September 7th, 2010
Stocks staged gains in the first few sessions of September, but market participants returned from Labor Day ready to sell. Their efforts were focused on financials and other cyclical plays. In the four sessions leading up to Labor Day weekend the S&P gained more than 5%. In the wake of such a heady move came rekindled concerns about the health of European banks. That invoked stiff selling among bank stocks. Weakness among large-cap banking issues undermined the broader financial sector. As such, financials fell to a collective loss of 2.4% and closed at session lows. Profit taking also undercut other cyclical plays, like consumer discretionary stocks and energy stocks. Both of those sectors fell 1.6%.
Still, such widespread weakness stoked volatility. That sent the Volatility Index (VIX) up almost 12% from the four-month low that it set late last week. Amid the stock market’s slide and the increase in volatility Treasuries attracted strong support – the benchmark 10-year Note climbed almost a full point and the 30-year Bond tacked on two full points.
Results from an auction of 3-year Notes were largely lackluster. The auction drew a bid-to-cover of 3.2, dollar demand of $105.9 billion and an indirect bidder participation rate of 42.4%. The four previous auctions held an average bid-to-cover of almost 3.3, dollar demand of about $116.3 billion, and an average indirect bidder participation rate of 44.6%. The greenback made a big gain by climbing 0.9% against a basket of competing currencies. Most of the move was against the euro, which dropped 1.4% in its steepest single-session slide in nearly four weeks.
Favor for safety also sparked buying in the yen, which set a fractionally improved 15-year high of 83.5 yen per dollar. Japan’s central bank brought little surprise with its decision to keep its benchmark lending rate at 0.1%.
Gold New High
Gold prices settled at a new high Tuesday as investors sought the safety of the metal on news that the eurozone stress tests were weaker than previously reported. Gold for December delivery closed $8.20 higher to $1,259.30 an ounce. The gold price Tuesday has traded as high as $1,261.60 and as low as $1,246.40 during the session. The U.S. dollar index was rising 0.81% to $82.74 while the euro was falling 1.25% to $1.27 vs. the dollar. The spot gold price Tuesday was soaring $11, according to Kitco’s gold index.
Tags: gold, new high
Posted in Contributors, Stock Market News | No Comments »
September 7th, 2010
Ahead of the opening bell, DJIA futures fell 57, to 10,379. S&P futures fell 6.90, or 0.6 percent, to 1,096.60. Stock futures slipped Tuesday to start the holiday-shortened week after some fresh concerns about the health of European banks rattled overseas markets. European markets fell after a report said the continent’s major banks have more potentially risky government debt on their books than was disclosed during stress tests earlier this year. The dollar strengthened against the euro and investors bought U.S. Treasurys on the new European bank concerns.
Stocks worldwide dropped during the spring because of worries that mounting government debt in Europe would hurt banks’ ability to lend and stunt an economic recovery on the continent. That, in turn, would drag down a global rebound. Investors could be taking their cues from overseas because there are few domestic economic reports due out this week that could sway traders. A barrage of mostly better-than-anticipated economic data sent stocks sharply higher last week. The reports helped push major indexes to their first winning week in a month.
The health of the U.S. economy has largely dictated trading since early August. Traders looking for new signs of the pace of recovery will get a look at regional economic activity when the Federal Reserve releases its beige book Wednesday. The Labor Department releases its weekly numbers on unemployment benefit claims Thursday.
Britain’s FTSE 100 fell 0.8 percent, Germany’s DAX index dropped 0.7 percent, and France’s CAC-40 fell 1.2 percent. Japan’s Nikkei stock average fell 0.8 percent. With investors worldwide moving out of stocks, U.S. bond prices climbed. That sent interest rates lower.
The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.64 percent from 2.71 percent late Friday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans. U.S. shares of many European banks fell in pre-opening trading. Share of Swiss bank UBS AG dropped 49 cents, or 2.7 percent, to $17.56. Spanish bank Banco Santander SA fell 36 cents, or 2.8 percent, to $12.32.
US News
In a Renewed effort to restart economy Obama has proposed to call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections. An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland Wednesday.
President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections. An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland Wednesday.
Obama has promised to propose new steps to stimulate the economy. In addition to the business investment tax breaks, he will also call for a $50 billion infrastructure investment and a permanent expansion of research and development tax credits for companies.
The proposals would requires congressional approval, which is highly uncertain given Washington’s partisan atmosphere. With the public worried about adding to the mounting federal deficits, and Republicans saying spending is out of control, even many Democratic lawmakers are reluctant to approve new spending so close to the midterm elections.
Posted in Economics, Stock Market News | No Comments »
September 3rd, 2010
The DJIA rose more than 110 points after employment numbers were better than predicted for August. Here’s the relatively good news just posted by the U.S. Department of Labor: Nonfarm payroll employment changed little — down just 54,000 jobs in August, and the unemployment rate was about unchanged at 9.6 percent. Because of the end of many Census jobs, government employment fell by 114,000. But private-sector payroll employment continued to trend up modestly, adding a net 67,000, the government reported. The August report also revised earlier numbers from June and July. Initially, a combined job loss of 351,000 had been reported. Revised, the loss was reduced to 229,000.
Job gains were reported in the health care and construction sectors. But jobs fell by 27,000 in manufacturing. Hours on the job were unchanged. Average hourly earnings were up by just 0.3 percent. The still-disturbing number: 14.9 million workers are unemployed and looking for work, and about 6.2 million of them have been jobless for six months or more.
It’s not a great report, but it’s much better than the market was expecting. You are seeing job growth, but it’s really not enough. One encouraging sign is temp-help payrolls rose 17,000, meaning employers may be willing to hire fulltime workers in the near future. Temp-help payrolls had stalled in June and July after averaging a monthly gain of 45,000 from October to May. It’s still suggesting more of the same positive job growth, but not especially strong.
President Barack Obama is scheduled to make a speech about the economy later this morning.
Tags: jobs report
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September 2nd, 2010
Stocks spent most of the session at breakeven today, as the Street’s initial reaction to relatively upbeat retail and economic reports was somewhat muted ahead of tomorrow’s highly anticipated nonfarm payrolls report. On the retail front, the back-to-school shopping season boded well for many major retailers, with heavyweights like Costco (COST) and Nordstrom, Inc. (JWN) recording stronger-than-expected sales in August. Meanwhile, a second straight dip in weekly jobless claims, as well as a surprise increase in pending home sales last month, helped to overshadow a slimmer-than-anticipated rise in July factory orders. Against this backdrop, the bulls emerged from the sidelines as the afternoon progressed, with the major market indexes settling at session highs.
Looks like the shorts couldn’t make much of a push into the close, as the market found a nice buying late in the session. So far, September has been very kind to stocks, but with the always-important monthly jobs numbers out tomorrow, that could change in a hurry.
With the late buying spree I’m led to believe numbers tomorrow wont be bad after all.
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September 2nd, 2010
The Dow slipped lower, after rising initially, after the government reported a slight drop in jobless claims and news of a stronger-than-expected showing in retail sales for August.
The Labor Department reported weekly jobless claims fell by 6,000 to 472,000 for the week ended Aug. 28, better than the 475,000 forecast by economists polled by Reuters. Last week’s claims were revised up to 478,000 in Thursday’s report. The government reported nonfarm productivity fell 1.8 percent, more than previously estimated in the second quarter and the largest drop since the third quarter of 2006. Consensus forecasts called for productivity to have dropped to a 1.9 percent annual rate and unit labor costs to have risen by 1.1 percent.
September started on a positive note driven by positive news on manufacturing in the U.S. and China, but investors now have their eyes on Friday’s monthly jobs report for insight on the health of the U.S. economy.
In other news; retailers are turning in surprisingly strong monthly sales reports in August, as sales-tax-free holidays and discounting coaxed shoppers to open their wallets and stock up on back-to-school items. Overall, the Thomson Reuters Same-Store Sales Index is expected to rise 2.5 percent in August, the research firm said. The majority of the retailers reporting monthly sales results have topped analysts’ estimates, according to Thomson Reuters. Consumers remain cautious about spending as unemployment remains high and questions about the economy persist. The real test for retailers will come in September. That is when investors will see if consumers are truly picking up their spending or if back-to-school sales merely shifted to August from September.
At 10 a.m., the National Association of Realtors will be out with its pending home sales report for July. Economists think home sales that have gone to contract but not yet closed fell 1 percent in July following a 2.6 percent gain in June. Also out at that time is the government’s July factory orders report, seen as rising by 0.2 percent after a 1.2 percent drop in June.
Tags: Q2 retail sales, retail, weekly job-less claims
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September 1st, 2010
Stocks surged on the first trading day of September after a report showed U.S. manufacturing showed surprising strength, and after signs emerged of a strengthening global economy. The DJIA rose more than 230 points. All 30 Dow components were higher this morning.
The Institute for Supply Management’s monthly manufacturing index for August came in at 56.3, much better than the expected drop to 52.5 for August. The July reading was 55.5. Construction spending, meanwhile, slumped 1.0 percent in July to $805.2 billion, the lowest level in 10 years, the Commerce Department reported. Figures for June were revised to an 0.8 percent fall, instead of the 0.1 percent gain previously reported.
Earlier Wednesday, the Mortgage Bankers Association reported applications for home purchassing and refinancing rose last week amid the lowest interest rates since 1990. A report from ADP and Macroeconomic Advisors showed the private sector lost 10,000 jobs from July to August largely due to a drop of 40,000 jobs in the goods-producing sector. The news was offset somewhat by a separate report from Challenger, Gray & Christmas showing that planned layoffs hit a 10-year low in the month.
Last month saw the worst August performance for Wall Street since 2001 and the first losing August since 2005, after a see-saw day of trading that ended with the Dow eking out a 5 point gain. September is typically one of the worst months of the year for the major stock market indexes, although that was not the case in September 2009.
European and Asian shares were higher after a rebound in Chinese manufacturing boosted investor sentiment. China’s manufacturing economy staged a moderate rebound in August after slowing for several months, according to the data.
What a great way to show optism after gloom and doom the past three months!!
Tags: confirmed, optimism, risk trade, support
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August 31st, 2010
U.S. stocks finished a lackluster session little changed on Tuesday but finished the month with their worst August performance since 2001 as concerns about the economy continued to pile on. The DJIA closed on Tuesday to end at 10,014.72. Stocks still posted steep losses for the month as investors lowered their expectations for economic growth in response to a flood of weak data in August. The Dow shed 4.3% this month, its first down August in five years and the blue-chip measure’s worst August since 2001. The S&P 500 and the NASDAQ also posted their worst August performance since 2001, down 4.7% and 6.2% respectively. Small-capitalization stocks, seen as leading indicator of the economy, have taken an even bigger hit this month. Amazingly to the unfortunate, the Russell 2000 index of small-cap stocks posted its worst August performance in 12 years.
Indices and stocks weren’t the only losers. Natural-gas futures, wrapping up their worst month in more than two years, are entering the historically weak month of September dogged by confusion over production. Prices for the most active contract have lost nearly 23% in August, as investors sold off the futures on estimates of abundant gas output.
Oil too has its share of losses for the month. October delivery ended down 3.7% at $71.92 a barrel on the New York Mercantile Exchange Tuesday, with declines accelerating toward the close of the session. Oil finished the month of August with a loss, down 8.9%, its first monthly decline since May. The month started well, with prices surpassing $82 a barrel, but soon got derailed as key reports showed the bad times were far from over.
And now onto our winner for the month (honestly the best performer year over year for the last 10 years) the shiny metal we’ve been touting ever since 2001 when President Bush entered 2 wars and lowered the tax rate for the last 9 years – Gold & Silver.
Gold rallied 5.6% in August. That compares to a decrease of 5% in July and is gold’s largest advance since April. Gold futures rose Tuesday, pushing August gains past 5%, and silver hit a three-month high as investors sought out both metals to protect against signs the economic recovery is faltering. Gold for December delivery added $11.10, or 0.9%, to $1,250.30 an ounce. It closed less than 1% from bullion’s record high of $1,266.50 an ounce on June 21.
Silver for December delivery added 36 cents, or 1.9%, to $19.43 an ounce, its highest close since mid-May. Silver has gained nearly 8% in August.
Gold and silver took advantage of investors’ growing concerns about the pace of the anemic economic recovery. Investors have become so optimistic that they’re accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.
Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high. As the economy stays weak or gets worse, then investors will be looking for a safe haven.
Buyers accumulated almost 278 tons of gold in 2010 across 10 ETPs, worth $10.4 billion at this year’s average price. Total holdings are almost twice Switzerland’s official reserves of 1,040 tons, data compiled by the World Gold Council show. ETP holdings reached a record 2,078 tons July 19.
One of the biggest buyers has been Soros Fund Management LLC, which oversees about $25 billion. George Soros, who made $1 billion breaking the Bank of England’s defense of the pound in 1992, described gold as “the ultimate asset bubble” at the World Economic Forum’s January meeting in Davos, Switzerland. Buying at the start of a bubble is “rational,” he said.
Bullion gained 13 percent since January, beating an 8.4 percent return on Treasuries, an 8 percent decline in the MSCI World Index of shares. Investors are concerned the recovery is weakening.
People fear another crisis and so they will diversify into gold. Gold will continue to be the safe haven especially when Bernanke confirmed they’re open to a QE 2.0 (Quantitative Easing, Stimulus) \
Let’s not forget the IMF’s 400 tons of Gold they’re looking to sell. The International Monetary Fund said July 7 China, the second-biggest bullion buyer after India, will expand 10 percent in 2010, compared with 9.1 percent last year. Gold imports by India this year may total 600 tons to 625 tons, compared with an estimated 480 tons to 485 tons last year.
Stocks to Buy
Earnings at Newmont Mining Corp.,(NEM) the largest U.S. gold producer, may increase 47 percent to $1.93 billion in 2010.
Eldorado Gold: (EGO) Shares of EGO closed at $19.31 in the previous trading session and opened today at $19.49. EGO is trading above the 50 day moving average and higher than the 200 day moving average. The stock’s 52 week low is $9.74 and 52 week high is $19.72.
Goldcorp Inc: (GG) Shares of Goldcorp traded 2.2% higher
Barrick Gold: (ABX) are up 2.0% on Tuesday. So far this year, the stock jumped over 17%
Hecla Mining Company: (HL) Up 16% in one week. Over the past 52-weeks, the stock has been trading within the range of $2.85-$7.47. At current market price, the market capitalization of the stock stands at $1.40 billion.
Silver Wheaton Corp (SLW) gained 0.70% to $22.96 on over 2.18 million shares. Today, the stock made its new 52-week high of $23.18. After opening the trade at $22.84, the stock is trading within the range of $22.73-$23.18.
Pan American Silver Corp (PAAS) $24.76; During the quarter ended June 30, 2010 the Company recorded sales of a record $147.3 million, a 32% increase compared to the second quarter of 2009.
We believe Gold will head $2,000 within the next 5-10 years. This will be a long term hold. Any weakness in Gold I recommend buying on the dips.
The remaining of the week prior to the Labor weekend, there is a heavy calendar for economic reports this week, including July employment numbers, manufacturing, productivity, and factory orders. I believe the results will be close to mediocre.
Tags: abx, August, ego, gg, gold, HL, NEM, PAAS, silver, slv, slw
Posted in Commodities, Stock Market News | Comments Off
August 31st, 2010
In the past 10 years we’ve witnessed several game changers with the coming of the Digital Age. In some degree businesses have become extinct today or are on the verge of falling off. I’ll mention two that took the retail business by surprise and then the next that may follow suit.
- Photography and Cameras
- The victim Eastman Kodak (EK) – Kodak was ill prepared. They did not take advantage of the 21st century technology. It took them for surprise which forced them to make capital burden expenditures. Itwas to update their niche Photography printing services which run rampant through Pharmacies and Supermarkets. Their stock was at an all time high of $95 in 1998. It now trades just shy of $6. The business remains intact and sits on roughly $1.5 billion in cash. They have lost significant amount of market share the past decade to the likes below.
- The Game Changers – Hewlett Packard (HPQ) in the Digital Printing and home photo printing; SnapFish & ShutterFly (SFLY)- Low cost Internet Digital Photo printing
- HPQ continues to chip away at EK market-share as they have recently sealed a deal with Wal-Mart (WM) to roll out 50 HP photo kiosks at their West Coast locations.
- DVD‘s & Video Game Rentals
- The victim Blockbuster (BBI) $ .40, Dollar Video, & West Coast Video. Blockbuster is the only one that remains in this once lucrative business. Again new technology and concept took them for surprise. Their business is catered around stand alone retail locations saturating the US. At one point they had over 9,000 locations in 25 countries. Now they dwindle to approximately 35% of stand alones throughout their portfolio. They have been attacked on all fronts.
- The Game Changer - Netflix (NFLX) $71 Why drive to to a Blockbuster when you can order home via the Internet and borrow as long as you’d like with no late fee? It was an instant hit! Stock took off, business revenues were increasing 50 fold, year over year while BBI is on the verge of becoming extinct like their former foes.
- On demand from Verizon, Cablevision, Time Warner, and Comcast has also made on an impact on BBI’s revenues which took an additional chunk of cash flow.
- GameStop (GME)$18.91 Operates 6,200 locations worldwide. They have grown at a rapid pace in providing video game new/used purchases in their small shop of 2,000 sqft retail space generating on average $750,000 per store.
Now onto the next game changer which I’m certain will take the Gaming industry by storm. It’s a private company named OnLive.
OnLive is launching the world’s highest performance Games On Demand service, instantly delivering the latest high-end titles over home broadband Internet to the TV and entry-level PCs and Macintosh computers. Founded by noted technology entrepreneur Steve Perlman (WebTV, QuickTime) and incubated within the Rearden media and technology incubator, OnLive spent seven years in stealth development before officially unveiling in March 2009.
OnLive, together with its Mova subsidiary, lies directly at the nexus of several key trends, all of which are reshaping the way we think about and use digital media:
- The shift to cloud computing, (i.e. Vmware and Google) displacing the limitations, cost and complexity of local computing;
- An explosion of consumer broadband connectivity, bringing fast bandwidth to the home;
- Unprecedented innovation, creativity and expansion within the video game market.
Pioneering the delivery of rich interactive media to the home, OnLive will change the way that entertainment applications are created, delivered and consumed.
It’s set to Launch June 17, 2010. They have partnered with EA Sports, Ubisoft, AMD, Gameloft….ect.
The actual game is hosted on the company’s servers, and streamed in real-time to the customer’s PC or TV. The company spent several years developing technology so that gamers would not experience any controller delays. The service has been in beta tests for the last several months. It’ll become commercially available on June 17 for $14.95 per month – though that fee will not cover the additional costs of buying or renting games. Prices for games will be set by publishers and be announced as the games become available. OnLive is part of a larger trend in the video game industry, which is moving aggressively to new digital distribution models. While any games are still sold as packaged goods through retailers, more services are allowing gamers to buy and download games through the Web.
Console makers such as Microsoft Corp. MSFT 29.11, Sony Corp. SNE 37.94, and Nintendo NTDO 38.30, all operate online game channels.
Whether OnLive succeeds or not I believe Sony, Microsoft, and Nintendo already see this as a threat as cloud computing takes hold. Sony has already launched a cloud themselves coded “PS Cloud”
The real threat is to GME
Or opportunity for investors as we cannot recommend Gamestop as a lucrative long term investment. You’re hearing this first here! Gamestop will follow BlockBuster’s path to non existence of course if they can adapt as Kodak has done so the past decade. (Odds of succeeding very slim 20%) Games of the future will be streamed online rather purchased via street stores. The only caveat that remains which gives Gamestop some time for survival (3 years) is that the infrastructure is not in place to transfer fast and constant stream of High Definition over lines. BUT….Google and Cisco recently stated they have the routers and Technology to launch super high speed Internet connections. (CSCO splashed the headlines this past Tuesday. It’s ironic how everything relates to one another)
Take this note of warning to GME investors first heard here!!
Tags: Blockbuster, cloud computing, gamestop, kodak. hpq, microsoft, netflix, onlive, sony
Posted in Large Cap Stocks, Technology Stocks | Comments Off
August 30th, 2010
The DJIA fell 140.92 points, or 1.4%, to end at 10,009.73, near session lows. The Dow is currently off 4.4% for August, with only one trading session left in the month.
The Commerce Department reported that personal spending climbed .04% in July more than the expected rise of 0.3% – the figures were quickly overshadowed by discouraging personal income data. More specifically, the government said personal income rose only 0.2% last month, falling short of economists’ prediction for 0.3% growth, and leading many to believe that the jump in spending is only temporary. Furthermore, the disappointing results loomed even more ominously ahead of Uncle Sam’s highly anticipated employment figures for August, which are set to hit the Street on Friday. Against this backdrop, stocks extended their retreat through the final hour of trading, with the Dow Jones Industrial Average harboring a triple-digit deficit by the time the closing bell mercifully rang.
In what is going to be a busy week on the economic-data front, today’s sell-off is rather disappointing, as it continues to show the bulls can find no consistent buyers.
The problem is Friday’s unemployment number, and investors may be staying on the sidelines concerned about it. Businesses should step up and start hiring people or we need one more shot of stimulus.
Tags: consumer spending, correction
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August 30th, 2010
The DJIA is down more than 40 points. The S&P is also down. All key S&P sectors are lower, led by financials, consumer discretionary stocks and industrials. The major indexes ended the previous week with a rally after the Federal Reserve signaled it was ready to support the recovery with monetary policy. Still, the Dow, and S&P are on track to post a loss in August for the first time since 2005.
The Commerce Department said consumer spending rose 0.4 percent after being flat in June. The results were better than the 0.3 percent rise estimated by analysts polled by Reuters. Personal incomes rose 0.2 percent in July.
In corporate news, Hewlett Packard’s shares are up more than 3 percent as the company’s board announced plans to buy back $3 billion in stock in the fourth quarter.
On the merger front, Genzyme (GENZ) shares rose after the pharmaceutical company’s board unanimously rejected an $18.5 billion offer that translated into $69 per share from Sanofi-Aventis. The U.S. shares of Sanofi were modestly higher. Intel (INTC) shares are lower after news it will buy the wireless unit of German chipmaker Infineon // (IFNNF) for $1.4 billion in cash. The unit will be operated as a standalone business.
Also, 3M // (MMM) // shares were down more than 1 percent after the company said it would buy biometric identification systems company Cogent // (COGT) // in a deal valued at $943 million. COGT is up more than 20%.
Tags: 3M, COGT, Infineon, intel, July consumer spending report, MMM
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