Market Update 081201 http://biz.yahoo.com/mu/update.html 4:30 pm : A sharp sell-off in the stock market Monday snapped a five-session winning streak as inventors digested a weak manufacturing survey, the possibility that the Federal Reserve may buy longer-term Treasuries, word that the U.S. economy officially entered recession in December 2007 and concerns regarding financials.
The S&P 500 dropped 8.9%, settling near its lows following a late session surge surge in selling interest. Volume was slightly above the year-to-date average. The decline was broad-based, with 498 of the components within the S&P 500 posting a decline.
The financial sector (-17.0%) got hit the hardest. Oppenheimer analyst Meredith Whitney said the U.S. credit card industry may cut credit lines by well over $2 trillion, or 45%, over the next 18 months, citing risk aversion, funding challenges and regulatory and accounting changes. Whitney's opinion is well respected after she correctly predicted much of the turmoil on Wall Street.
Weakness in commodities (-3.6%), with oil dropping 9.5%, weighed on the energy (-10.3%) and material sectors (-9.8%).
In economic news, Federal Reserve Chairman Ben Bernanke said the U.S. economy remains under stress despite the efforts of the Fed and other Policy makers. To help alleviate the stress, he laid out possible further policy actions, including lowering the fed funds rate, purchasing longer-term Treasuries or agency securities on the open market.
The latter comment, along with a flight-to-safety bid, sparked a rally in Treasuries, with yields of both the 10-year note and 30-year bond dropping too record lows. The 10-year note rose 48 ticks to yield only 2.75% and the 30-year bond rose more than four points to yield 3.23%.
The November ISM Index, a national manufacturing survey, declined to 36.2 from the October reading of 38.9. This was worse than the consensus estimate of 37.0 and, represents the most contraction in U.S. manufacturing since 1982. The survey shows continued signs of dropping prices, with the ISM Prices Paid Index declining to 25.5 from October's reading of 37.0. The industrials sector dropped 8.5%.
The National Bureau of Economic Research announced that December 2007 marks the end of a 73 month expansion in the U.S. economy and the beginning of a recession. Assuming the U.S. is still in a recession, the duration of decline the peak to trough decline will surpass the recessions of 2001 (8 months) and 1990/1991 (8 months), marking the longest recession since 1981/1982 (16 months).
Black Friday sales were better-than-feared. Depending on the research firm, sales were up between 2% and 7% year-over-year. However, there are concerns that the sales came at the expense of steep discounts and buying has since tapered off. Retailer stocks dropped 9.3%.
In the end, the S&P 500's decline of 80 points erased nearly all of last week's 96 point gain. The index is up 10.2% from its multi-year low reached on Nov. 21, and down 44.4% this year.DJ30 -679.95 NASDAQ -137.50 NQ100 -8.0% R2K -11.9% SP400 -10.9% SP500 -80.03 NASDAQ Dec/Adv/Vol 2353/416/1.95 bln NYSE Dec/Adv/Vol 2809/356/1.63 bln
3:30 pm : Stocks extend their losses. Treasury Secretary Paulson has finished giving his prepared speech and is currently answering questions.
Paulson said the housing correction is the root of the economic and market difficulties. As a result, Paulson believes the most important thing to do is mitigate foreclosures and reduce the cost of mortgage finance.DJ30 -501.94 NASDAQ -103.78 SP500 -60.94 NASDAQ Dec/Adv/Vol 2292/446/1.43 bln NYSE Dec/Adv/Vol 2791/350/970 mln
3:05 pm : The S&P 500 is down 6.0%, which is near its worst level when it was down 6.4%.
Treasury Secretary Paulson is about to speak. In his prepared text, Paulson said the Treasury is actively mulling new rescue programs.
All ten economic sectors are down at least 3%. Financials (-9.5%), energy (-7.2%) and materials (-6.4%) are showing the most weakness. Defensive-oriented consumer staples (-3.3%), utilities (-4.2%) and healthcare (-3.5%) are outperforming on a relative basis.DJ30 -448.42 NASDAQ -92.21 SP500 -53.69 NASDAQ Dec/Adv/Vol 2257/465/1.31 bln NYSE Dec/Adv/Vol 2761/367/889 mln
2:30 pm : Stocks remain near session lows as Bernanke participates in a question and answer session.
Bernanke said that actions taken by policymakers have helped alleviate some problems in the financial markets, but markets are still far from normal. Bernanke said in his speech that the Fed could increase liquidity by purchasing longer-term Treasury or agency securities on the open market.
Treasury prices spike higher as a result. The 10-year note is up more that two points to send its yield down to 2.67% and the 30-year bond is up more than 5 points to send its yield down to just 3.18%. DJ30 -435.27 NASDAQ -95.38 SP500 -52.67 NASDAQ Dec/Adv/Vol 2242/460/1.16 bln NYSE Dec/Adv/Vol 2757/367/795 mln
2:10 pm : Stocks remain near session lows as Fed Chairman Ben Bernanke speaks about the economy.
In his prepared text, Bernanke said the U.S. economy remains under stress despite the efforts of the Fed and other policymakers.
Bernanke then laid out the future policy options. He said it is "feasible" to cut the fed funds rate below its current level of 1%. He also said that although interest rates can't be cut below zero, the Fed has other policy tools, including increasing liquidity, backstopping liquidity directly in certain financial markets and working with other agencies to minimize systemic risk.
Treasuries rally as the Chairman speaks. The 10-year note is up nearly two points, sending its yield down to 2.71%.DJ30 -452.72 NASDAQ -94.44 SP500 -54.60 NASDAQ Dec/Adv/Vol 2223/453/1.08 bln NYSE Dec/Adv/Vol 2755/366/738 mln
1:30 pm : Stocks trade in a relatively tight range near session lows.
Fed Chairman Bernanke is set to speak about the economy in about 15 minutes. His speech has the potential to be a market-moving event.DJ30 -431.13 NASDAQ -90.50 SP500 -52.30 NASDAQ Dec/Adv/Vol 2208/438/950 mln NYSE Dec/Adv/Vol 2736/367/652 mln
12:55 pm : Buyers are sitting on the sidelines as stocks trade at or near session lows.
Within the S&P 500, only six components are posting a gain. The biggest percent advancers are Ford (F 2.85, +0.16), +5.9%, and Rohm and Hass (ROH 71.49, +3.08), +4.5%. The biggest percent losers are Liz Claiborne (LIZ 2.10, -0.75), -26.3%, and Janus Capital Group (JNS 6.01, -2.15), -26.3%.DJ30 -449.37 NASDAQ -94.30 SP500 -54.69 NASDAQ Dec/Adv/Vol 2200/434/852 mln NYSE Dec/Adv/Vol 2735/345/589 mln
12:30 pm : Stocks extend their declines, with the S&P 500 down 6.0%. Selling interest is broad based.
The National Bureau of Economic Research announced that December 2007 marks the end of a 73 month expansion in the U.S. economy and the beginning of a recession.
Assuming the U.S. is still in a recession, the current decline from peak to trough will surpass the recessions of 2001 (8 months) and 1990/1991 (8 months), marking the longest duration since at least 1981/1982 (16 months).
The U.S. has yet to hit the textbook definition of recession -- two consecutive quarters of negative GDP growth -- although it is widely expected that fourth quarter GDP will be negative, as the third quarter was.
Pilgrim's Pride (PPC 0.62, -0.52), once a $2.7 billion market cap company, filed for Chapter 11 bankruptcy. The chicken processor cited significant challenges, including higher feed-ingredient costs, oversupply of chicken and softening demand. Pilgrim's Pride said it will continue normal operations as it works on restructuring. The Texas-based company employs about 48,000 people.DJ30 -436.07 NASDAQ -89.99 SP500 -52.94 NASDAQ Dec/Adv/Vol 2174/452/774 mln NYSE Dec/Adv/Vol 2721/344/540 mln
12:00 pm : December starts on a sharply lower note as investors digest that November U.S. manufacturing activity contracted the most in 26 years.
At midday, the S&P 500 is down 5.4% in broad-based weakness -- only nine stocks are posting a gain.
The November ISM Index, a national manufacturing survey, declined to 36.2 from the October reading of 38.9. This was worse than the consensus estimate of 37.0 and, since the number was below 50, represents contraction in U.S. manufacturing. The survey shows continued signs of dropping prices, with the ISM Prices Paid Index declining to 25.5 from October's reading of 37.0. The industrials sector is down 6.1%.
The financial sector (-8.5%) is posting the largest decline. Goldman Sachs (GS 69.01, -9.98) and Morgan Stanley (MS 12.37, -2.38) are laggards after having their fourth quarter and 2009 earnings estimates cut at Credit Suisse. Oppenheimer analyst Meredith Whitney said the U.S. credit card industry may cut credit lines by well over $2 trillion over the next 18 months, citing risk aversion, funding challenges and regulatory and accounting changes.
Black Friday sales rose 3% year-over-year according to ShopperTrak. Although this was better than some analysts had feared, there are concerns that the sales came at the expense of steep discounts and buying has since tapered off. Retailers are down 5.7% this session.
Commodities (-3.4%) are under selling pressure. Oil prices are down a steep 8.3% to $49.91 per barrel after OPEC left output unchanged at a meeting over the weekend, and the manufacturing survey raised demand concerns. The cartel is scheduled to meet again in mid-December.
Although off their best levels of the session, Treasury prices are up sharply to send yields to record lows. The 10-year note is yielding only 2.83% and the 30-year bond is yielding only 3.35%.
The S&P 500 is still up 14.4% from its multi-year low reached on Nov. 21 thanks to five consecutive gains made prior to this session.DJ30 -398.80 NASDAQ -84.34 SP500 -48.26 NASDAQ Dec/Adv/Vol 2148/449/703 mln NYSE Dec/Adv/Vol 2700/362/490 mln
11:30 am : Stocks post steep losses, and are trading near session lows.
General Motors (GM 4.88, -0.36) has reversed into the red on no specific news item after being up as much as 9.7%. Ford (F 2.75, +0.06) has given up much of its advance, but remains in the green.
GM's retreat means all 30 of the Dow components are now posting a loss. By point change, the worst performers are Chevron (CVX 75.35, -3.66) and Caterpillar (CAT 38.01, -2.98). By percent change, the worst performers are Citigroup (C 7.30, -0.99), -11.9%, and Bank of America (BAC 14.43, -1.82), -11.3%.DJ30 -417.99 NASDAQ -87.25 SP500 -49.83 NASDAQ Dec/Adv/Vol 2135/443/609 mln NYSE Dec/Adv/Vol 2702/315/430 mln
11:00 am : Stocks trade near recently reached session lows. European markets are also posting steep declines, with notable weakness in material and financial stocks. London's FTSE is down 4.5%, Germany's DAX is down 5.4% and France's CAC is down 4.6%.
President-elect Obama named Hillary Clinton as secretary of state, Janet Napolitano as homeland security secretary, Eric Holder as attorney general and Robert Gates to remain as defense secretary.
Commodities (-2.9%) are under selling pressure, with oil prices down 6.6% to $50.88 per barrel and gold down 5.0% to $775.50 per ounce. The dollar is up 0.6%.DJ30 -389.40 NASDAQ -79.11 SP500 -46.54 NASDAQ Dec/Adv/Vol 2052/464/488 mln NYSE Dec/Adv/Vol 2654/330/355 mln
10:30 am : Broad-based selling interest sends stocks lower. The S&P 500 is currently down roughly 5%.
The financial sector (-7.2%) is posting the largest loss. Goldman Sachs (GS 71.78, -7.21) and Morgan Stanley (MS 13.15, -1.60) are laggards after having their fourth quarter and 2009 earnings estimates cut at Credit Suisse.
General Electric (GE 15.91, -1.26) is down 7.3% after Citigroup said the GE Capital webcast scheduled for Tuesday could also serve as a venue to lower 2009 earnings per share expectations. The industrials sector is down 5.9%.
Ford (F 2.88, +0.19) and General Motors (GM 5.46, +0.22) are a pocket of strength. The automakers, along with Chrysler, are expected to go before Congress Tuesday to lay out their plans on how a potential $25 billion loan from the government would be used.
Ford this morning said it may sell its Sweden-based Volvo Car Corporation. In addition, the Financial Times reports that GM and Ford have approached Sweden's government for financial aid for their Saab and Volvo brands and The Wall Street Journal reported that the United Auto Workers Union is in talks with the automakers to stop a program that pays idled workers.DJ30 -382.07 NASDAQ -71.65 SP500 -44.47 NASDAQ Dec/Adv/Vol 2006/461/368 mln NYSE Dec/Adv/Vol 2628/315/279 mln
10:00 am : Stocks extend opening declines in broad-based weakness and then drop some more as two economic reports are released. Losses range from 2.7% (consumer staples) to 6.6% (financials).
U.S manufacturing in November contracted the most since 1982, according to a national survey. Specifically, the November ISM Index declined to 36.2 from the October reading of 38.9. This was worse than the consensus estimate of 37.0 and, since the number was below 50, represents contraction in U.S. manufacturing. The survey shows continued signs of dropping prices, with the ISM Prices Paid Index declining to 25.5 from October's reading of 37.0.
Construction spending in October fell 1.2%, which was worse than the expected decrease of 1.0%.
Treasuries prices are rallying, causing yields to drop to record lows. The 10-year note is up more than a point to send its yield to just 2.80% and the 30-year bond is up more than three points to send its yield down to just 3.28%.DJ30 -337.42 NASDAQ -67.77 SP500 -40.19 NASDAQ Dec/Adv/Vol 1921/438/220 mln NYSE Dec/Adv/Vol 2562/313/190 mln
09:35 am : Stocks start December on a low note, with commodity related companies showing notable weakness.
Oil prices are down 6.9% to $50.70 per barrel after OPEC decided to leave output unchanged at its meeting over the weekend. The cartel is scheduled to meet again in a few weeks.
Black Friday sales were up 3.0% year-over-year, according to ShopperTrak. The result was better than many analysts had expected, but there are concerns that sales came at the cost of steep discounts and that buying has tapered off.DJ30 -219.83 NASDAQ -41.25 SP500 -23.64
09:15 am : S&P futures vs fair value: -24.40. Nasdaq futures vs fair value: -25.80.
09:04 am : S&P futures vs fair value: -22.60. Nasdaq futures vs fair value: -24.00. Futures indicate a lower start. Goldman Sachs (GS) and Morgan Stanley (MS) had their fourth quarter and 2009 earnings estimates cut at Credit Suisse. Oppenheimer analyst Meredith Whitney said the U.S. credit card industry may cut credit lines by well over $2 trillion, citing risk aversion, funding challenges and regulatory and accounting changes.
08:34 am : S&P futures vs fair value: -23.60. Nasdaq futures vs fair value: -26.80. Stock futures suggest a lower open. Looking ahead, October construction spending and the November ISM Index are both set for release at 10:00 AM ET. Fed Chairman Bernanke and Dallas Fed President Fisher are set to speak about the economy at 1:45 PM ET. Treasury Secretary Paulson is scheduled to speak about the economy at 3:00 PM ET.
08:10 am : S&P futures vs fair value: -25.30. Nasdaq futures vs fair value: -27.50. Stock futures suggest a sharply lower open. Crude oil prices are down 5.1% to $51.67 per barrel after OPEC decided to take no action during its meeting over the weekend. Black Friday sales rose 3.0% according to ShopperTrak RCT, which was better than some had feared. In deal news, Johnson & Johnson (JNJ) has entered a definitive agreement to acquire Mentor Corp (MNT) for $31.00 per share, or $1.07 billion in cash.
06:41 am : S&P futures vs fair value: -22.40. Nasdaq futures vs fair value: -29.00.
06:41 am : Nikkei...8397.22...-115.10...-1.40%. Hang Seng...14108.84...+220.60...+1.60%.
06:41 am : FTSE...4188.70...-99.30...-2.30%. DAX...4515.84...-153.60...-3.30%.
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