“Are we there yet?” “ No …”
The major indices ended up the week in a mixed note, with Nasdaq saving face of all three, having gained (gasp!) 28 points, or 1.2% to end up at 2311. The S&P 500 index lost 3 points (can we do better than this?), or 0.2% to end up at 1258. The big daddy of all, the might Dow Jones Industrial Average, has lost 126, or 1.1% to end up at 11,371. That’s it? Oh, yeah, the Dow dropped like a rock on Thursday, when the release of sales data for existing homes has sent it down, without a parachute, to plunge 283 points. Now that’s action!
“Are we there yet?” “No…”
Sounds like capitulation, right? Sounds like we’ve found a bottom … Ya’ think? Not according to Wachovia’s head of equity strategy, Stuart Freeman, who doesn’t see The Bottom just yet. For that, we may have to wait, but not long, if you ask me.
“What? You’re asking about oil? What about it?”
The crude has continued its slide from the height of $147, just three weeks ago, and fell 4.8% for the week, to $123 per barrel. Well, wasn’t that just few weeks ago, we were talking about oil supply (that’s shrinking) and demand increasing? I thought so too, but only this week, we will reverse the story. Barron’s pulls out some facts:
• Gasoline usage has fallen for 13 consecutive weeks
• Demand is down 2.2% YTD
• Even China (“What, China?” “Yes, I say”) shows a slowdown in the growth of energy demand
• Some people are looking for $80 per barrel in the medium term, like Steve Auth, CIO, Federated Investors cited by Barron’s.
• The supply side continues to do its part, and now drilling is booming around the world
• The US Geological Survey reported that the area north of the Arctic Circle contains about two-thirds the proved gas reserves of the Middle East.
“What now, Buster?”
Well, these mini breaks in oil’s uptrend and stocks downtrend may push the S&P 500 into a nice little rally of 5% within the next weeks.
“What else happened last week?”
• Oh, yes, the financials. What has become customary these days, we report banks’ losses without a blink, like it was yesterday’s news. Washington Mutual posted a $3.3 billion (with a “b”) quarterly loss. Gosh! Its shares got hammered amid concern that unsecured investors lost confidence in it. Can you say “financial distress” really slowly?
• Troubles in Motorland. Chrysler is cutting 1,000 salaried jobs, and gets out of the auto-leasing business, because it’s too expensive for consumers and the company… Hmmm, I did not see this one coming. Ford Motors posted a $8.7 billion (again, with a “b”) quarterly loss … no matter how you look at it – big “B”, small “b” – that’s one big number . (I wanted to say “one big a…s…s number” but then I have to put $1 in the jar, so I won’t say it). General Motors, not to be outdone, said that July sales will be “similar to June’s”… in other words they will be low again.
There may be some other news happened last week, but I think you got the picture by now.
Good news? What good news? Are you from another planet or something?
Sunday, July 27, 2008
Saturday, July 19, 2008
July 20 - Finally, a rally!
Boy, did we catch a break! Just last week we said that the markets were to rally about 5-10%, and here they are! True to their word, and they made quite a spirited rally. All indexes ended up for the week: Dow Jones, up 396 points, or 3.57% to close at 11,497, Nasdaq Composite, up 44 points , or 1.95%, to close at 2,283 and the S&P 500, up 21 points, or 1.71%, to close at 1,261.
Who let the financials out? Nice surprises, after all the bloodbath: Citigroup (ticker: C) posted a loss, but it was smaller than expected, JP Morgan Chase (ticker: JPM) managed to top estimates, and Wells Fargo (ticker: WFC) managed to top estimates. As a result, the Financial Select SPDR (ticker: XLF) bounced 23% off its mid-week low. Time to buy banks? Barron’s thinks so; take a look at the attached article.
Low expectations about the financial sector may help these stocks over the summer. Only 49% of financial stocks have beaten the expectations, the worst among the S&P sector. However, the financial companies that beat expectations saw their stock jumping 10.1%, as investors are grabbing on any piece of good news. To contrast, the 71% of the consumer staples companies that beat estimates only saw their shares pull back 4.7%.
The rise in stocks was helped by the slide in oil, which fail from $145 to $129, an astonishing drop.
What else happened?
• Inflation on the wholesale and consumer levels has jumped up, with producer prices spiking 9.2% for the 12 months ended in June, the fastest pace since the summer of 1981, and consumer prices jumping 1.1% in June, higher than expected. Don’t worry, the Fed is watching! Minutes from the Fed’s last meeting showed officials believing that the next rate move will likely be up.
• Google misses the estimates; its Q2 EPS rose 30% to $4.63 ex items, missing by 11 cents. Revenue ex items met the estimates. Google blamed on weaknesses in real estate and auto sectors, which hurt business. The stock plunged almost 10% on Friday, stopping at $481.32.
• Ebay’s Q2 EPS rose 27% and sales went up 20%, both topping the expectations, but the outlook for Q3 forecasts lower than expected. Shares went down 14% to a 2-yr low.
Who let the financials out? Nice surprises, after all the bloodbath: Citigroup (ticker: C) posted a loss, but it was smaller than expected, JP Morgan Chase (ticker: JPM) managed to top estimates, and Wells Fargo (ticker: WFC) managed to top estimates. As a result, the Financial Select SPDR (ticker: XLF) bounced 23% off its mid-week low. Time to buy banks? Barron’s thinks so; take a look at the attached article.
Low expectations about the financial sector may help these stocks over the summer. Only 49% of financial stocks have beaten the expectations, the worst among the S&P sector. However, the financial companies that beat expectations saw their stock jumping 10.1%, as investors are grabbing on any piece of good news. To contrast, the 71% of the consumer staples companies that beat estimates only saw their shares pull back 4.7%.
The rise in stocks was helped by the slide in oil, which fail from $145 to $129, an astonishing drop.
What else happened?
• Inflation on the wholesale and consumer levels has jumped up, with producer prices spiking 9.2% for the 12 months ended in June, the fastest pace since the summer of 1981, and consumer prices jumping 1.1% in June, higher than expected. Don’t worry, the Fed is watching! Minutes from the Fed’s last meeting showed officials believing that the next rate move will likely be up.
• Google misses the estimates; its Q2 EPS rose 30% to $4.63 ex items, missing by 11 cents. Revenue ex items met the estimates. Google blamed on weaknesses in real estate and auto sectors, which hurt business. The stock plunged almost 10% on Friday, stopping at $481.32.
• Ebay’s Q2 EPS rose 27% and sales went up 20%, both topping the expectations, but the outlook for Q3 forecasts lower than expected. Shares went down 14% to a 2-yr low.
Sunday, July 13, 2008
July 13 - weekly recap
For the week, all indices have finished lower again, with Dow Jones (a worthless index according to some) closing at 11,000.54, just a hanging chad from the psychological threshold of 11,000. Some analysts see a short 5-10% rally, but the markets will continue to drop.
Dow Jones Industrials Close: 11,000.54 % change: YTD: -16.32 wk: -1.67
Nasdaq Composite: Close: 2239.08 %change: YTD: -15.58 wk: -0.28
S&P 500: Close: 1239.49 %change: YTD: 15.59 wk: -1.85
News and Events:
• Retailers reported better-than-expected June results helped by the federal checks and heavy spending at discounters. Sales may go up 4.3%, beating 2%-3% forecasts.
• IMF says that the global economy is teetering between “the ice of recession and the fire of inflation”. Global recovery is expected in Q1 ’09, led by a better-than-expected Q1 in U.S.
• The siblings, Fannie Mae and Freddie Mac took a dive of 45% and 47% respectively, on fears that some government intervention may be needed.
• Oil keeps going up, like there is no tomorrow. All sorts of supply fears – strike in Brazil, militant threats in Nigeria, rising hostilities in Iran, decline in the dollar – sent investors rushing back in the energy markets. The crude passes $147 for first time, before settling at $145. Anybody cares to guess a top price?
• GE’s net income fell 6% vs. a year earlier, with revenue rising 11% to $46.9 billion, slightly above Wall Street expectations.
• Lehman Brothers fell 40% last week, victim of a spillover effect from Fannie and Freddie. BofA, Merrill Lynch and Wachovia also hit new lows. Citigroup will sell its German retail operations to France’s Credit Mutuel for $7.7 billion in cash. Citi shares fell 9% to 16.19.
• IndyMac Bancorp, $32 billion outfit, has hit the skids. The regulators has closed it out and placed it under FDIC control because of the liquidity crisis.
• Pending home sales slide in May by 4.7%, which comes after April’s jump of 7.1%.
Dow Jones Industrials Close: 11,000.54 % change: YTD: -16.32 wk: -1.67
Nasdaq Composite: Close: 2239.08 %change: YTD: -15.58 wk: -0.28
S&P 500: Close: 1239.49 %change: YTD: 15.59 wk: -1.85
News and Events:
• Retailers reported better-than-expected June results helped by the federal checks and heavy spending at discounters. Sales may go up 4.3%, beating 2%-3% forecasts.
• IMF says that the global economy is teetering between “the ice of recession and the fire of inflation”. Global recovery is expected in Q1 ’09, led by a better-than-expected Q1 in U.S.
• The siblings, Fannie Mae and Freddie Mac took a dive of 45% and 47% respectively, on fears that some government intervention may be needed.
• Oil keeps going up, like there is no tomorrow. All sorts of supply fears – strike in Brazil, militant threats in Nigeria, rising hostilities in Iran, decline in the dollar – sent investors rushing back in the energy markets. The crude passes $147 for first time, before settling at $145. Anybody cares to guess a top price?
• GE’s net income fell 6% vs. a year earlier, with revenue rising 11% to $46.9 billion, slightly above Wall Street expectations.
• Lehman Brothers fell 40% last week, victim of a spillover effect from Fannie and Freddie. BofA, Merrill Lynch and Wachovia also hit new lows. Citigroup will sell its German retail operations to France’s Credit Mutuel for $7.7 billion in cash. Citi shares fell 9% to 16.19.
• IndyMac Bancorp, $32 billion outfit, has hit the skids. The regulators has closed it out and placed it under FDIC control because of the liquidity crisis.
• Pending home sales slide in May by 4.7%, which comes after April’s jump of 7.1%.
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