Market Update 080129 http://biz.yahoo.com/mu/update.html 4:25 pm : On Monday the stock market rallied reportedly because an ugly new home sales report increased the chances the Fed would cut by 50 basis points at this week's FOMC meeting. If logic holds, then, the stock market should have suffered a good-sized sell-off on Tuesday since the December Durable Orders report was much stronger than expected and reduced the probability of a 50 basis point cut.
That logic, however, didn't hold. In fact, what should have happened, happened. The stock market rallied on the encouraging economic release that suggested the economy is not entering a recession.
Specifically, durable orders were up 5.2% (consensus +1.6%). Nondefense capital goods orders excluding transportation, which is considered a proxy for business investment, rose 4.4%.
The Conference Board's Consumer Confidence report did slip to 87.9 (consensus 87.0) from 90.6 in December, but confidence figures are a poor barometer when it comes to actual economic activity. Hence, while the indices suffered a knee-jerk dip following the report, they quickly rebounded, riding the support provided by some generally good earnings news from the likes of 3M (MMM 78.02, +0.58), Eli Lilly (LLY 52.31, +0.91), and Burlington Northern (BNI 84.65, +1.51), and continued strength in the financial sector.
Once again, the financial sector, up 1.4%, provided influential leadership for the market, overcoming a cautious 2008 outlook from American Express (AXP 47.80, +0.40), chatter that the ratings agencies are poised to downgrade the bond insurers, and a Wall Street Journal report that the FBI has opened criminal inquiries on 14 companies in its subprime mortgage probe.
The homebuilders, in turn, continued to attract bottom-fishing interest. The S&P homebuilding group jumped 3.8% and is now up a whopping 50% from its low on January 15.
Strikingly, the tech sector continued to trail the broader market, ending Tuesday's session roughly flat as further losses in Google (GOOG 550.52, -5.46), Microsoft (MSFT 32.60, -0.12), Oracle (ORCL 20.07, -0.19) and Cisco (CSCO 24.06, -0.04) acted as a restraining factor.
On Wednesday, the advanced reading on fourth quarter GDP will preoccupy the market in early trading. Economists expect to see growth of 1.2%, down from 4.9% in the third quarter. The FOMC meeting, however, will remain the center of attention.
A monetary policy decision is expected around 14:15 ET. Following the Durable Orders report, the probability of a 50 basis point rate cut was reduced in the fed funds futures market to 72.0% from 86.0%. A cut of at least 25 basis points to 3.25% is fully expected. DJ30 +96.41 NASDAQ +8.15 NQ100 +0.1% R2K +0.4% SP400 +0.7% SP500 +8.33 NASDAQ Dec/Adv/Vol 1273/1686/2.19 bln NYSE Dec/Adv/Vol 1031/2100/1.55 bln
3:35 pm : The Dow and S&P break through their session ranges, climbing to fresh session highs. The move has been concentrated within the financial sector (+1.4%) and telecom (+3.4%).
Tomorrow, the FOMC will issue its statement at 14:15 ET. Fed funds futures price a 74% chance of a 50 basis point cut with a 25 basis point cut fully priced in. The advanced fourth quarter GDP reading will be released as will the ADP private employment reading. The market will also have another barrage of earnings reports to process, including Boeing (BA 80.99, +3.39), Merck (MRK 47.96, -1.29), Kraft Foods (KFT 30.13, -0.31) and Altria (MO 76.07, +1.06).DJ30 +94.79 NASDAQ +7.63 SP500 +8.42 NASDAQ Dec/Adv/Vol 1285/1661/1.76 bln NYSE Dec/Adv/Vol 1010/2115/1.15 bln
3:05 pm : Stocks make some modest gains, and are now trading slightly below their best levels of the session. Buying interest has been broad-based.
As of Jan. 25, 160 S&P 500 companies have reported earnings. 59% have beat expectations, 14% have been in-line, and 28% missed, according to Thomson Financial. This is close to a typical quarter that sees 60% beat, 20% meet and 20% miss. The financial sector has had the most dismal results, with the majority of companies missing estimates. Financials earnings are expected to drop 104% compared to last year. If financials were removed from the S&P 500, earnings would rise by 11.3%.DJ30 +75.20 NASDAQ +3.55 SP500 +5.77 NASDAQ Dec/Adv/Vol 1351/1574/1.60 bln NYSE Dec/Adv/Vol 1136/1973/1.02 bln
2:30 pm : The stock market continues to trade in a tight range slighty above the unchanged mark. Consumer discretionary (-0.1%) has slipped into the red.
320 stocks in the S&P 500 are higher. AT&T (T 37.43, +1.03), AIG (AIG 56.29, +1.54) and JPMorgan Chase (JPM 46.66, +1.10) are providing leadership. Merck (MRK 47.48, -1.78), Pepsico (PEP 68.49, -1.78) and Google (GOOG 544.56, -11.42) are the main laggards.DJ30 +58.53 NASDAQ +2.85 SP500 +4.66 NASDAQ Dec/Adv/Vol 1366/1534/1.44 bln NYSE Dec/Adv/Vol 1244/1857/952 mln
1:55 pm : The stock market has been unable to extend its gains as it trades near where it did 30 minutes ago. Telecom (+3.0%) is posting the largest gain thanks to strength in Sprint-Nextel (10.75, +0.78) and AT&T (T 37.53, +1.13)
On the NYSE advancers outpace decliners by 5-to-3 and new 52-week lows outpace new highs by 10-to-8. On the Nasdaq advancers outpace decliners by 7-to-6 and new 52-week lows outpace new highs by 3-to-1. DJ30 +54.87 NASDAQ +0.03 SP500 +4.53 NASDAQ Dec/Adv/Vol 1322/1553/1.30 bln NYSE Dec/Adv/Vol 1143/1943/858 mln
1:30 pm : Stocks are back on the rise in a broad-based move. Only tech (-0.5%) and consumer staples (-0.3%) remain in the red.
Making headlines before the open, Wal-Mart (WMT 48.81, +0.10) announced an "economic stimulus plan for U.S. shoppers." The company is cutting prices by 10% to 30% on "thousands" of items and is offering no interest for 18 months on purchases of $250 or more. Traders have had a mixed response to the press release, as the company's stock has traded in negative territory for most of the session. DJ30 +47.31 NASDAQ -0.95 SP500 +3.54 NASDAQ Dec/Adv/Vol 1393/1465/1.21 bln NYSE Dec/Adv/Vol 1216/1863/782 mln
1:00 pm : Selling pressure eases as the stock market holds with a slight gain and the Nasdaq holds with a slight loss.
The small-cap Russell 2000 Index is trailing the S&P 500. The S&P 400 Mid-Cap Index is posting a gain that is in-line with its large-cap counterparts.
The Amex Airline Index is outperforming with a 3.2% gain. Northwest Airlines (NWA 18.67, +0.73) and JetBlue Airways (JBLU 5.83, +0.89) reported earnings that topped expectations.DJ30 +36.50 NASDAQ -4.81 R2K -0.2% SP400 +0.2% SP500 +2.14 NASDAQ Dec/Adv/Vol 1439/1419/1.10 bln NYSE Dec/Adv/Vol 1259/1802/741 mln
12:30 pm : Selling interest picks up, sending the stock market to the unchanged mark. The Nasdaq Composite is back in the red. The retreat has been led by the tech sector (-0.8%), which is the worst-performing sector in 2008.
Tech company VMware (VMW 56.36, -26.64) is getting clipped despite topping earnings estimates. The 2007 IPO of the virtualization software company was once red hot, gaining 332% in roughly three months. Now traders are pummeling the stock after the company reported slightly lower revenue than expectations. The company forecast 2008 revenue will grow by 50%, which is also slightly below analysts' expectations. The stock is down 55% from its October high. EMC Corp. (EMC 15.61, -1.30) topped earnings expectations, but is getting clipped as it owns a big stake in VMware.DJ30 +41.30 NASDAQ -7.43 SP500 +1.97 NASDAQ Dec/Adv/Vol 1305/1523/962 mln NYSE Dec/Adv/Vol 1072/1996/656 mln
12:00 pm : It has been a choppy day of trading on Wall Street, although the stock market's range has been somewhat tight relative to recent sessions. At midday, stocks are trading near their best levels of the session with decent gains.
The major indices opened higher on news that December durable orders rose 5.2%, compared to November's upwardly revised reading of 0.5%. Economists expected a rise of 1.6%. Excluding transportation, orders still rose a healthy 2.6%. This strong level of orders in December does not support the assertion that the economy is in a recession.
The stock market quickly gave up its gains, though, after the Conference Board said January consumer confidence slipped to 87.9. The reading actually topped expectations (87.0), but only because December's reading was revised higher to 90.6 from 88.6. The losses were short-lived, as a rebound in financials (+1.0%) led the broader market higher.
The flagging bond insurers are playing a role in financials strength. New York Governor Spitzer said he is "tending" to bond insurers, and will do what is appropriate for the bond market, according to Reuters. Ambac (ABK 13.35, +2.22) is up 20% and MBIA (MBI 15.49, +0.64) is up 4.3%.
Earnings reports were mostly better than expected, although traders were concerned with several company's outlooks. Of the 87 companies that reported yesterday after the close and this morning, 60% beat expectations, 17% were in-line and 23% missed.
Notable companies that topped estimates include 3M (MMM 78.26, +0.82), Dow Chemical (DOW 38.17, +0.58), Eli Lilly (LLY 52.36, +0.96), EMC Corp (EMC 15.67, -1.24), Travelers (TRV 48.02, +0.02) and VMware (VMW 56.91, -26.09). American Express (AXP 47.75, +0.35) was in-line with expectations. Countrywide (CFC 6.18, +0.23) missed.
Seven of the ten sectors are higher. Telecom is leading the way with a 2.7% surge. Materials (+1.1%) and financials (+1.0%) are providing leadership. Consumer staples (-0.2%) and tech (-0.2%) are underperforming on a relative basis. DJ30 +71.21 NASDAQ +2.26 SP500 +6.07 NASDAQ Dec/Adv/Vol 1233/1556/842 mln NYSE Dec/Adv/Vol 1029/2011/574 mln
11:30 am : In the past half-hour, the Dow climbs to fresh session highs and the S&P trades near its intraday high. The Nasdaq is well off its lows, but has been unable to reach its opening highs as it trades slightly above the unchanged mark.
The International Monetary Fund (IMF) cut its forecast for world growth this year, citing continued stress in global credit markets, according to Reuters. The IMF also warned that economic activity could slow further. It now expects the global economy to grow 4.1%, compared to its earlier forecast of 4.4%.DJ30 +77.72 NASDAQ +3.56 SP500 +7.37 NASDAQ Dec/Adv/Vol 1337/1422/725 mln NYSE Dec/Adv/Vol 1115/1870/477 mln
11:00 am : The major indices are trading in mixed fashion. The Dow and S&P are holding slight gains, while the Nasdaq is trading with a slight loss. Seven of the ten sectors are higher, led by a 2.6% surge in telecom. Consumer discretionary is the main laggard (-0.7%) as retailers shed 1%.
The market rumor that JPMorgan Chase (JPM 45.95, +0.83) was facing a big derivative loss is not true, according to Reuters, citing sources. JPMorgan has been relatively unscathed by the subprime turmoil that has mired other Wall Street banks.DJ30 +47.13 NASDAQ -3.88 SP500 +4.71 NASDAQ Dec/Adv/Vol 1363/1332/579 mln NYSE Dec/Adv/Vol 1167/1759/366 mln
10:30 am : The stock market is back in the green as it rises in conjunction with financials (+0.7%). JPMorgan (JPM 45.88, +0.31) declined sharply during the recent retreat on a headline that stated there is a rumor the company may be facing a large trading loss. A CNBC commentator has said the rumor is most likely not true, as the stock recovers.
After a rough start, 3M (MMM 77.84, +0.40) is modestly outperforming the broader market. The company reported fourth quarter earnings of $1.19 per share, topping estimates by two cents. The company also reiterated its 2008 guidance. The stock was lower at the start of trading, but has rebounded in the green after traders liked what the company said during its conference call. DJ30 +54.22 NASDAQ -1.21 SP500 +5.23 NASDAQ Dec/Adv/Vol 1397/1195/419 mln NYSE Dec/Adv/Vol 1329/1550/258 mln
10:05 am : Stocks give up their early gains, led by a dip in tech (-0.8%) and financials (-0.2%).
Just hitting the wires, the Conference Board said January consumer confidence was 87.9, down from December's revised reading of 90.6. Economists expected a reading of 87.0. The response immediately after the release was negative, sending the major indices to their session lows.
The weakness in tech is weighing on the Nasdaq, which is now trading with a modest loss. The S&P and Dow are trading with a slight loss.DJ30 -15.52 NASDAQ -16.08 SP500 -2.25 NASDAQ Dec/Adv/Vol 857/1509/134 mln
09:45 am : The stock market opens modestly higher, buoyed by a better than expected durable orders report.
December durable orders rose 5.2%, larger than the expected 1.6% rise. Excluding transportation, orders still rose a healthy 2.6%. This strong level of orders in December does not support the assertion that the economy is in a recession.
Earnings reports have been mostly better than expected, although some companies disappointed with their outlooks.
The consumer confidence reading will be released at the top of the hour.DJ30 +47.31 NASDAQ +7.90 SP500 +6.73
09:13 am : S&P futures vs fair value: +9.2. Nasdaq futures vs fair value: +11.8.
08:59 am : S&P futures vs fair value: +8.7. Nasdaq futures vs fair value: +12.0. Futures continue to point to a higher start. The FOMC begins its two day meeting today, and is set to issue its statement on Wednesday at 14:15 ET. Fed funds futures indicate a 76% chance of a 50 basis point cut, with the rest of the bets on a 25 basis point cut.
08:30 am : S&P futures vs fair value: +9.9. Nasdaq futures vs fair value: +9.5. Stock futures extended their gains, and then climb higher on a better than expected economic release. December Durable orders rose 5.2%, compared November’s revised reading of 0.5%. Economists expected a rise of 1.6%. Countrywide (CFC) reported a fourth quarter loss of $0.79 per share, $0.49 worse than the consensus estimate. The company issued a dividend of $0.15 on its common shares. It will not be holding a conference call to discuss its results due to its pending merger with Bank of America.
08:01 am : S&P futures vs fair value: +3.3. Nasdaq futures vs fair value: flat. Futures point to a flat to slightly higher open. Earnings reports have been mostly better than expected. 3M (MMM) topped estimates by two cents and reaffirmed its FY08 earnings guidance. Eli Lilly (LLY) and EMC (EMC) beat their estimates and provided reassuring FY08 guidance. American Express (AXP) met, but continues to be cautious in its 2008 outlook. VMware (VMW) beat expectations but is getting clipped in pre-market trading after guiding revenues slightly below the consensus estimate.
06:19 am : S&P futures vs fair value: +5.9. Nasdaq futures vs fair value: +3.3.
06:16 am : FTSE...5883.60...+94.70...+1.6%. DAX...6911.98...+93.13...+1.4%.
06:16 am : Nikkei...13478.86...+390.95...+3.0%. Hang Seng...24291.80...+238.19...+1.0%.
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