Market Update 080212 http://biz.yahoo.com/mu/update.html 4:20 pm : The stock market covered its fair share of ground Tuesday, moving mostly in bullish fashion until a late-day retreat led by the big-cap technology issues cut into its gains.
Warren Buffett provided the fuel for a broad-based rally in the early going when he told business channel CNBC that Berkshire Hathaway offered to assume $800 billion in municipal bond liabilities from the three major bond insurers, MBIA (MBI 11.50, -2.08), Ambac Financial (ABK 8.90, -1.58) and FGIC Corp.
His offer mitigated the market's concerns about a large-scale municipal bond selloff that might occur in the event the bond insurers lose their AAA rating.
Buffett was quick to note that one bond insurer already said no to his offer and that he hadn't heard from the other two. The lack of interest is certainly understandable since the offer only extends to the municipal bond portfolio. The bond insurers would still be strapped with their CDO business. The market recognized the desperate nature of the situation for the bond insurers that was exposed by Buffett's offer, and hence, their stocks languished in its wake.
From a broader standpoint, though, Berkshire Hathaway's offer left the market cognizant that Mr. Buffett expressed an economic interest in assuming these liabilities now, and presumably, will have that same desire in the future if the bond insurers get tripped up for good with the loss of their AAA rating. Accordingly, it was comforted by the realization that a safety net of some sort seemed readily available for the municipal bond market.
The offer put a bid in the financial sector (+1.4%), which led the early advance, although every sector went along for the relief ride that was also aided by the government's announcement of "Project Lifeline" which involves six, major mortgage lenders and is designed to help homeowners avoid foreclosure. At their highs of the session, the Dow, Nasdaq and S&P 500 were up 229, 29 and 23 points, respectively.
Even General Motors (GM 26.60, -0.52), which reported a $1.5 billion adjusted loss before taxes for its North American business in 2007, gained ground.
GM's gain ultimately didn't hold, as the market reflected on the idea that profitability for the North American business still seems a long way off. Moreover, it was not overlooked that the company's fourth quarter adjusted profit of $0.08 per share was driven by a $1.6 billion, or $2.82 per share, tax credit. When the latter is excluded, GM came up well short of the consensus loss estimate of $0.55 that did not include the benefit.
Similarly, the tech sector did some backtracking in the afternoon trade, paced by its big-cap components which had been outperforming in recent sessions. That selling pressure weighed on the broader market, as did a retrenchment in most sectors in the final hour. The tech sector, up as much as 1.2%, ended down 0.2%.
The market, to its credit, gained some traction in the closing minutes to finish on an upbeat note. Still, the major indices closed the day well off their best levels of the session. DJ30 +133.40 NASDAQ -0.02 NQ100 -0.7% R2K +0.8% SP400 +0.2% SP500 +9.73 NASDAQ Dec/Adv/Vol 1297/1702/2.21 bln NYSE Dec/Adv/Vol 1173/1976/1.52 bln
3:35 pm : The stock market has fallen back to the day's opening levels, posting a modest gain for the day. The Nasdaq has fallen into negative territory.
Financials (+0.6%) had been offering a large leadership role, but are now performing in-line with the broader market. Investment banks and brokerages (-2.1%) are weighing on the sector.
Tech (-0.4%) and materials (-0.2%) have fallen into negative territory.
The Commodity Price Index has declined 0.7% this session. Gold is down 1.8%, while crude is down 1.1%.DJ30 +119.17 NASDAQ -1.40 SP500 +8.04 NASDAQ Dec/Adv/Vol 1120/1852/1.67 bln NYSE Dec/Adv/Vol 1023/2109/1.08 bln
3:00 pm : Stocks are moving higher after a recent pullback. The S&P 500 is currently sporting its highest one-day gain this month.
The tech sector (+0.5%) and energy sector (+0.7%) have retreated from earlier levels but remain in positive territory. Tech is being led lower by Apple (AAPL 126.52, -2.93), while the energy sector has moved downward in conjunction with lower oil prices. Crude has lost nearly 1.0% today.DJ30 +190.87 NASDAQ +16.19 SP500 +16.36 NASDAQ Dec/Adv/Vol 1119/1815/1.49 bln NYSE Dec/Adv/Vol 987/2144/958 mln
2:30 pm : Thus far stocks have been unable to establish new session highs, having pared recent gains.
Standard & Poor's and Moody's both reduced AIG's (AIG 46.39, +1.65) rating outlook to negative, but the stock is still providing leadership. Yesterday AIG's shares retreated more than 10% after the company announced the market value of its CDOs may be too high, meaning further write-downs may result.DJ30 +175.10 NASDAQ +15.44 SP500 +15.06 NASDAQ Dec/Adv/Vol 969/1937/1.37 bln NYSE Dec/Adv/Vol 845/2286/877 mln
2:00 pm : All ten sectors remain in the green, led by Financials (+2.7%). The sector's resurgance has provided a recent push to the stock market, which is approaching session highs.
Within the S&P 500, 413 stocks are trading higher. The leading movers are Exxon Mobil (XOM 84.75, +1.53), General Electric (GE 34.61, +0.60), AT&T (T 37.64, +0.77).DJ30 +207.05 NASDAQ +22.25 SP500 +19.33 NASDAQ Dec/Adv/Vol 1012/1881/1.27 bln NYSE Dec/Adv/Vol 845/2269/800 mln
1:30 pm : The stock market has come off a momentary lull and is moving higher. Financials (+2.0%) are lending support to the advance, but Telecom (+2.5%) has taken the leadership role in the stock market.
Telecom's members are all trading higher, led by AT&T (T 37.77, +0.90) and Verizon (VZ 37.60, +0.81). Qwest (Q 5.43, +0.30) is also trading higher after announcing quarterly results this morning that were on par with estimates. As a whole, telecom stocks have fallen 12% year-to-date.DJ30 +200.79 NASDAQ +19.06 SP500 +17.55 NASDAQ Dec/Adv/Vol 1040/1843/1.16 bln NYSE Dec/Adv/Vol 870/2224/741 mln
1:00 pm : The stock market has made a slight upturn after steadily declining from its session high. Financials (+1.8%) continue to provide a leadership role in today's buying activity.
AIG (AIG 46.16, +1.42) is providing positive influence to the sector after seeing steep declines in yesterday's trading.DJ30 +172.66 NASDAQ +15.41 SP500 +14.82 NASDAQ Dec/Adv/Vol 1111/1749/1.06 bln NYSE Dec/Adv/Vol 915/2165/659 mln
12:25 pm : The major indices dip off their best levels but continue to hold healthy gains. The recent selling interest has been broad-based.
Advancers outpace decliners by 3-to-1 on the NYSE and by 2-to-1 on the Nasdaq. New 52-week highs outpace new lows by nearly 2-to-1 on the NYSE and new 52-week lows outpace new highs by 2-to-1 on the Nasdaq. Volume is on the light side.
Mid-cap stocks are underperforming their large-cap counterparts, while small-caps are performing in-line.DJ30 +176.13 NASDAQ +17.48 R2K +1.2% SP400 +0.7% SP500 +15.66 NASDAQ Dec/Adv/Vol 950/1893/902 mln NYSE Dec/Adv/Vol 746/2292/556 mln
12:00 pm : It is shaping up to be the S&P 500's largest advance so far this February. Financials are leading the market higher, fueled by news that Warren Buffett made an offer to several bond insurers and details of the White House's plan to help people facing foreclosure.
Berkshire Hathaway last week sent an offer to reinsure the municipal bond holdings of Ambac (ABK 10.17, -0.31), MBIA (MBI 12.77, -0.81) and FGIC. Berkshire offered to take a liability of $800 billion, adding $5 billion of its resources. Berkshire pledged there would be no distribution or management fees taken for 10 years.
Berkshire was turned down by one, and has not heard back from two. The bond insurers were given 30 days to find a better offer. The offer does not include CDOs and other investment vehicles that have been hit the hardest by the subprime crisis.
Also giving financials a boost are reports that the White House's foreclosure relief plan, called "Project Lifeline." The plan will allow borrowers who are 90 days delinquent to suspend foreclosures for 30 days while they work out more affordable terms with lenders. The six largest lenders will participate, including Bank of America (BAC 42.92, +0.78), JPMorgan Chase (JPM 43.82, +0.47), Citigroup (C 26.51, +0.70), Countrywide (CFC 6.83, +0.18), Washington Mutual (WM 17.23, +0.43) and Wells Fargo (WFC 30.24, +0.70).
Also making headlines this morning is Dow component General Motors (GM 27.56, +0.44), which reported a fourth quarter profit of $0.08 per share, beating the expected loss of $0.55. These numbers are likely not comparable, though, due to a $1.6 billion tax benefit, which amounts to $2.82 per share.
GM also announced that it will be offering buyout packages to all of its 74,000 UAW members in an attempt to save costs by replacing the workers with cheaper labor. GM's stock has traded in a choppy manner, opening lower and then quickly bouncing into the green.
All ten economic sectors are posting a gain of at least 1%. The financial sector (+2.3%) is posting the largest gain. All of its industry groups are in the green led by a 4.8% advance in residential REITs. Other than financials, strength is being seen in materials (+2.0%) and telecom (+2.2%).
As equities rally, Treasuries are seeing some selling interest. The 10-year note is down 23 ticks, sending its yield up to 3.7%. DJ30 +193.23 NASDAQ +22.67 SP500 +17.99 NASDAQ Dec/Adv/Vol 921/1912/816 mln NYSE Dec/Adv/Vol 717/2307/505 mln
11:30 am : Stocks are trading near their highs as the bullish bias remains intact.
Treasury Secretary Paulson is currently speaking about the White House's foreclosure help plan, "Project Lifeline." All 90-day delinquent homeowners will be able to get their foreclosure suspended for 30 days so they can work out affordable loans with lenders. Six of the largest mortgage lenders will be participating in the plan.
All ten economic sectors are posting a gain of at least 1%. Financials (+2.5%) and materials (+2.0%) are providing leadership. Tech (+1.0%) is underperforming on a relative basis, although not by much.DJ30 +212.74 NASDAQ +25.64 SP500 +20.75 NASDAQ Dec/Adv/Vol 846/1933/696 mln NYSE Dec/Adv/Vol 701/2291/433 mln
10:55 am : Stocks hit fresh session highs. At current levels, this session's advance marks the largest daily gain this February.
One standout this session is Schering-Plough (SGP 21.88, +1.26), a leading producer of prescription and over-the-counter pharmaceuticals. The company reported fourth quarter earnings of $0.27 per share, higher than the $0.24 reading analysts expected.
Crude oil (+0.5% to $94.01) has rebounded into the green, which follows its strong gains yesterday.DJ30 +218.14 NASDAQ +26.06 SP500 +20.81 NASDAQ Dec/Adv/Vol 863/1844/514mln NYSE Dec/Adv/Vol 684/2228/315 mln
10:25 am : The major indices spike higher, with relative strength seen in the financial sector (+2.2%). All of the sector's industry groups are in the green. Residential REITs are posting the largest advance of 4.4%.
The Philadelphia Fed surveyed 38 economists regarding an economic stimulus package. Thirteen believe a stimulus package will have an effect beginning in the second quarter, 19 think an effect will begin in the third quarter. Two responses were for the fourth quarter, and the rest did not answer the question. The median forecast calls for a 0.3% boost in real GDP in 2008 and 0.1% in 2009.DJ30 +170.88 NASDAQ +18.56 SP500 +17.03 NASDAQ Dec/Adv/Vol 826/1775/323 mln NYSE Dec/Adv/Vol 748/2058/187 mln
10:00 am : The major indices extend their gains with all ten economic sectors in positive territory. Financials (+0.8%) are only performing in-line with the broader market despite the Buffett induced boost. Weakness in investment banks (-1.0%) is weighing on the sector.
Dow component General Motors (GM 27.40, +0.28) reported a fourth quarter profit of $0.08 per share, compared to the expected loss of $0.55. It is unclear whether these numbers are comparable due to a tax benefit. GM also announced that it will be offering buyout packages to all of its 74,000 UAW members. GM's stock has traded in a choppy manner, opening lower and then quickly bouncing into the green.DJ30 +95.60 NASDAQ +12.71 SP500 +10.36 NASDAQ Dec/Adv/Vol 733/1569/98 mln
09:35 am : Stock open modestly higher on news that Warren Buffett's Berkshire Hathaway (BRK.A) has made an offer to several flagging bond insurers.
Berkshire Hathaway sent an offer to reinsure the municipal bond holdings of Ambac (ABK), MBIA (MBI) and FGIC. Berkshire offered to take a liability of $800 billion, adding $5 billion of its resources. Berkshire pledged there would be no distribution or management fees taken for 10 years. Berkshire was turned down by one, and has not heard back from two. The bond insurers were given 30 days to find a better offer. Stocks responded positively to the news, although the offer does not include CDOs and other investment vehicles that have been hit the hardest by the subprime crisis.
In other financial news, six major mortgage lenders are going to announce a plan to help delinquent homeowners avoid foreclosure, according to reports.DJ30 +53.65 NASDAQ +12.04 SP500 +7.00
09:15 am : S&P futures vs fair value: +8.8. Nasdaq futures vs fair value: +12.8.
09:00 am : S&P futures vs fair value: +8.1. Nasdaq futures vs fair value: +11.8. S&P 500 futures are managing to hold most of their Buffett induced gains. Crude oil is down 1.2% to $92.48 per barrel after spiking higher yesterday. The sole report on the economic calendar is the January Treasury Budget, and it is not expected to be a market mover.
08:30 am : S&P futures vs fair value: +9.8. Nasdaq futures vs fair value: +16.3. S&P 500 futures are trading near their best levels, boosted by Buffett's offer to bond insurers. Buffet’s Berkshire Hathaway (BRK.A) offered to take over $800 billion in municipal bond liabilities from Ambac (ABK), MBIA (MBI) and FGIC. The offer only includes municipal bonds, not CDOs and other investment vehicles. One of the companies has turned him down, and he has not heard back from the other two.
08:05 am : S&P futures vs fair value: +6.6. Nasdaq futures vs fair value: +9.0. Futures suggest higher start, and get a boost on news that Warren Buffett has offered to reinsure municipal bond insureres, with the offer extending to Ambac (ABK), MBIA (MBI) and FGIC. General Motors reported earnings of $0.08 per share, compared to the expectation the company would post a loss of $0.55 per share. The stock was originally trading higher after its report, but has since fallen into negative territory due to some confusion regarding its earnings numbers. Six major mortgage lenders are on the cusp of announcing a plan that will help homeowners delinquent with payments avoid foreclosure, according to an AP report.
06:18 am : S&P futures vs fair value: -1.6. Nasdaq futures vs fair value: -2.0.
06:17 am : FTSE...5761.80...+54.10...+1%. DAX...6795.16...+51.62...+0.8%.
06:17 am : Nikkei...13021.96...+4.72...+0.0%. Hang Seng...22921.67...+305.56...+1.4%.
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