Market Update 080605 http://biz.yahoo.com/mu/update.html 4:15 pm : It was a big day in the stock market Thursday as a broad-based rally effort followed some pleasing same-store sales reports for May, encouraging initial claims data, and an M&A deal of size and significance in the telecom services sector.
The day was not without its trials. Oil prices spiked more than $5.00 to $127.79 per barrel, the 10-year note yield rose above 4.00%, and Standard & Poor's lowered its financial strength ratings on bond insurers Ambac Financial (ABK 2.62, +0.13) and MBIA (MBI 6.04, +0.41) to 'AA' from 'AAA'.
The negatives, though, barely registered as the bulls held sway over today's proceedings.
Wal-Mart (WMT 59.80, +2.12) and the retailers set the tone before the open when their same-store sales reports proved to be better than expected. Wal-Mart was the headline leader in that respect, posting a 3.9% increase, excluding fuel. The company had forecast same-store sales to be flat to up 2%.
For June Wal-Mart is expecting same-store sales to be up 2% to 4% due in part to an expected benefit from the spending of stimulus checks.
Wal-Mart's forecast set an optimistic mood for the market that was enhanced when the Department of Labor reported initial claims fell 18,000 in the week ended May 31 to 357,000. The latter was well below the consensus estimate of 375,000 and was certainly not a recession-like level of claims, which would typically be above 400,000.
All ten economic sectors participated in today's gains. The materials sector, which surged 3.4% after steel maker Nucor (NUE 80.54, +6.40) raised its second quarter guidance, led the way. It was followed by telecom services, which jumped 2.9% on the report that Verizon (VZ 38.96, +1.98) agreed to acquire Alltel for a total consideration of $28.1 billion. The acquisition will enable Verizon to supplant AT&T (T 39.46, +0.96) as the nation's largest mobile phone operator.
The indices did hit a small air pocket in afternoon trading when oil prices accelerated to the upside on the dollar's weakness and technical buying interest. Strikingly, oil touched $121.61 at its low today before closing NYMEX trading at $127.79 per barrel, up 4.5%.
At the same time oil prices were surging in the afternoon trade, Standard & Poor's announced it was cutting its ratings on Ambac Financial and MBIA. Those stocks, and the market, suffered a knee-jerk dip, but regrouped in quick fashion on the idea that the downgrades had already been accounted for in stock prices.
The market's resilience in the face of the downgrades spurred a renewed wave of buying interest that culminated with the indices closing at, or near, their best levels of the day.
Presumably, the market's behavior after the downgrades was viewed by some traders as an anecdotal signal that the financial sector may be close to a bottom, or at a point at least where it is believed its long-term upside potential outweighs its near-term downside risk.
Sentiment can change in a hurry these days, but clearly, the prevailing mood on Thursday was a positive one.
The next test of sentiment comes Friday with the release of the May employment report. DJ30 +213.97 NASDAQ +46.80 NQ100 +1.7% R2K +2.6% SP400 +2.3% SP500 +26.85 NASDAQ Dec/Adv/Vol 745/2141/2.24 bln NYSE Dec/Adv/Vol 669/2464/1.31 bln
3:30 pm : The market's resilience in the face of downgrades to bond insurers Ambac Financial (ABK 2.62, +0.13) and MBIA (MBI 6.03, +0.40) eventually triggered a new wave of buying interest that carried each of the major indices to new session highs.
It appears that traders are viewing the lack of a notable sell-off following the downgrades as a sign that this news was already accounted for. Accordingly, some may be even viewing it as an anecdotal signal that the financial sector is close to a bottom or, at least, at a point where its upside potential outweighs the downside risk.
Sentiment is subject to quick change these days, but today, the prevailing attitude after some pleasing same-store sales reports and initial claims data has been positive.DJ30 +184.74 NASDAQ +40.39 SP500 +22.85 NASDAQ Dec/Adv/Vol 805/2056/1.80 bln NYSE Dec/Adv/Vol 771/2339/898 bln
3:00 pm : Stocks have recovered from a bout of selling pressure tied to a spike in oil prices and a downgrade of bond insurers Ambac Financial (ABK 2.46, -0.03) and MBIA (MBI 5.81, +0.18) at Standard & Poor's.
The indices, though, remain shy of their best levels as the jump in oil prices is providing some interference in the bid to get back to the best levels of the day.
Separately, the understanding that the market held its own following the downgrade of the bond insurers suggests such an action had been expected. In fact, MBIA is trading higher now while Ambac is almost unchanged.DJ30 +150.87 NASDAQ +35.71 SP500 +19.52 NASDAQ Dec/Adv/Vol 888/1955/1.62 bln NYSE Dec/Adv/Vol 896/2172/806 mln
2:30 pm : Stocks have fallen off their highs as oil has shifted in to high gear, passing not only $125 in the past hour, but also $126 and $127. It is currently on the $128 threshold, up 4.8% today.
The pickup in buying interest in the oil pits is more than a dollar-related move. Presumably, there is a technical trade at work as the commodity had pulled back roughly 10% from its high entering the session. Recognizing that it found support has emboldened some traders to think the recent pullback is simply a normal correction within a bull market (a 10% move is defined as a correction).
In any event, this resurgence in oil prices has taken some steam out of today's stock rally. The consumer discretionary sector, which is sensitive to moves in energy prices, is up 0.4% for the session but had been up 1.3% at its high today.
Separately, in the past half-hour S&P also announced that it has lowered the financial strength ratings for Ambac (ABK 2.31, -0.18) and MBIA (MBI 5.49, -0.14) to AA from AAA. This action has also taken some steam out of the market.DJ30 +114.96 NASDAQ +27.37 SP500 +14.71 NASDAQ Dec/Adv/Vol 834/2004/1.49 bln NYSE Dec/Adv/Vol 797/2287/728 mln
2:00 pm : Buying interest seen earlier has faded, yet sellers haven't exerted too much influence so far. We would note that the indices have backed off their highs as oil prices, up 2.8% today, have recently pushed back above $125 per barrel.
The move in oil has been attributed in part to the dollar's weakness, which followed on the heels of some hawkish-sounding talk from ECB President Trichet who said it is a possibility (but not a certainty) the ECB could raise rates next month to fight inflation pressures.
Heading in to today's session, oil prices had fallen nearly $13, or 9.5%, from the high of $135.09 they hit on May 22. DJ30 +155.35 NASDAQ +36.35 SP500 +19.31 NASDAQ Dec/Adv/Vol 762/2061/1.35 bln NYSE Dec/Adv/Vol 721/2348/658 mln
1:30 pm : The market is off its highs, but still holds the lion's share of today's advance.
As noted in previous posts, all ten economic sectors are showing a gain, so clearly there are a lot of industry groups trading higher. Four groups, however, are notable laggards, registering declines in excess of 1.0%. They include the homebuilding, photo products, auto parts and advertising groups in the S&P 500.
The homebuilding group, down 3.9%, is the biggest laggard out there. It's still struggling to overcome some poor results and commentary heard earlier in the week from Toll Brothers (TOL 20.05, -0.97) and Hovnanian (HOV 7.32, -0.18). For the week, the S&P homebuilding group is down 4.4%.DJ30 +165.60 NASDAQ +37.02 SP500 +19.45 NASDAQ Dec/Adv/Vol 745/2065/1.24 bln NYSE Dec/Adv/Vol 698/2355/608 mln
1:00 pm : The major indices continue to run with some heady gains built on light-to-moderate volume. Retail, energy, steel, telecom, financial and airline stocks have been among the best performers today.
The move in airlines has been notable given that oil prices are up today (+1.6% to $124.17/bbl). Lehman Bros., however, has provided offsetting support with upgrades to UAL Corp. (UAUA 10.20, +1.06) and Northwest (NWA 8.06, +1.05) to Overweight from Equal Weight and a contention that the industry's upside potential is substantial in light of the restructuring that is taking place at an accelerated rate.
On a related note, Continental Airlines (CAL 15.39, +0.89) was the latest airline to report that it is cutting capacity and staff as it works to combat the adverse effects of high jet fuel costs.
The AMEX Airline Index is up 6.9% today.DJ30 +182.22 NASDAQ +38.07 SP500 +20.24 NASDAQ Dec/Adv/Vol 735/2049/1.12 bln NYSE Dec/Adv/Vol 719/2308/546 mln
12:30 pm : Ater a volley of buying interest earlier this morning, the market had stabilized at noticeably higher levels. In the past ten minutes, though, it has broken out to new session highs.
At its current level, the S&P 500 is up 1.4% for the day. That's a healthy move to be sure, but despite the move, the S&P 500 is still down slightly for the week.
The breakeven mark is 1400.38. The 1400 level has been an area of resistance in past moves higher this year.DJ30 +170.25 NASDAQ +36.57 SP500 +19.53 NASDAQ Dec/Adv/Vol 778/1957/977 mln NYSE Dec/Adv/Vol 766/2237/480 mln
12:00 pm : It has been a good day in the stock market thus far. All ten economic sectors are sporting a gain and six sectors specifically are up more than 1.0%.
The catalysts for the advance have been threefold. First, retailers, led by Wal-Mart (WMT 59.56, +1.88), reported better-than-expected same-store sales for May. Secondly, the weekly initial claims data was better than expected and certainly not recession-like, as claims fell 18,000 to 357,000. And third, there has been an enthusiastic response to news that Verizon (VZ 39.08, +2.10) has agreed to acquire Alltel for $28.1 billion, which includes the assumption of debt.
The latter news has vaulted the telecom services sector (+2.5%) to the top of the best-performers list. It has been followed closely by the materials sector (+2.3%), which is rallying after steel maker Nucor (NUE 79.45, +5.31) raised its guidance for the second quarter.
Strikingly, the financial sector (+1.5%) is also acting better today in the wake of some supportive comments out of Deutsche Bank, which thinks the shares of Lehman Bros. (LEH 32.65, +1.25) already reflect worst-case scenarios on the basis that liquidity is not a major issue in its view. The translation is that Deutsche Bank doesn't feel Lehman Bros. is another Bear Stearns.
Leadership from the influential financial sector has been a sustaining factor for the broader market, which has traded at current levels for a good portion of the morning trade.
The retailers have also played a big part in today's session, as evidenced by the 1.8% gain in the S&P 500 Retailing Index.
Wal-Mart, which reported a 3.9% increase in May same-store sales, excluding fuel, sits atop the Dow in today's session; its stock is approaching price levels that haven't been seen since April 2004. Wal-Mart easily eclipsed the market's same-store sales expectations and its own forecast for same-store sales to be flat to up 2%. It also provided an upbeat 2% to 4% same-store sales growth projection for June.
DJ30 +131.90 NASDAQ +31.42 SP500 +15.35 NASDAQ Dec/Adv/Vol 789/1924/871 mln NYSE Dec/Adv/Vol 783/2188/424 mln
11:35 am : The major averages are still well in the black. Of the major averages, the Nasdaq is leading the pack, with a gain of 1.2%.
Sector leaders include telecom (2.3%), materials (1.8%) and energy (1.4%).
Meanwhile, crude oil is trading higher by $1.20 at $123.50, which is off its session high of $124.39.DJ30 +125.63 NASDAQ +29.64 SP500 +14.07 NASDAQ Dec/Adv/Vol 144.35/588.91/742.04 NYSE Dec/Adv/Vol 781/2145/357.34
11:00 am : The major indices continue to sport solid gains, underpinned by a spate of favorable developments.
First, same-store sales for May came in better than expected. Secondly, the weekly initial claims data was better than expected. And third, there was actually an M&A deal of some size and significance today.
Verizon (VZ 39.10, +2.12) is going to buy privately-held Alltel for $28.1 billion. In the process, it will supplant AT&T (T 39.38, +0.88) as the biggest mobile phone operator in the country.
Verizon is the pacesetter for the Dow. Conversely, Caterpillar (CAT 81.94, -0.52) is the biggest drag today as it responds to a UBS downgrade to Sell from Neutral.DJ30 +121.97 NASDAQ +31.22 SP500 +14.61 NASDAQ Dec/Adv/Vol 661/1918/611 mln NYSE Dec/Adv/Vol 691/2187/281 mln
10:30 am : Market bulls have been in command so far this session as the indices have pressed on to new session highs in the past half hour.
The latest move followed a dip in the averages that occurred when headlines hit the wires from a speech from Fed Vice Chairman Kohn who acknowledged the Fed has strongly urged banks to raise capital and that banks could face deteriorating loan quality.
Although the headlines didn't carry positive connotations, they also weren't anything the market didn't already known based on its own assessment of matters and previous commentary from other Fed officials. Accordingly, the market quickly regrouped from the aforementioned dip and is sporting solid gains in midmorning trading.
All 10 economic sectors are in positive territory, with six sectors posting gains in excess of 1.0%. Telecom services, +2.7%, is the best-performing.DJ30 +111.54 NASDAQ +31.54 SP500 +14.13 NASDAQ Dec/Adv/Vol 622/1812/378 mln NYSE Dec/Adv/Vol 782/1954/168 mln
10:00 am : After a deliberate start, the market has kicked in to a higher gear with each of the major indices getting a notable boost as buyers pick up their efforts.
The retail sector is exhibiting early leadership after a round of better-than-expected same-store sales reports for May. Wal-Mart (WMT 59.60, +1.92), which posted a 3.9% increase, excluding fuel, is a clear winner in this respect as its stock is challenging a level not seen since April 2004.
Leadership, overall, is fairly good at this point with the financial, energy, materials and telecom services sectors all up 1.0% or better. The latter sector was boosted on news that Verizon (VZ 37.93, +0.95) will acquire Alltel for $28.1 billion, which includes the assumption of Alltel's debt.DJ30 +78.00 NASDAQ +20.10 SP500 +9.79 NASDAQ Dec/Adv/Vol 777/1436/181 mln NYSE Dec/Adv 978/1546
09:40 am : The major indices got off to a positive start as presaged by the futures market. The opening gains, however, have been tempered as buyers haven't shown a great deal of conviction.
A 10-year note yield above 4.00% and a rebound in oil prices (+$1.80 to $124.10) have been restraining factors, along with remarks from European Central Bank President Trichet who floated the possibility that the ECB might hike rates as early as next month to counter inflation pressures.DJ30 +32.24 NASDAQ +6.35 SP500 +4.90
09:15 am : S&P futures vs fair value: +3.8. Nasdaq futures vs fair value: +3.5. The futures market has backed off its best levels of the morning as the yield on the 10-year note has moved back above 4.00% (now 4.02%). Still, the indication at this point is that the major indices will start the session on a higher note.
09:01 am : S&P futures vs fair value: +4.7. Nasdaq futures vs fair value: +5.0.
08:42 am : S&P futures vs fair value: +9.0. Nasdaq futures vs fair value: +10.0. The futures market strengthened in the wake of the weekly initial claims report, which showed an 18K drop to 357K (consensus 375K). The 4-wk moving average, meanwhile, dipped tp 368,500 from 371,250. The level of claims simply isn't at recession-like levels. This realization, combined with the generally pleasing same-store sales reports, has the market on track for a positive open.
08:08 am : S&P futures vs fair value: +4.9. Nasdaq futures vs fair value: +7.2. The futures market is signaling a higher open as better-than-expected same-store sales reports from Wal-Mart and Costco are providing support for the positive bias. Separately, both the Bank of England and European Central Bank voted to keep their key lending rates unchanged.
06:19 am : S&P futures vs fair value: +3.5. Nasdaq futures vs fair value: +3.3.
06:19 am : FTSE...5968.50...-1.60...-0.0%. DAX...6980.40...+14.97...+0.2%.
06:19 am : Nikkei...14341.12...-94.45...-0.7%. Hang Seng...24255.29...+132.04...+0.6%.
My posting is for my own entertainment, do your own DD before pushing your buy/call button
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