Market Update 080131 http://biz.yahoo.com/mu/update.html 4:25 pm : On Thursday, the major indices were able to rally, despite opening sharply lower in the wake of a disappointing unemployment claim report. Sentiment was lifted due to a bond insurer's positive outlook. This is in contrast to Wednesday, when concerns over bond insurers caused the stock market to give up all of its FOMC induced gains.
The major indices finished modestly off their highs on a report released with five minutes left in the session that said Standard & Poor's put MBIA's (MBI 15.50, +1.54) credit rating on negative watch and downgraded FGIC to AA from AAA. Yesteday, Fitch cut FGIC's rating, so its downgrade was not surprising. S&P affirmed Ambac's (ABK 11.64, +0.79) AAA rating.
Despite the S&P report, the major indices still finished sharply higher, led by financials (+2.7%), retailers (+4.4%) and consumer discretionary (+3.4%). These three areas were the main laggards in 2007, and stand to benefit from the recent rate cutting cycle. The Dow, Nasdaq and S&P all closed 3.3% above their session lows.
Bond insurers weighed on sentiment in the early going after MBIA reported a larger than expected loss. MBIA said it had an operating loss of $3.38 per share in the fourth quarter, compared to a profit of $1.16 a year ago.
Sentiment then turned positve, as MBIA led financials and the broader market higher. MBIA's conference call, which lasted four hours, eased traders' uneasiness.
Specifically, the company acknowledged it will have significant losses, but nothing to justify the 80% decline in the share price since last year. The company said its capital plan will exceed all AAA rating requirements. It said a downgrade would impact capital by $100 million to $200 million in a worst case scenario. The company said it will not be forced into bankruptcy and that it is virtually impossible to imagine a situation where MBI would become insolvent.
In economic news, a Dept. of Labor report showed jobless claims for the week ended Jan. 26 jumped to 375,000 from 306,000. Economists expected 320,000 claims. Stocks opened sharply lower on the report. The knee jerk reaction was overdone, as one week does not make a trend, and Briefing.com expected claims to increase due to seasonal factors.
The Dept. of Commerce said December personal income rose 0.5% and spending rose 0.2%, which were mostly in-line with expectations. Separately, fourth quarter employment costs rose 0.8%, in-line with expectations.
All ten sectors closed higher. Energy (+0.3%) underperformed on a relative basis due to a 0.8% slip in crude oil prices. DJ30 +207.53 NASDAQ +40.86 NQ100 +1.8% R2K +2.6% SP400 +2.2% SP500 +22.74 NASDAQ Dec/Adv/Vol 966/2039/2.87 bln NYSE Dec/Adv/Vol 776/2384/2.19 bln
3:30 pm : The major indices climb to fresh session highs with the Dow now posting a gain of more than 200 points. Retailers are up 5.4%, financials are up 2.9% and consumer discretionary is up 3.9%.
Although stocks are looking to end the month on a high note, January has been a volatile and disappointing start to the trading year, with the Dow, Nasdaq and S&P down 4.9%, 10.0% and 6.3% yesterday. The following is the best and worst performing industry groups this month. Best: 1) Homebuilding +27% 2) Home improvement retail +14.5% 3) Education services +13.7%. Worst: 1) Consumer electronics -36.4% 2) oil & gas equipment -19.8% 3) home entertainment software -19.4%.
All sectors are in the red this year. Financials, the worst-performing sector in 2007, is outperforming on a relative basis with a 0.5% loss. Tech is the main laggard with a 12.4% loss.DJ30 +208.32 NASDAQ +41.35 SP500 +23.48 NASDAQ Dec/Adv/Vol 975/2001/2.14 bln NYSE Dec/Adv/Vol 831/2328/1.42 bln
3:00 pm : The stock market is trading near its best level of the session. Energy (-0.7%) has pared most of its losses in conjunction with crude oil (-0.9% to $91.52)
Reuters reports New York Gov. Spitzer said he and the state insurance superintendent were making "good progress" in creating a plan to help bond insurers. Both MBIA (MBI 14.72, +0.76) and Ambac (ABK 11.72, +0.87) are trading off their session highs.
Despite the Fed cutting interest rates by 125 basis points in the last two weeks, traders still expect more. Fed funds futures price a 68% chance of a 50 basis point rate cut on March 18, with the rest of the bets on a 25 basis point cut. The meeting is a long time away, so expectations may change substantially by then.DJ30 +155.75 NASDAQ +33.06 SP500 +18.29 NASDAQ Dec/Adv/Vol 1090/1884/1.91 bln NYSE Dec/Adv/Vol 941/2196/1.27 bln
2:30 pm : The major indices hit or reach their session highs before retreating a bit. The beaten down areas of 2007, financials (+2.3%), consumer discretionary (+3.0%) and retailers (+4.2%), are providing leadership. Those areas are also outperforming the broader market year-to-date.
Bank of America (BAC 43.99, +1.78), CVS Caremark (CVS 38.60, +2.58) and Wal-Mart (WMT50.49, +1.34) are the leaders among the 361 stocks trading higher in the S&P 500. Dow components Exxon Mobil (XOM 84.57, -0.76) and Merck (MRK 45.96, 0.74) are the main laggards.DJ30 +135.51 NASDAQ +28.91 SP500 +14.32 NASDAQ Dec/Adv/Vol 1098/1862/1.75 bln NYSE Dec/Adv/Vol 1026/2089/1.15 bln
2:00 pm : The stock market climbs near its session high after a new wave of buying interest. All sectors are seeing some interest, and there is notable strength within consumer discretionary (+2.6%) and financials (+1.9%).
During a question and answer session, MBIA (MBI 15.28, +1.32) said they could not be forced into bankruptcy. The company said it is virtually impossible to imagine a situation where MBI would become insolvent and go into a rehabilitation program in New York.DJ30 +107.38 NASDAQ +20.93 SP500 +11.20 NASDAQ Dec/Adv/Vol 1092/1821/1.59 bln NYSE Dec/Adv/Vol 1034/2075/1.08 bln
1:30 pm : Selling pressure eases as the major indices hold with decent-sized gains.
Retailers are showing leadership this session, as they have through 2008. Target (TGT 54.75, +2.37) is the best-performing stock in the S&P 500 Retailing Index (+3.4%). Amazon.com (AMZN 75.10, +0.89) is also lending support after rebounding from its lows, when it was down more than 7%.DJ30 +87.06 NASDAQ +14.72 SP500 +8.41 NASDAQ Dec/Adv/Vol 1180/1687/1.46 bln NYSE Dec/Adv/Vol 1126/1949/986 mln
12:55 pm : The major indices slip a bit more, and are now trading only modestly above the unchanged mark. The pullback off the intraday highs was broad-based.
Advancers outpace decliners by 7-to-4 on the NYSE and by 3-to-2 on the Nasdaq. New 52-week lows outpace new highs by 5.5-to-1 on the NYSE and by 10-to-1 on the Nasdaq.DJ30 +39.02 NASDAQ +8.75 SP500 +4.57 NASDAQ Dec/Adv/Vol 1171/1679/1.31 bln NYSE Dec/Adv/Vol 1105/1948/888 mln
12:30 pm : The major indices retreat off their highs, but continue to post modest gains and are well off their session lows. Nine of the ten sectors are now in positive territory. Energy (-1.2%) continues to trail, as it has been unable to overcome the weakness in crude oil prices.
The buying interest in stocks has taken the wind out of Treasury bonds. The 10-year note is now only up 6 ticks, after being up over 20 ticks.DJ30 +52.43 NASDAQ +8.81 SP500 +5.84 NASDAQ Dec/Adv/Vol 1151/1666/1.19 bln NYSE Dec/Adv/Vol 982/2075/779 mln
11:55 am : Stocks rebounded after opening sharply lower on continued bond insurer concerns and a lower than expected initial unemployment claim report. At midday stocks are posting sizeable gains, as financials and retailers led a recovery effort. The Dow has gained 330 points from its opening low.
With regard to bond insurers, MBIA (MBI 14.50, +0.54) reported a larger than expected loss, which follows Fitch Ratings cutting FGIC Corp.'s AAA rating yesterday. MBIA (MBI 14.50, +0.54) said it had an operating loss of $3.38 per share in the fourth quarter, compared to an income of $1.16 a year ago.
Despite the early concerns, bond insurers led financials, and the broader market, higher after MBIA's CEO said the company will have real and significant losses, but nothing to justify the 80% decline in share price since last year. The CEO noted the company's capital plan will exceed all AAA rating requirements.
The stock market's negative open was also fueled by a Dept. of Labor report that showed jobless claims for the week ended Jan. 26 jumped to 375,000 from 306,000. Economists expected 320,000 claims. The knee jerk reaction was overdone, as one week does not make a trend, and Briefing.com expected claims to increase due to seasonal factors.
In other economic news, Dept. of commerce said December personal income rose 0.5% and spending rose 0.2%, which were mostly in-line with expectations. Economists expected income to rise 0.4% and spending to rise 0.1%. PCE Core rose 0.2% month-over-month, in-line with expectations.
Fourth quarter employment costs rose 0.8%, in-line with expectations.
Earnings have been mixed. Bristol-Myers (BMY 22.80, -0.46) missed its earnings expectations and issued downside guidance. MasterCard (MA 215.87, +28.89), Amazon.com (AMZN 74.44, +0.23) and Procter & Gamble (PG 66.59, +0.50) topped their earnings estimates.
Six of the ten sectors are higher, led by consumer discretionary (+2.5%) and financials (+2.5%). Retailers (+4.0%) are supporting consumer discretionary's outperformance. Energy (-0.7%) is the main laggard as crude slips 2%. DJ30 +150.22 NASDAQ +27.93 SP500 +18.28 NASDAQ Dec/Adv/Vol 1209/1572/967 mln NYSE Dec/Adv/Vol 1480/1504/549 mln
11:30 am : The stock market pared its losses, and is now trading in positive territory. The Dow has gained roughly 190 points from its opening low. Five of the ten sectors are now in positive territory, with the influential financial sector (+1.5%) seeing relative strength.
MBIA (MBI 14.30, +0.34) said it has not seen anything that justifies its 80% drop in stock price, and that its capital plan will exceed all AAA rating requirements. The company said its has over $16 billion in claim pay resources.DJ30 +3.01 NASDAQ 2553.41+7.75 SP500 +5.77 NASDAQ Dec/Adv/Vol 1396/1336/802 mln NYSE Dec/Adv/Vol 1426/1552/557 mln
11:00 am : The major indices run into resistance near their best levels, as they continue to trade with modest losses. Energy (-1.8%) is the main laggard as it falls in conjunction with crude oil prices. Crude prices are down 2.8% to $89.74 per barrel. Retailers (+1.9%) have extended their gains, lending support to consumer discretionary (+0.7%) and consumer staples (+0.4%).
The Senate Finance Committee yesterday passed an economic stimulus package, according to reports. The committee has made some changes from the House version, including lower rebates of $500 per individual and $1000 per couple. The House version has rebates of $600 per individual and $1200 per couple. The bill increased the maximum income a person or couple can earn and still receive rebates to $150,000 and $300,000. The Senate still has to vote on the bill.
Treasury Secretary Paulson said he is concerned the Senate will bog down the stimulus efforts, according to Dow Jones.DJ30 -64.55 NASDAQ -14.64 SP500 -7.49 NASDAQ Dec/Adv/Vol 1608/1063/620 mln NYSE Dec/Adv/Vol 1655/1226/392 mln
10:30 am : The major indices are attempting to extend their recoveries, but have hit some resistance. Despite the recent uptick, stocks still have a way to go to reach the unchanged mark. The financial sector (+0.1%) has had a notable amount of buying interest, and is no longer a laggard. Bond insurers MBIA (MBI 14.00, +0.04) and Ambac (ABK 11.07, +0.22) are now in the green after seeing steep declines during the open.
Retailers (+0.8%) are also seeing relative strength, as are consumer staples (+0.3%)
MasterCard (MA 208.16, +19.16) is sporting a nice gain after the company reported better than expected earnings. MasterCard's earnings came in at $0.89, topping the consensus estimate of $0.72. Its revenue increased 27.8% year over year. MasterCard processes credit cards transactions, and does not issue debt. Therefore it has weathered the recent downturn better than American Express (AXP 47.61, +0.27). The company noted a shift of purchases to everyday items from discretionary items, but does not expect transaction volumes to decrease.DJ30 -78.61 NASDAQ -16.81 SP500 -5.50 NASDAQ Dec/Adv/Vol 1530/1050/422 mln NYSE Dec/Adv/Vol 1916/902/248 mln
10:00 am : The stock market is off its opening lows, but continues to trade with large loses. All ten economic sectors are in the red, led by declines in energy (-2.1%) and financials (-1.4%).
The January Chicago PMI, a regional manufacturing survey, dropped to 51.5 from December's reading of 56.4. Economists expected a slightly higher reading of 52.0. A reading over 50 reflects manufacturing growth in the Chicago region. The market had a limited response to the release.
The poor jobs number and the stock market weakness is spurring buying interest in the Treasury market. The 10-year note is up 18 ticks, pushing its yield down to 3.60%.DJ30 -103.40 NASDAQ -19.43 SP500 -12.94 NASDAQ Dec/Adv/Vol 1735/673/179 mln
09:40 am : Stocks open on a sharply lower note on continued worries over bond insurer fallout and a higher than expected initial jobless claims reading.
With regard to bond insurers, MBIA (MBI) reported a larger than expected loss, which follows Fitch Ratings cutting FGIC Corp.'s AAA rating yesterday.
Standard & Poor's said after the close yesterday losses from subprime mortgages may exceed $265 billion, according to reports. S&P said that large firms account for most of the $90 billion that has already been written down, but expects to see losses from smaller financial firms during the next wave of write-downs. The firm cut or put reviews on the ratings of $534 billion of bonds and CDOs yesterday.
Futures dropped sharply after the Dept. of Labor said jobless claims for the week ended Jan. 26 jumped to 375,000 from 306,000. Economists expected 320,000 claims. The reaction was overdone, as one week does not make a trend, and Briefing.com expected claims to increase due to seasonal factors.DJ30 -135.27 NASDAQ -25.53 SP500 -17.99
09:15 am : S&P futures vs fair value: -21.6. Nasdaq futures vs fair value: -26.8.
08:59 am : S&P futures vs fair value: -22.5. Nasdaq futures vs fair value: -28.5. Futures continue to point to a sharply lower start as market participants respond negatively to the larger than expected jobless claims number. Chicago PMI, a regional manufacturing survey, is set for release at 9:45 ET.
08:30 am : S&P futures vs fair value: -21.0. Nasdaq futures vs fair value: -21.0. Stock futures slide on a pair of economic releases, as one shows higher than expected unemployment claims last week. Just reported, the Dept. of commerce said Dec. personal income rose 0.5% and spending rose 0.2%. Economists expected income to rise 0.4% and spending to rise 0.1%. PCE Core rose 0.2% month over month, in-line with expectations. Separately, the Dept. of Labor said there were 375K initial jobless claims for the week ended Jan. 26 (consensus 319K). In earnings news, MasterCard (MA) topped expectations by $0.17 per share.
08:00 am : S&P futures vs fair value: -10.4. Nasdaq futures vs fair value: -12.5. Futures suggest the stock market will face some selling pressure at the open as worries over bond insurers continue to weigh on sentiment. Bond insurer MBIA (MBI) reported a larger than expected loss. Dow Component Procter & Gamble (PG) topped its earnings expectations, but guided third quarter earnings below analysts’ expectations. Economic reports personal income and the weekly initial jobless claims will both be released at 8:30 ET. Chicago PMI is set for release at 9:45.
06:16 am : S&P futures vs fair value: -11.6. Nasdaq futures vs fair value: -13.8.
06:16 am : FTSE...5787.90...-49.40...-0.9%. DAX...6785.03...-90.32...-1.3%.
06:16 am : Nikkei...13592.47...+247.44...+1.9%. Hang Seng...23455.74...-197.95...-0.8%.
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