Market Update 080225 http://biz.yahoo.com/mu/update.html 4:25 pm : The new week began like the prior week ended, which is to say news regarding the bond insurers sparked another afternoon rally effort that led to substantive gains for the major indices.
Briefly, news crossed the wires around 2:30 p.m. ET that Standard & Poor's took MBIA (MBI 14.58, +2.40) off CreditWatch and assigned a negative outlook. Additionally, the ratings agency affirmed the 'AAA' financial strength rating of Ambac Financial (ABK 12.41, +1.70), yet said the company remains on CreditWatch with negative implications.
The decision by Standard & Poor's not to downgrade the ratings at this time helped mitigate some of the worst fears about the potential for a wave of counter party-related write-downs at financial companies.
This development still doesn't qualify as an all-clear signal regarding the issues facing the bond insurers, but it is certainly the type of news that creates a sense that things are headed in the right direction. Fittingly, the 10-year Treasury note sold off in response while the financial sector, which was down as much as 1.8% earlier in the day, led the rally effort and ended up 1.2% for the session.
Prior to the late-day fireworks, the stock market was trading close to unchanged, with participants lacking any real conviction on either the buy side or the sell side despite some M&A activity that included a $2 billion offer from Electronic Arts (ERTS 47.14, -2.60) to acquire Take-Two Interactive (TTWO 26.89, +9.53) and a $2.4 billion private equity buyout of Getty Images (GYI 31.67, +7.22).
Worries about deteriorating earnings prospects for the financial sector that were touched off by estimate cuts and downgrades for several companies in the space cast a pall on the proceedings. Goldman Sachs (GS 177.36, -0.35) was a focal point in this respect after The Wall Street Journal published a cautious-sounding article on its diminished earnings power.
Speaking of diminished earnings power, home improvement retailer Lowe's (LOW 24.50, +0.91) reported a 33% decline in fourth quarter net earnings and provided a fiscal 2008 EPS outlook of $1.50 to $1.58 that marks a 17% decline at the midpoint from fiscal 2007.
The stock of Lowe's held up well in Monday's trading, though, on the notion that the worst of its earnings difficulties has already been priced into the stock. Separately, its stock also garnered support from a better than expected existing home sales report for January.
Shortly after the start of trading it was reported that existing home sales dipped just 0.4% to an annual rate of 4.89 million, a 9-year low. Economists were expecting a 1.8% decline.
The inventory of unsold homes rose to 10.3 months versus 9.7 months in December, which is a clear sign that the housing market is still quite weak. Nevertheless, the "upside surprise" in January provided a modicum of hope that the market is beginning to bottom.
The latter view gave the broader market a bit of a boost for a time, but the bounce was short-lived and it looked as if the indices might limp into the close. Then, the bond insurer news hit and the market's mood was again lifted.
Today's gains marked the best percentage gains for the Dow and S&P this month.DJ30 +189.20 NASDAQ +24.13 SP500 +18.69 NASDAQ Dec/Adv/Vol 984/1998/2.41 bln NYSE Dec/Adv/Vol 766/2389/1.47 bln
3:30 pm : All 10 economic sectors remain in the green and advancing issues outpace decliners by 2-to-1 on the NYSE. Stocks had pulled off their earlier highs, but the market is trending back to higher ground in choppy action.
Materials (+1.9%) is the only sector to achieve a gain year-to-date. The sector is up just 0.6% in 2008.
Monsanto (MON 120.90, +4.23) and Alcoa (AA 38.64, +2.09) are providing materials with leadership. DJ30 +145.88 NASDAQ +18.02 SP500 +13.59 NASDAQ Dec/Adv/Vol 1069/1861/1.75 bln NYSE Dec/Adv/Vol 874/2249/1.16 bln
3:00 pm : The stock market spiked on news that bond insurers MBIA (MBI 13.82, +1.64) and Ambac (ABK 11.44, +0.73) had their AAA credit ratings reaffirmed by Standard & Poor's. MBIA remains on the rating agency's negative watch list, but is no longer under review for a possible downgrade at this time. Ambac, however, remains under review for a possible downgrade.
The announcement prompted a rush of buying and short-covering trades, but some of the initial exuberance has faded as the market sees the challenges surrounding the bond insurers have not yet abated. Still, the development creates a sense that things are moving in the right direction.
Stocks are off their session highs, but are holding on to gains.DJ30 +126.18 NASDAQ +12.18 SP500 +9.36 NASDAQ Dec/Adv/Vol 1165/1747/1.57 bln NYSE Dec/Adv/Vol 994/2105/1.02 bln
2:30 pm : MBIA (MBI 13.74, 1.56) has been removed from S&P's credit watch listing. The stock market is having a rapid spike to its best levels of the session. Ambac (ABK 11.90, +1.19) has had its AAA rating reiterated, but it remains on S&P's negative watch list.
All ten sectors are in positive territory. The financial sector (+0.5%) is up from negative territory.DJ30 +147.92 NASDAQ +16.17 SP500 +14.01 NASDAQ Dec/Adv/Vol 1168/1735/1.38 bln NYSE Dec/Adv/Vol 957/2144/875 mln
2:00 pm : After moving well into positive territory, the tech sector (-0.2%) is back in negative ground. Apple (AAPL 117.31, -2.15) is trading 1.8% lower and has extended its year-to-date loss to 40%. Google (GOOG 492.50, -15.30) is also having an off day. Its shares are more than 3% lower.
Financials (-1.3%) remain today's worst performer. The sector, however, remains off its worst level of the day.
The market continues to flutter along the unchanged mark, oscillating between positive and negative territory.DJ30 +47.78 NASDAQ -0.21 SP500 +2.27 NASDAQ Dec/Adv/Vol 1423/1451/1.24 bln NYSE Dec/Adv/Vol 1360/1697/758 mln
1:30 pm : Stocks remain range bound, hovering near the unchanged mark, with the Nasdaq in negative territory. Energy remains the day's primary leader, up 1.4%.
The National Association for Business Economics reported that the U.S. will likely skirt a recession, but growth will slow to an anemic pace for the first half of the year, according to Reuters. 55% of the group's survey base expects slow growth, and the remainder believes the U.S. will enter a recession by year's end.DJ30 +28.16 NASDAQ -2.49 SP500 +0.25 NASDAQ Dec/Adv/Vol 1439/1422/1.14 bln NYSE Dec/Adv/Vol 1394/1658/695 mln
1:00 pm : The market remains modestly higher, up just 0.2%. Some of the largest issues are treading in neutral waters. The S&P 100 is unchanged and the Nasdaq 100 is up 0.1%.
The neutral sentiment is reflected by the S&P 500. Advancers and decliners are trading at nearly 1-to-1.
Telecom has had a nice rebound. The sector was down almost 1%, but is now up 0.4%.DJ30 +33.21 NASDAQ +4.27 SP500 +1.87 NASDAQ Dec/Adv/Vol 1368/1477/1.03 bln NYSE Dec/Adv/Vol 1323/1717/628 mln
12:30 pm : The market briefly fell back into negative territory, led by the financial sector (-1.6%), but is now flat. Tech has seen a reversal. The sector had been trading as much as 0.7% for the better, but is now down 0.4%.
Of the Dow's members, 20 stocks are trading higher, while 10 are trading lower.
DJ30 +11.64 NASDAQ -2.05 SP500 -0.68 NASDAQ Dec/Adv/Vol 1459/1368/947 mln NYSE Dec/Adv/Vol 1449/1578/573 mln
12:00 pm : The major indices rebounded into positive territory, lifted by a better-than-expected existing home sales reading, but are now only posting slight gains at midday as selling interest in financials picks up. It has been a busy day of trading, as there have been a large number of corporate news items.
Existing home sales for January came in at an annualized rate of 4.89 million, which marks a decline of 0.4% month-over-month. Economists expected 4.80 million sales, a decrease of 1.8% month-over-month. The median price of an existing home fell to $201,100, a 4.6% decrease from last year.
Although existing home sales remain weak, traders are encouraged by the fact that sales are declining at a slower pace, indicating a bottom may soon hit.
Financials (-1.2%) have been in the spotlight in Monday's trade, and are currently the main laggards. Goldman Sachs cut its first quarter earnings estimates on several investment banks & brokerages (-1.1%), according to Bloomberg.com. The firm also downgraded Fannie Mae (FNM 28.15, -0.57), Freddie Mac (FRE 26.09, -0.52) and Washington Mutual (WM 16.49, -0.41) to Sell from Neutral.
On a related note, Oppenheimer analyst Meredith Whitney cut her 2008 earnings estimates on Citigroup (C 24.64, -0.48) to $0.75 per share from $2.70.
Helping to offset some selling pressure in financials, is continued speculation that a bailout plan for Ambac (ABK 10.87, +0.16) may be announced as early as today, although Reuters reports the deal will likely be announced early next week according to a person briefed on the matter. Market participants hope a bailout for the struggling bond insurer would ensure its AAA rating remains intact.
Biotechnology company Genentech (DNA 78.21, +6.61) is making its largest advance since April 2005 on news that its drug Avastin has received accelerated approval to treat breast cancer from the FDA. Its gain, however, is not having an effect on the S&P 500, as it is not included in the index.
In earnings news, home improvement retailer Lowe's (LOW 24.74, +1.15) reported fourth quarter earnings that topped expectations, but issued guidance that fell short of estimates. Its stock traded lower in the early-going, but rebounded into the green after the better than expected existing home sales report.
There are two merger and acquisition deals of note. Video game maker and publisher Electronic Arts (ERTS 47.63, -2.11) offered $2 billion, or $26 per share, in an unsolicited bid for Take-Two Interactive (TTWO 26.43, +9.07). The offer represents a 50% premium over Take-Two's closing price on Friday. Take-Two already rejected the deal, and reports indicate that EA will take the offer straight to shareholders. Take-Two has surged 52% on the offer, its largest one-day percentage gain.
Getty Images announced that it has entered a definite agreement to be acquired by a private equity firm at a deal valued at $2.4 billion. The $34 per share each Getty shareholder will receive represents a 55% premium over Getty's closing price on Jan. 18, when the company announced it was exploring strategic alternatives.
Credit card company Visa is in the spotlight after announcing its IPO will raise up to $19 billion. According to reports the offering will be the largest in United States history. DJ30 +32.40 NASDAQ +2.95 NQ100 +0.1% R2K +0.4% SP400 +0.5% SP500 +0.29 NASDAQ Dec/Adv/Vol 1324/1473/841 mln NYSE Dec/Adv/Vol 1353/1662/515 mln
11:30 am : The major indices dip off their best levels as the financial sector falls back into the red. The stock market is still holding onto a healthy-sized gain.
Credit card processing company Visa is garnering a large portion of the market's attention this morning. The company said its IPO could raise up to $19 billion, which would be the largest in U.S. history according to reports. It expects to offer 406 million shares to be priced between $37 and $42 each. The IPO is likely to be on traders' radar as they hope it will emulate MasterCard's (MA 200.65, -2.85) 2006 initial offering. Shares of MasterCard have soared 413% to current levels. DJ30 +73.51 NASDAQ +11.79 SP500 +6.41 NASDAQ Dec/Adv/Vol 1153/1616/726 mln NYSE Dec/Adv/Vol 1066/1918/444 mln
11:00 am : Buyers continue to show interest as they drive the major indices to fresh highs. Financials (flat) are playing a large role in the recent surge, as the sector rebounds to the unchanged mark after being down as much as 1.8%.
Financial companies have been reporting dismal earnings. Of the 86 financial companies that have reported earnings, 58% fell short of analysts' expectations, according to Thomson Financial. The sector earnings growth rate stands at -109%. If it was excluded from the S&P 500, earnings would grow by 12.4% instead of the current expected decline of 21.0%. Month-to-date the sector is down 6.9% and year-to-date it is down 7.4%.DJ30 +101.84 NASDAQ +15.69 SP500 +8.65 NASDAQ Dec/Adv/Vol 986/1694/603 mln NYSE Dec/Adv/Vol 999/1964/361 mln
10:35 am : The major indices rebound into the green, hitting their best levels. Participation is broad-based, although the heavily-weighted financial sector (-0.7%) continues to be a laggard. Of the eight sectors trending higher, energy is leading the way with a 0.9% advance.
Biotechnology company Genentech (DNA 77.91, +6.31) is making its largest advance since April 2005 on news that its drug Avastin has received accelerated approval to treat breast cancer from the FDA. Its gain, however, is not having an effect on the S&P 500, as it is not included in the index.DJ30 +69.11 NASDAQ +18.66 SP500 +7.00 NASDAQ Dec/Adv/Vol 947/1686/451 mln NYSE Dec/Adv/Vol 1052/1821/271 mln
10:05 am : Stocks slip into the red, led by financials (-1.5%). Stocks then recover a bit, but remain in negative territory, after a modestly better than expected housing-related economic release.
Just hitting the news wires, existing home sales for January came in at an annualized rate of 4.89 million, which marks a decline of 0.4% month-over-month. Economists expected 4.80 million sales, a decrease of 1.8% month-over-month. The median price of an existing home fell to $201,100, a 4.6% decrease from last year.
There are two merger and acquisition deals of note. Video game maker and publisher Electronic Arts (ERTS 48.44, -1.30) offered $2 billion, or $26 per share, in an unsolicited bid for Take-Two Interactive (TTWO 25.68, +8.32). The offer represents a 50% premium over Take-Two's closing price on Friday. Take-Two already rejected the deal, and reports indicate that EA will take the offer straight to shareholders. Take-Two has surged 48% on the offer, its largest one-day percentage gain.
Getty Images announced that it has entered a definite agreement to be acquired by a private equity firm at a deal valued at $2.4 billion. The $34 per share each Getty shareholder will receive represents a 55% premium over Getty's closing price on Jan. 18, when the company announced it was exploring strategic alternatives.DJ30 -5.95 NASDAQ -3.70 SP500 -3.24 NASDAQ Dec/Adv/Vol 1328/1135/185 mln NYSE Dec/Adv/Vol 1634/1132/123 mln
09:35 am : The stock market opens on a flat note on a busy morning despite a lack of pre-market economic releases.
There is continued speculation that there will be a bailout plan for Ambac (ABK) announced as early as today, which is helping to keep sellers at bay. The hope is the plan would ensure Ambac's AAA rating will stay intact.
In earnings news, home improvement retailer Lowe's (LOW) is under selling pressure after issuing earnings guidance that fell short of expectations. It did, however, report fourth quarter earnings that topped expectations.
Goldman Sachs reduced its first quarter earnings estimates on several investment banks & brokerages, according to Bloomberg.com.DJ30 +26.94 NASDAQ +2.50 SP500 +2.82
09:16 am : S&P futures vs fair value: flat. Nasdaq futures vs fair value: -0.8.
09:00 am : S&P futures vs fair value: +0.2. Nasdaq futures vs fair value: -1.5. Stock futures fall to their worst levels and now indicate a flat to slightly lower start to the trading day. Credit card processor Visa may have the largest IPO in history, at as much as $17 billion, according to Bloomberg.com. Shares are expected to be priced between $37 and $42.
08:30 am : S&P futures vs fair value: +2.2. Nasdaq futures vs fair value: +0.2. A slightly higher to flat open is expected. The only item on the economic calender is the January Existing Home sales at 10:00 ET. Economists expect a reading of 4.80 Million, a decrease of 1.8% month over month. Crude oil is trading slightly higher, up $0.15 to $98.96 per barrel.
08:00 am : S&P futures vs fair value: +2.3. Nasdaq futures vs fair value: +1.5. Futures suggest a slightly higher start, but are off their best levels. Continued speculation that there will be a bailout plan for Ambac (ABK) is helping to keep the sellers at bay. In earnings news, home improvement retailer Lowe's (LOW) topped its earnings expectations, but issued guidance that was below current estimates. There is a merger & acquisition deal of note. Last Friday, video game developer and publisher Electronic Arts (ERTS) offered $26 per share to acquire Take-Two (TTWO) in an all cash deal. Take-Two rejected the deal, and reports indicate EA is going straight to Take-Two's shareholders. In overseas trading, the European bourses are posting a gain of at least 1% and Japan's Nikkei rose more than 3%.
06:22 am : S&P futures vs fair value: +6.3. Nasdaq futures vs fair value: +7.8.
06:21 am : FTSE...5997.40...+108.90...+1.9%. DAX...6904.56...+98.27...+1.4%.
06:21 am : Nikkei...13914.57...+414.11...+3.1%. Hang Seng...23269.14...-35.90...-0.2%.
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