices are trading with modest gains, but are off their highs reached shortly after Bernanke's comments hit the wires. He is near the end of his prepared text.DJ30 +71.37 NASDAQ +6.11 SP500 +3.57 NASDAQ Dec/Adv/Vol 1281/1654/1.45 bln NYSE Dec/Adv/Vol 1257/1827/982 mln
1:00 pm : There has been some choppy action since the Bernanke statement induced spike. The Nasdaq and S&P briefly fell into the red, but have since recovered.
In the wake of the statements, fed funds futures indicate a 90% chance of a 50 basis point rate cut on Jan. 30, up from the pre-statement level of 74%. The rest of the bets are on a 25 basis point cut. Briefing.com's Chief Economist, Tim Rogers, said the statement indicates a rate cut, but does not leave a clear message as to what size the cut will be.
Bernanke is set to speak as this comment gets posted.DJ30 +97.54 NASDAQ +11.94 SP500 +7.93 NASDAQ Dec/Adv/Vol 1533/1372/1.24 bln NYSE Dec/Adv/Vol 1363/1716/822 mln
12:35 pm : The stock market spikes into positive territory after Bernanke statements come across Bloomberg. Currently, the major indices are off their highs, but remain in the green.
Bernanke said additional policy easing may well be necessary, and that the Fed stands ready to take "substantive additional action." These headlines hit before Bernanke's scheduled speech at 1:00 ET. The comments are likely from a prepared text, pre-released to Bloomberg.
The Bernanke statements suggest further Fed easing is very likely, causing the dollar to slide. Meanwhile, gold made a fresh intraday high of $893.60 per ounce.
Separately, National Bureau of Economic Research President Martin Feldstein said a U.S. recession is “not a sure thing,” but the odds are now over 50%, according to Reuters.DJ30 +88.52 NASDAQ +5.91 SP500 +5.87 NASDAQ Dec/Adv/Vol 1668/1200/981 mln NYSE Dec/Adv/Vol 1802/1253/660 mln
12:25 pm : Market spikes as Bernanke statements come across the wires indicating future rate cuts. Briefing.com will provide a full update at the bottom of the hour.DJ30 +120.95 NASDAQ +16.33 SP500 +10.16
12:00 pm : The stock market has traded in choppy fashion as inventors remain nervous despite a better than expected unemployment reading. At midday, stocks are trading in the red, but remain off their worst levels that were seen shortly after the open.
The negative sentiment was fueled by Capital One (COF 41.02, -2.33) after the company said it reduced its profit outlook due to increased loan delinquencies and additional legal reserves established in the fourth quarter. Many fear that if the housing crisis spreads to other areas, such as credit card debt, the economy may face a recession.
The majority of retailers reported disappointing same-store sales, although a few of the larger companies reported better than expected numbers. Some names that topped expectations include Wal-Mart (WMT 47.73, +0.83), Target (TGT 50.85, +0.93) and Costco (COST 68.71, +1.44). The S&P 500 Retailing Index is currently flat.
On the positive side, Dow component Alcoa (AA 31.28, +0.03) kicked off fourth quarter earnings season with a better than expected report. Next week will see an acceleration in the number of companies reporting earnings.
Jobless claims for the week ended Jan. 5 unexpectedly slid to 322,000 from 337,000. This data are from a shortened holiday week so some may dismiss it as aberrant. However, it does indicate companies are not laying people off at a rate that is consistent with recessions.
Federal Reserve Chairman Ben Bernanke's speech on the U.S. economic outlook at 1:00 ET may affect investor sentiment, as market participants look for further clues about the central bank's intentions and possible interest rate cuts.
Seven of the ten economic sectors are posting a loss. Energy (-1.7%) is the main laggard as it falls in conjunction with crude oil (-1.9% to $93.87). Tech (-0.8%) is again under selling pressure. Telecom (+0.3%) is outperforming on a relative basis after underperforming the last two sessions.DJ30 -20.08 NASDAQ -17.10 SP500 -7.38 NASDAQ Dec/Adv/Vol 1801/1037/843 mln NYSE Dec/Adv/Vol 1872/1150/536 mln
11:35 am : The stock market continues to trade in negative territory, but remains well off its worst level of the session that was reached shortly after the opening bell. The Dow is outperforming, even though only eight of its 30 Components are trading higher.
Boeing (BA 82.30, +2.00) and Wal-Mart (WMT 47.84, +0.93) are providing leadership. An analyst highlighted Boeing's record airplane order backlog and Wal-Mart is benefiting from its better than expected same-store sales. American Express (AXP 47.99, -1.09) and Intel (INTL 22.29, -0.46) are the main laggards. American Express is seeing selling pressure in conjunction with Capital One (COF 40.50, -2.85) and Intel declined after a CNBC reported the New York attorney general has subpoenaed the company.DJ30 -25.85 NASDAQ -18.12 SP500 -7.68 NASDAQ Dec/Adv/Vol 1760/1051/739 mln NYSE Dec/Adv/Vol 1876/1099/486 mln
11:00 am : The stock market reached its best levels of the session in the past half-hour, but is now back on the decline as selling pressure picks up in the tech sector (-1.1%). Financials (-0.1%) have dipped below their best levels, but have seen a nice bounce off their lows, when they were down 2.0%.
Meanwhile, the Amex Airline Index is up an impressive 7.2% on a view that the Index was oversold. Yesterday, UBS upgraded airlines noting a major merger is "more likely than not" in the next six months. The 2% slide in crude oil prices is also providing support. DJ30 -27.40 NASDAQ -18.00 SP500 -6.20 NASDAQ Dec/Adv/Vol 1494/1220/545 mln NYSE Dec/Adv/Vol 1657/1237/331 mln
10:30 am : The stock market continued its recovery effort, sending the Dow back to the unchanged mark, but has since pulled back a bit.
Five of the ten sectors are now posting a gain, with the telecom sector (+0.6%) providing leadership after underperforming the last few days. The sector came off its highs after Verizon (VZ 43.11, +0.64) said it has seen no economic impact on enterprise business, and only a small uptick in bad debt in consumer business. The sector got hammered after AT&T's (T 39.00, +0.00) CEO warned of consumer weakness two days ago.
Federal Reserve Chairman Ben Bernanke's speech on the U.S. economic outlook at 1:00 ET will be a focal point during the upcoming session, as investors look for further clues about the central bank's intentions and possible interest rate cuts to stave off an economic recession.DJ30 -10.90 NASDAQ -16.37 SP500 -4.22 NASDAQ Dec/Adv/Vol 1589/1030/379 mln NYSE Dec/Adv/Vol 1564/1264/227 mln
10:00 am : Stocks bounce off their lows, with defensive sectors outperforming on a relative basis. Strikingly, the S&P 500 Retailing Index has rebounded into positive territory (+0.3%).
Of the eight sectors trading lower, Energy (-1.6%) is the main laggard as it slides in conjunction with crude oil. Crude is down 2.1% to $93.70 per barrel. Once again, financials (-1.0%) are under selling pressure.
Just hitting the wires, November wholesale inventory levels rose 0.6%, compared to the expected 0.4% rise. Growth was flat in October.DJ30 -44.71 NASDAQ -17.05 SP500 -7.59 NASDAQ Dec/Adv/Vol 1729/630/134 mln
09:40 am : Stocks open on a low note, as concerns about a slow-down in consumers weighed on the market.
Capital One (COF) raised concerns after the company reduced its profit outlook due to increased loan delinquencies and additional legal reserves established in the fourth quarter.
Adding to concerns, December same-store retail sales disappointed, and many retailers lowered earnings guidance. One notable exception was Wal-Mart (WMT), which topped its expectations.
Initial jobless claims for the week ended January 5 unexpectedly fell to 322,000 from 337,000 the prior week. The release is good news for the stock market, although it did not give futures much of a boost.DJ30 -72.92 NASDAQ -20.76 SP500 -10.82
09:15 am : S&P futures vs fair value: -11.6. Nasdaq futures vs fair value: -22.3.
09:00 am : S&P futures vs fair value: -10.5. Nasdaq futures vs fair value: -19.8. The market is poised for a weak start. Overall, December same-store sales have been worse than expected, although the largest retailers posted better than expected numbers. There positive surprises include sales that topped estimates at Wal-Mart (WMT) and Costco (COST). Retailers are down 8.5% in 2008.
08:35 am : S&P futures vs fair value: -9.4. Nasdaq futures vs fair value: -17.3. Futures drift lower despite a better than expected initial claims report. Initial jobless claims for the week ended Jan 5 came in at 322K, lower than the expected reading of 340K. The market will be paying close attention to Ben Bernanke’s speech on the economic outlook at 13:00 ET. Market participants are hoping to get some clues about future Fed policy. Fed funds futures suggest a 74% chance of a 50 basis point rate cut with the rest of the bets on a 25 basis point cut.
07:59 am : S&P futures vs fair value: -6.0. Nasdaq futures vs fair value: -11.5. Early indications suggest a lower open for the stock market. Capital One (COF) warned its 2007 earnings would fall short of its previous expectations, citing an increase in loan delinquencies. Also weighing on the market are reports that Freddie Mac’s (FRE) credit rating may be cut by Moody’s. On the positive side, Wal-Mart reported better than expected same store sales and Dow Component Alcoa (AA) kicked off the fourth quarter earnings season on a positive note. Both the Bank of England and the European Central Bank decided to leave interest rates unchanged.
06:17 am : FTSE...6279.10...+6.40...+0.1%. DAX...7791.54...+8.83...+0.1%.
06:17 am : S&P futures vs fair value: -7.2. Nasdaq futures vs fair value: -12.5.
06:17 am : Nikkei...14388.11...-211.05...-1.5%. Hang Seng...27230.86...-384.99...-1.4%.
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