Weekly Recap - Week ending 15-Aug-08 http://finance.yahoo.com/marketupdate/update After gaining 8.0% from its July 15 low entering the week, it wasn't a stretch to think the market was due for what technical analysts refer to as a consolidation period. That's a fancy way of saying the market was probably due to go sideways.
Setting the market parlance aside, sideways trading is basically what we got this week when it was all said and done. The journey along the way, though, was anything but uneventful.
There were plenty of compelling story lines, the most prominent of which was the continued strength in the dollar and the continued weakness in commodities. There is a correlation factor between the two since commodities are dollar-denominated. When the dollar strengthens, they become less affordable for foreign buyers, which reduces demand.
However, the weakness in commodity prices, and particularly oil, is more than just a currency trade. In part, it reflects burgeoning concerns about a global economic slowdown. Those concerns were fed by weak data out of Europe and Asia.
The notion that the U.S. is further along in the slowdown process than foreign economies enabled it to outperform many other major markets on the week. To wit, the S&P 500 gained 0.1% versus a 0.6% decline for England's FTSE 100, a 1.8% decline for Germany's DAX Index, a 0.9% decline for France's CAC 40 Index, a 1.1% decline for Japan's Nikkei Average and a 3.3% decline for Hong Kong's Hang Seng Index.
This relative view of things gave the dollar another nice boost since it is presumed at this juncture that foreign central banks will be quicker to cut rates than the Fed will be to tighten rates.
A narrowing interest rate differential is considered to be supportive for the depressed greenback. The dollar index, which measures the dollar's performance against a basket of 6 major currencies, surged 1.8% this week. Since the July 15 low for the S&P 500, the dollar index is up 7.4%.
The economic news this week was mixed.
Industrial production rose 0.2% in July, but it was the trade deficit for June that brought particularly good news in terms of GDP calculations. It was reported that the real trade deficit, which is price adjusted, improved to $39.1 billion from $43.1 billion in May. The reduced deficit should lead to an upward revision for second quarter GDP and implies trade will once again provide a strong boost to third quarter GDP.
The encouraging trade report was offset to an extent by a disappointing report that retail sales declined 0.1% in July. Excluding autos, they were up 0.4%.
Overall, the retail sales report was on the soft side and it piqued concerns about the pace of discretionary spending. The weekly initial claims report did the same, as the 4-week moving average increased 19K to 440,500.
Separately, the consumer price index for July didn't bring good inflation news. Both headline and core-CPI, which excludes food and energy, were higher than expected. On a year-over-year basis, total CPI was up 5.6% -- the highest rate of increase since 1991 -- while core CPI was up 2.5%, which is a level outside the Fed's comfort zone.
The market, though, managed to digest the CPI report rather well on the presumption that lower commodity prices and a stronger dollar will lead to improved inflation readings in coming months. The Treasury market seemed to be of the same volition as the yield on the 10-year note dropped nine basis points to 3.84%. The bulk of that move came in the final two sessions of the week.
Some pundits suggested, however, that the Treasury market's strength reflected more of a flight-to-safety bid than anything else.
Interestingly, there did seem to be a disconnect between the stock and bond markets as it relates to the economic outlook. The latter was underpinned by slowdown concerns while the former was led by growth-oriented areas like the consumer discretionary, telecom and technology sectors.
Retailers were a notable pocket of strength despite persistent musings about the consumer's certain demise in the face of high food and gas prices, falling home values, rising unemployment and tighter credit conditions. For the week, the S&P Retailing Index jumped 4.8%, bringing its gain since the July 15 low to 28%!
Several retailers, including Wal-Mart (WMT), Kohl's (KSS), J.C. Penney (JCP) and Nordstrom (JWN), posted better-than-expected second quarter earnings results, yet most expressed some caution about the outlook for the third quarter and/or full year.
Airlines also scored some big gains in response to the drop in oil prices, although the broader transportation average dipped 1.2% for the week in a move that many thought tracked the economic concerns being interpreted from the drop in commodity prices.
Oil prices traded as low as $111.34 per barrel before settling the week at $113.77. The settlement price marked a 1.2% drop from the prior week. Oil prices are now down 23% from the high they hit July 11.
The pullback in oil continued to be a drag on the energy sector, which slipped 0.8% this week.
It was the financial sector, though, that was this week's worst sector performer. It fell 2.8% on festering concerns about credit market conditions and low levels of business activity that saw several brokerage firms slash earnings estimates for leading investment bank Goldman Sachs (GS). Additionally, a warning from JPMorgan Chase (JPM) that it has seen a substantial deterioration in trading conditions since the end of the second quarter acted as another trigger for the selling interest.
My posting is for my own entertainment, do your own DD before pushing your buy/call button
Market Update 080818 http://biz.yahoo.com/mu/update.html 4:30 pm : News flow was relatively light Monday, but participants still found an excuse to take money off the table. Their selling efforts pushed the major indices substantially lower; each finished a bit above their session lows.
The early morning mood had been generally upbeat, but as oil prices reversed declines, stocks were sent lower. Stocks then stayed there for the rest of the session as focus returned to the troubles of government-sponsored enterprises Fannie Mae (FNM 6.15, -1.76) and Freddie Mac (FRE 4.39, -1.46), even though crude settled lower below the $113 per barrel mark. The two were spotlighted in a weekend Barron's article that suggests the Treasury may need to recapitalize the duo sooner rather than later. Trading volume climbed in the two, but the increase was not reflected in the broader market.
The lack of volume in the broader market suggests there is no real fear in the market for this matter. Instead, it provided an excuse for participants to take profits. Despite the session's decline the stock market is still up 6.5% and the financial sector is up 22% since the July 15 low. The financial sector finished the session 3.6% lower.
Other news stories were given secondary status. In the tech sector (-1.3%), video game maker Electronic Arts (ERTS 47.76, -0.48) is letting its offer for Take-Two Interactive (TTWO 23.75, -1.09) expire tonight. However, Electronic Arts will join in Take-Two's review of strategic alternatives.
Home improvement retailer Lowe's (LOW 24.54, +0.04) posted better-than-expected earnings per share results for its latest quarter, but issued a mixed outlook.
Meanwhile, mining outfit BHP Billiton (BHP 65.48, +0.26) posted its sixth record full-year profit and offered an upbeat outlook, according to an article in this morning's edition of The Wall Street Journal.
Still, without any clear leader and selling abounding, only one sector was able to finish the session with any sort of gain: the defensive-orientated utilities sector (+0.1%). Utilities hit a 52-week low earlier this month and are up little more than 2% since. DJ30 -180.51 NASDAQ -35.54 NQ100 -1.3% R2K -1.5% SP400 -1.3% SP500 -19.60 NASDAQ Adv/Vol/Dec 880/1.68 bln/1935 NYSE Adv/Vol/Dec 888/984 mln/2228
3:35 pm : The major indices have turned upward slightly as the closing bell approaches. Although, losses remain heavy as seven of the economic sectors sport losses in excess of 1%.
Traders were following oil prices earlier in the session, which took the indices into the red. But profit-takers soon piled on to exacerbate losses.
Crude shed roughly 0.5% this session to trade near $113 per barrel.DJ30 -199.16 NASDAQ -40.94 SP500 -20.32 NASDAQ Adv/Vol/Dec 801/1.38 bln/1994 NYSE Adv/Vol/Dec 832/715 mln/2286
3:05 pm : Losses in the utility sector have eased. It is now trading at the unchanged mark. The Dow Jones Utility Average, however, is trading with a gain of 0.3%, thanks partly to strength in companies like Consolidated Edison (ED 41.25, +0.49) that hold regulated utilities.
Though stocks remain out of favor, Treasuries are not garnering considerable attention. The benchmark 10-year Note is only up 7 ticks despite heavy losses in stocks. DJ30 -183.03 NASDAQ -40.88 SP500 -19.22 NASDAQ Adv/Vol/Dec 782/1.21 bln/2003 NYSE Adv/Vol/Dec 844/634 mln/2245
2:35 pm : The major indices continue to trend lower as losses across all ten of the economic sectors mount. Aside from the first few minutes of trading, the tone has been pessimistic for virtually the entire session.
Financials remain the worst offenders; the sector is now down 3.6%.
Large-cap banks like Bank of America (BAC 29.36, -1.34) and JPMorgan Chase (JPM 36.84, -1.23) are down markedly and also weighing on the Dow Jones Industrial Average, making the Dow the worst performer of the three major indices.DJ30 -199.89 NASDAQ -40.85 SP500 -20.41 NASDAQ Adv/Vol/Dec 786/1.11 b;m/1974 NYSE Adv/Vol/Dec 837/585 mln/2236
2:00 pm : The S&P 500 is trading just off its worst level of the session, currently down 1.5%, as all ten of the major economic sectors fall to session lows. Earlier there were a few pockets of strength, but now each sector is showing a loss.DJ30 -197.45 NASDAQ -37.27 SP500 -18.60 NASDAQ Adv/Vol/Dec 899/999 mln/1863 NYSE Adv/Vol/Dec 959/522 mln/2107
1:30 pm : The major indices are suffering notable lossses in a broad-based retreat that has been fueled by concerns highlighted in a Barron's article that said it is likely the U.S. Treasury (i.e., taxpayers) will need to recapitalize government sponsored enterprises Fannie Mae (FNM 6.50, -1.41) and Freddie Mac (FRE 4.85, -1.00).
Although the Barron's article rehashes many of the concerns already known with respect to these GSEs, it is written in a manner that makes it sound as if a government-led recapitalization will be occurring sooner rather than later.
The recapitalization might not come to fruition, but on a slow news day and following a sharp run in the broader market, it is the type of story that is able to hasten profit-taking efforts.
Although trading is heavy in FNM and FRE, the overall volume for the NYSE doesn't validate the idea that there is a real fear in the market regarding this story. DJ30 -153.64 NASDAQ -27.62 SP500 -13.72 NASDAQ Adv/Vol/Dec 1006/875 mln/1747 NYSE Adv/Vol/Dec 1031/450 mln/1950
1:00 pm : Stocks have fallen another leg lower and are now trading at their worst level of the session. Roughly 80% of the S&P 500 components are trading with losses.
Meanwhile, oil is trading near the unchanged mark after climbing out of the red.
Energy (+0.1%) has joined the utility sector (+0.2%) in positive territory. Oil and gas exploration companies are holding up; as an industry it is up 0.4%. Refiners, however, are down 4.2%.DJ30 -185.07 NASDAQ -32.60 SP500 -15.78 NASDAQ Adv/Vol/Dec 974/825 mln/1742 NYSE Adv/Vol/Dec 1053/437 mln/1960
12:35 pm : Stocks are trading sideways after falling to a new session low. The Dow Jones Industrial Average is now down roughly 1%. Only four of its 30 components are trading with gains.
The dollar has declined further. It is down 0.3% currently. However, it is still up 0.3% year-to-date.
The 10-year Treasury Note has found modest favor. It is currently up just a few ticks, yielding roughly 3.8%.DJ30 -110.81 NASDAQ -21.70 SP500 -10.35 NASDAQ Adv/Vol/Dec 1116/735 mln/1565 NYSE Adv/Vol/Dec 1193/394 mln/1794
12:00 pm : The news stream has been rather dry Monday, leaving market participants looking to crude prices for direction. Premarket sentiment had been largely optimistic, but as oil rebounded in the early going the major indices made an immediate push lower. Though oil prices have fallen back into negative ground, stocks remain mired in losses.
Losses are considerable in financials and technology, which represent the two largest economic sectors in the S&P 500 by accounting for more than 30% of its weight. A lack of leadership from either sector has helped oil prices govern trading.
Declines are the heaviest in the financial sector (-2.1%). Thrifts and mortgages (-7.8%) are the worst performing industry group, thanks to Fannie Mae (FNM 6.56, -1.35) and Freddie Mac (FRE 4.77, -1.08). The duo was the focus of an article suggesting it is becoming increasingly likely they will be recapitalized by the Treasury.
In the tech sector (-1.0%), video game maker Electronic Arts (ERTS 47.41, -0.83) is letting its offer for Take-Two Interactive (TTWO 24.00, -0.84) expire tonight. However, Electronic Arts will join in Take-Two's review of strategic alternatives.
Elsewhere, Lowe's (LOW 24.46, -0.04) posted better-than-expected earnings per share results for its second fiscal quarter. The company, however, issued a mixed outlook for its third quarter and the fiscal year.
Meanwhile, BHP Billiton (BHP 65.40, +0.18) posted its sixth record full-year profit and offered an upbeat outlook, according to an article in this morning's edition of The Wall Street Journal. DJ30 -111.55 NASDAQ -18.46 SP500 -10.89 NASDAQ Adv/Vol/Dec 1117/634 mln/1507 NYSE Adv/Vol/Dec 1216/345 mln/1745
11:30 am : Stocks remain in negative territory, trading in choppy fashion. As a result of the relatively pessimistic tone, the defensive-oriented utility sector (+0.5%) is sporting the largest gain.
Utilities often find favor amid tumult, given their steady and predictable earnings and cash flow. Within the Dow Jones Utility Average only Williams Companies (WMB 27.97, -0.12) and First Energy (FE 71.46, -0.05) are trading without gains.DJ30 -45.60 NASDAQ -6.97 SP500 -4.15 NASDAQ Adv/Vol/Dec 1266/550 mln/1328 NYSE Adv/Vol/Dec 1309/298 mln/1591
11:05 am : Stocks are trending upward now that oil has gone on the retreat. Crude futures are now down more than 1%.
The ascent is broad-based with traders rotating out of energy (-0.2%) and materials (+0.2%) into various other sectors. Though off their session lows, the two largest economic sectors, tech (-0.6%) and financials (-1.3%), are still trading with losses.
In the tech sector, video game maker Electronic Arts (ERTS 48.08, -0.16) is letting its offer for Take-Two Interactive (TTWO 23.96, -0.88) expire tonight. Electronic Arts has long been interested in acquiring Take-Two, but Electronic Arts stated it needs to validate the assumptions it made in pricing its offer of $25.74 per share for TTWO. Take-Two continues to believe that offer undervalues its shares, but will allow Electronic Arts to join in its process for reviewing strategic alternatives.DJ30 -39.33 NASDAQ -5.56 SP500 -3.72 NASDAQ Adv/Vol/Dec 1255/448 mln/1269 NYSE Adv/Vol/Dec 1390/243 mln/1470
10:35 am : Stocks are trading with appreciable losses. Small, mid, and large-cap stocks have all fallen out of favor. The Russel 2000 is down 0.4%, the S&P 400 is down 0.2%, and the S&P 100 is down 0.4%.
Losses are not as steep as earlier, easing off morning lows as oil prices drop off morning highs. Oil was up more than 1% earlier, but is now up just 0.1% to $114 per barrel.DJ30 -63.35 NASDAQ -12.28 SP500 -6.12 NASDAQ Adv/Vol/Dec 1032/323 mln/1439 NYSE Adv/Vol/Dec 1198/176 mln/1613
10:05 am : All three of the major indices are trading with losses. Seven of the ten economic sectors are showing declines.
Declines are most pronounced in the financial sector (-1.7%). Each of its industry groups is showing a loss. Thrifts and mortgages (-4.9%) are the worst performing industry group, but the weight of diversified financial service companies (-1.9%) is having the most adverse effect. Members of the diversified financial services industry include JPMorgan Chase (JPM 37.54, -0.53), Bank of America (BAC 30.02, -0.68), and Citigroup (C 18.17, -0.38). DJ30 -39.49 NASDAQ -11.77 SP500 -5.68 NASDAQ Adv/Vol/Dec 1000/193 mln/1391 NYSE Adv/Vol/Dec 1134/112 mln/1579
09:45 am : The major indices pushed lower after opening in positive ground. Only the Dow has avoided falling into the red.
Despite trading lower in early action, oil prices have climbed higher. Crude futures are trading just below $115 per barrel, up roughly 1%.DJ30 +5.86 NASDAQ -4.41 SP500 -1.43 NASDAQ Adv/Vol/Dec 1014/95 mln/1246 NYSE Adv/Vol/Dec 1282/63 mln/1312
09:15 am : S&P futures vs fair value: +5.2. Nasdaq futures vs fair value: +9.3. The mood remains upbeat just ahead of the opening bell. Mitsubishi UFJ Financial Group and UnionBanCal (UB) have signed a definitive merger agreement whereby UnionBanCal will be acquired for $73.50 per share. Last week UnionBanCal rejected a $63 per share offering from Mitsuibishi UFJ Financial.
09:01 am : S&P futures vs fair value: +6.9. Nasdaq futures vs fair value: +10.3. The mood in premarket action remains upbeat. Oil has pared early morning losses and now trades with a slight decline. The dollar is also trading slightly lower relative to major foreign currencies.
08:30 am : S&P futures vs fair value: +4.0. Nasdaq futures vs fair value: +8.1. Stock futures continue to indicate an upward start to trading Monday. BHP Billiton (BHP) posted its sixth record full-year profit and offered an upbeat outlook, according to an article in this morning's edition of The Wall Street Journal. The article also stated that BHP believes its proposal to acquire Rio Tinto (RTP) makes more sense than ever.
08:00 am : S&P futures vs fair value: +4.3. Nasdaq futures vs fair value: +9.6. A sense of optimism is currently indicated in premarket trading. Lowe's (LOW) posted better-than-expected earnings per share results for its second fiscal quarter. The company, however, issued a mixed outlook for its third quarter and the fiscal year.
06:14 am : S&P futures vs fair value: -0.8. Nasdaq futures vs fair value: +1.6.
06:14 am : FTSE...5440.40...-14.40...-0.3%. DAX...6403.80...-42.22...-0.7%.
06:14 am : Nikkei...13165.45...+146.04...+1.1%. Hang Seng...20930.67...-229.91...-1.1%.
My posting is for my own entertainment, do your own DD before pushing your buy/call button
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