Archive for March, 2010

DJIA Down But Ends Quarter Positive

Wednesday, March 31st, 2010

A double dose of downbeat economic data weighed on stocks today, as reports on business activity and unemployment gave the bulls a one-two punch. First, the Institute for Supply Management-Chicago’s business barometer fell to 58.8% in March, marking a steeper-than-anticipated slide from February’s reading of 62.6%, and pointing to milder-than-forecast manufacturing activity in the Midwest. Elsewhere, the ADP’s employment report indicated that private-sector firms issued 23,000 pink slips last month – a surprise to economists, who predicted a gain of 50,000 jobs. With the Labor Department’s highly anticipated nonfarm payrolls report slated to hit the Street on Friday, today’s dismal data left an ominous taste in the mouths of bulls, prompting the major indexes to settle south of breakeven. The ADP report is closely watched ahead of the government’s jobs report on Friday.

This was a shocker that should raise some questions about Friday’s employment report.  I think markets are going to view the anticipated numbers on Friday negatively. Markets would be forced to correct this current rally. We could see a short term pop in private sector job growth in the spring and summer similar to the swing we have seen in inventories. Firms that have needed workers but refused to hire will start doing that. But once they add those workers, they may not be in any mood to hire any more. We won’t see encouraging numbers until the April- May report. Here‘s a way to profit in anticipation of disappointing numbers for Friday as a precaution.

In Europe, Moody’s downgraded its credit rating on five Greek banks, including National Bank of Greece. This comes amid news that Greece will issue a U.S. dollar-denominated bond in late April or early May.

On the commodities front, oil settled at a 1 1/2-year high above $83 a barrel after official U.S. inventory data showed a slight but unexpected build in crude stocks. The dollar retreated from a three-month high against the yen and fell against the euro while gold rose more than $10, settling around $1,114 an ounce.

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Obama to Permit Drilling Off VA & Gulf Coasts

Wednesday, March 31st, 2010

This law change can only benefit companies that have a strong presence in the coast. We had mentioned the two oil and gas exploration companies in our Large Cap Selection here, that I believe would benefit handsomely. VLO and WMB.

So onto the story! In a move that could help win Republican support for other energy initiatives, President Obama will announce plans Wednesday to open large sections of the eastern Gulf of Mexico and an area off the Virginia coast for oil and natural gas drilling. This will set America on a path to energy independence that we must leverage our diverse domestic resources by pursuing a comprehensive energy strategy. The president will announce today additional measures that will boost domestic energy production and promote clean energy innovation.

The GOP has long championed additional domestic drilling to lessen America’s dependence on outside energy sources. And while the plan could help win Republican support for other White House initiatives, it won’t find many fans among environmentalists. The proposal includes lifting a 20-year ban on drilling off the Virginia coastline, while putting the clamps on sites that had been approved off the coast of Alaska. Additionally, the interior department would be authorized to conduct seismic surveys off the south and mid-Atlantic coasts to determine the quantity and location of potential oil and gas resources to support energy planning. The administration has been weighing the pros and cons of offshore drilling since it took office and put the brakes on a Bush-era proposal which called for drilling along the East Coast and off the coast of California. An administration official said, as part of the new plan, Interior will conduct the first new offshore oil and gas sale in the Atlantic Ocean in over two decades as part of a lease sale 50 miles off the coast of Virginia. A senior Interior official said in January that drilling off Virginia’s coast would be delayed past the original 2011 leasing date. The Bush plan had called for leases to be offered in November 2011 but it was not immediately clear whether the Obama administration would stick to that schedule. The proposed Virginia lease area, located about 50 miles from shore, may hold 130 million barrels of oil and 1.14 trillion cubic feet of natural gas, based on Interior Department estimates.

In addition, the Interior Department will continue lease sales in the Central and Western Gulf of Mexico, which have proved to have sizable reserves. Much of the Eastern Gulf is currently under a congressional moratorium on oil and gas operations. The Interior Department’s plan would open up about two-thirds of the available oil and gas resources in this region in the event that the moratorium is lifted, the official said. Military training in the Eastern Gulf will be protected and drilling activities will occur more than 125 miles from the Florida coast.

Proposed oil and gas leasing in Alaska’s Bristol Bay will be canceled out of concern for protecting sensitive areas of the Outer Continental Shelf from environmental dangers.

This could affect companies like Royal Dutch Shell RDSA-LN // which has expressed interest in the region, as well as ConocoPhillips COP, BP BP-LN and Statoil. Four pending lease sales in the Chukchi and Beaufort Seas in North Alaska will be canceled and those areas reserved for future scientific research to determine if they are suitable for further leasing. At the same time, a previously scheduled lease sale in Alaska’s Cook Inlet will proceed. Congress allowed a prohibition on offshore drilling to expire in 2008 and former President George W. Bush lifted a drilling moratorium that year.

The expanded offshore drilling is part of a larger effort by the White House to promote energy independence.

Obama will introduce the measures during an address at Joint Base Andrews Naval Air Facility Washington late Wednesday morning. On Thursday, the Environmental Protection Agency and the Department of Transportation will sign an agreement establishing fuel economy standards for cars and trucks for model years 2012-2016.  The White House is “leading by example” and will also announce the purchase of 5,000 hybrid vehicles for the federal fleet.

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Market Ekes Out a Gain on a Choppy Day

Tuesday, March 30th, 2010

The DJIA 10,907.42 ended the day on a slim gain of 11.6 points, or 0.1%, as exactly half of its 30 components made the trek higher. Verizon Communications (VZ) and 3M Company (MMM) paced the 15 advancing blue chips, while AT&T (T) set the pace for the 15 laggards. While today’s climb seems relatively tame, it actually marks the Dow’s first close above 10,900 — as well as its highest daily close since Sept. 26, 2008. Meanwhile, the S&P 1,173.27 finished almost flat, adding just 0.05 point by the close. Today’s stagnant action aside, the SPX is still poised to notch a key victory above its 160-month moving average in tomorrow’s trading.

Despite a round of generally positive economic data, stocks had trouble finding a foothold on positive ground today. Bright and early, investors learned that the S&P Case-Shiller home-price index fell 0.7% in January, marking its slimmest annual decline in nearly three years, while home prices edged 0.3% higher on a monthly basis. Elsewhere, the Conference Board reported that its consumer confidence index jumped to 52.5 in March, reversing a portion of the previous month’s steep drop. However, traders also considered a dismal bond sale by Greece, along with a credit-rating downgrade for Iceland from Standard & Poor’s. With concerns about the global economy still weighing heavy and with the week’s marquee payrolls report looming on Friday most traders seemed content to watch the market chop sideways throughout today’s session.

Still to Come:

WEDNESDAY: Fed ends mortgage-buyback, TALF programs; weekly mortgage apps; ADP employment report; Chicago PMI; factory orders; weekly crude inventories; Fed’s Lockhart speaks; Feinberg speaks; Earnings from Dollar General, Rite Aid, Research In Motion
THURSDAY: March auto sales; Challenger job-cuts report; weekly jobless claims; construction spending; ISM manufacturing index
FRIDAY: March jobs report; Stock market closed in observance of Good Friday; Bond market closes at noon

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Verizon to Get IPhone Within 12 Months

Tuesday, March 30th, 2010

On March 3rd I stated here, that Apple would be on the Verizon market within time. News broke across headlines this morning stating just that. Apple Inc., trying to build on the success of its iPhone, is developing a new version, one of which will work over the Verizon Wireless network.

Mass production of the Verizon Wireless phone is rumored to be scheduled for September. The other new iPhone may debut this summer.

AT&T Inc. has been the exclusive US carrier for the iPhone since its debut in 2007, gaining an advantage over rivals in the smart-phone market. An agreement with Apple would let Verizon Wireless tap rising demand for the iPhone, which has sold more 42 million units. The iPhone, which lets users surf the Web, listen to music, and watch videos, consumes about twice the bandwidth of other smart-phones. That’s strained AT&T’s network, particularly in major cities such as New York and San Francisco. The company has said it is spending an extra $2 billion this year to help ease capacity crunches. Apple continues to refuse to comment on rumor and speculation.

Apple named AT&T as the provider of wireless service for its iPad tablet computer in January. Verizon and AT&T are both beginning to offer more kinds of devices, such as low-cost computers, as they seek new ways to keep growing. The Ipad seems to have experienced a minor shipping delay has just made its debut that much more exciting. According to published reports, Apple moved back the shipping date for its iPad tablet to April 12th for customers who placed pre orders. (However, those who ordered the tablet before Sunday, March 28th will still get it Saturday, April 3rd.)  Although there’s no comment for Apple about the delay it could be due to overwhelming demand. Analysts for Morgan Stanley wrote in a note Monday they expect Apple to ship about 2.5 million units in its first quarter on the market, and more than 6 million units this year.

Two Taiwanese companies are rumored, Hon Hai Precision Industry Co. and Pegatron Technology Corp., are making the new phones on the CDMA network.

If the iPhone were to become available on Verizon, it could be a significant blow to AT&T T 26.10, which has enjoyed great success with the phone since it hit the market in 2007. Shares of AT&T slumped nearly 3% in after-hours trading on Monday following the report. Verizon shares were up 3.7%, while Apple rose 2.5% in the evening. This proves another devastating blow to RIMM and only strengthens my play on Apple that I had advised on March 3rd post. It will continue to trade at an all time highs. Currently trades $237.00 Up 14% from my initial announcement.

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Stocks Rise to Increased Consumer Spending

Monday, March 29th, 2010

Stocks kicked off the week on a high note today, as the Street cheered about encouraging economic data. More specifically, the Commerce Department reported that consumer spending accelerated by 0.3% in February — in line with economists’ expectations, and marking the fifth straight monthly increase. The data boosted investors’ confidence ahead of the Labor Department’s highly anticipated monthly employment report, slated to hit the Street later this week. Meanwhile, easing concerns about Greece’s sovereign debt and robust economic indicators out of China were a boon for crude and gold, with commodity concerns blazing the broad-market path into the black. 

The DJIA 10,895.86 finished 45.5 points, or 0.4%, ahead, as 23 of its 30 components ended higher. Hewlett-Packard (HPQ) paced the seven decliners, while Boeing (BA) led the charge into the black amid positive news concerning the 787 Dreamliner.

The S&P 1,173.22 also explored positive ground throughout the entire session, settling on a gain of 6.6 points, or 0.6%, to extend its lead atop its 160-month moving average. Finally, the Nasdaq 2,404.36) advanced 9.2 points, or 0.4%, with Apple Inc. AAPL lifting the tech-rich index amid massive pre-iPad excitement. The Nasdaq is now on pace to finish the month atop the 2,400 level for the first time since May 2008.

Crude futures finished in the black today, as a weaker greenback made dollar-denominated commodities cheaper for holders of foreign currencies. In addition, a Chinese government researcher predicted the country’s annual economic growth to reach 12% this quarter, boosting expectations for escalating fuel demand from the world’s second-largest oil consumer. Against this backdrop, crude oil for May delivery added $2.17, or 2.7%, to settle at $82.17 per barrel.

The ailing greenback was also a boon for gold futures today, with the dollar ticking lower against the euro after Greece sold 7-year bonds to help ease its deficit. In addition, the World Gold Council said Chinese gold demand could double in the next decade, giving the malleable metal an added lift. By the close, gold for June delivery – the most active contract – advanced $6.10, or 0.5%, to finish at $1,111.50 an ounce.

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Obama Set To Expand Home Loan Modifications

Friday, March 26th, 2010

With millions of foreclosures expected over the next five years the Obama administration on Friday plans to announce adjustments to its $75 billion mortgage-modification program to assist a greater number of unemployed homeowners. The Obama administration plans to implement new measures to slow the pace of home foreclosures, even as concern grows about the effectiveness of the federal government’s expensive intervention program. This only supports my argument that the government fears the housing double dip that I have been saying all along. We’re not out of the woods. Great step forward, but will only add more to the deficit that are kids and their kids would have to pay back.

“These program adjustments will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own,” according to an administration official.”The program modifications will expand flexibility for mortgage servicers and originators to assist more unemployed homeowners, and to help more people who owe more on their mortgage than their home is worth because their local markets saw large declines in home values.” In other words homeowners that are underwater will be assisted. The White House’s Home Affordable Modification Program was designed to help unemployed borrowers who are underwater on their mortgages by writing down principal.

The government has provided support to the troubled housing market through tax credits for buyers and by essentially taking over mortgage giants Fannie Mae FNM 1.07, and Freddie Mac FRE 1.28.Another stimulus measure, the Federal Reserve’s $1.25 trillion program to buy mortgage-backed securities, is set to wind down at the end of this month. The private market is to help facilitate further MBS purchases in place of the government.

The Obama administration will tap funds from the Troubled Asset Relief Program proceeds to pay for the expanded mortgage assistance.

National home prices have fallen about 30% from their peak in 2006. Earlier this week, the Commerce Department reported sales of new homes dropped to a record low.

Just this week Bank of America BAC and Citigroup C announced plans to enter the loan modification program prior to enactment. Facilities are set to launch in April. The plan works like this: The government will provide the banks not homeowners further funding. Joe Smo owns a home that he purchased at the height of the market for $100,000. He’s underwater 20%. BAC will provide a “forbearance” to the 20%  underwater. The homeowner will have 5 years, if qualified, to pay off the $20,000 underwater interest free. The original loan will now fall to $80,000 making the home 100% loan to value or LTV meaning no equity in house is available. The original loan gets modified to accommodate the forbearance. Interest rates will be fixed and payments will be lowered.

In my opinion, this is a great idea for those who have a job and are willing and able to pay off the underwater amount interest free. But I’m not sure if I’d want to pay the amount that’s underwater in the first place. The banks are getting greedy once again. Creative plan at the works when you ensue a fake support propaganda. The problem is people have bought beyond their means. To make this work and avert a second dip in housing, you must forgive all underwater amounts expanded to all homeowners. That is a true similus package at work. Banks have already written off these mortgages that are deemed foreclosed or on the verge. This plan will only delay the inevitable once again. This supports the bank’s cause but not consumers. I’d purchase US banks as this provides further funding to support their books and bottom line. Long BAC and C

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US Stocks Erase Gains

Thursday, March 25th, 2010

US markets opened up strong with the bulls taking control. An improved outlook from wireless-chip manufacturer Qualcomm QCOM 42.19, bolstered the technology sector, while robust results from electronics retailer Best Buy BBY 42.66, helped boost consumer discretionary issues. 1st quarter earnings are showing good signs for the first half of the year. Earnings carried the DJIA up 60 points by 10:30. Further adding to the bulls case were comments made by Bernanke as the U.S. economy still needs help from the Fed’s low-interest-rate policy but the central bank is prepared to begin removing its extraordinary stimulus measures as economic expansion “matures,” Bernanke told the House financial-services committee in a hearing about the Fed’s exit strategy. This carried the DJIA up further to 110 points.

Then by 2 PM, markets began teetering. Trichet told a French TV network that Greece having to go to the IMF for aid was a “very, very bad” thing and that the European Union isn’t doing enough. Those comments sent the dollar soaring against the euro and commodity prices lower. Material and energy stocks were the day’s worst performers. Market finished up 5 points erasing the 110 point gain. 

Treasury prices continued to slide after another weak auction: The seven-year saw a high yield of 3.374 percent and a bid-to-cover ratio of 2.61.

Even in a bull market, prices don’t go up every day, reiterating my notion that the market is due for a minor correction of 2% to 3%t. I think tech is going to lead the way in this first-half rally, but that the market will peak sometime in the second quarter or early third as the realization sets in that taxes on the wealthy are going up and they’re going to keep going up given all the U.S. debt piling up, plus a lot of adjustable-rate mortgages piling up.

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Futures Head Higher Shrugging Yesterday's Losses

Thursday, March 25th, 2010

Stocks look set for a rebound from the previous session’s sharp declines Thursday, with stock index futures rising and European markets higher. U.S. stock futures retained the bulk of their gains Thursday after the government said Americans filing for jobless benefits fell to its lowest reading since early July. 

Futures largely shrugged off news that weekly jobless claims dropped slightly to 442,000, shedding a few points on the Dow but still positive.

Solid company performance helped set the tone early on, with Best Buy BBY  44.18  shares surging more than 8 percent after the company smashed fourth-quarter earnings expectations though ConAgra CAG  26.10 fell after matching estimates.

Other events on the economic calendar include the EIA’s weekly report on natural gas inventories at 10:30 am, and the Treasury’s $32 billion sale of 7-year Notes, with the results available shortly after 1 pm. Thursday will also feature testimony from Federal Reserve Chairman Ben Bernanke on the topic of exit strategy.

Overseas, attention turns to a two-day gathering of European leaders amid disputes throughout the euro zone on what type of support, if at all, to offer Greece. The European Central Bank relaxed collateral rules that will make it easier for Greek lenders who seek funding next year. Also on the sovereign debt front, the Dubai government reportedly will give $9.5 billion in new funding to support the restructuring of Dubai World and Nakheel.

Database software giant Oracle is among the companies scheduled to report after the closing bell.

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Stocks End Down After Huge Rally

Wednesday, March 24th, 2010

Sovereign debt concerns are ringing bells again. 

After tapping fresh highs in Tuesday’s session, the major market indexes pulled back today as the bulls took a breather. Weighing on stocks were debt concerns from across the pond – though this time Portugal took some of the heat off Greece. More specifically, Fitch Ratings slashed its credit rating on the nation, one notch to AA- and warned that another downgrade could be on the way. Fitch, predicting a slower economic recovery compared to its euro zone peers. Meanwhile, the Commerce Department rubbed salt in the bulls’ wounds, announcing that new home sales unexpectedly fell to a record low in February, dropping a steeper-than-predicted 2.2% in the wake of unfavorable winter weather. Against this backdrop, stocks shaved a healthy portion of their weekly gains, with all three indexes finishing south of break even. Which PIIGS of Europe will fall to prey to the gavel of the rating agencies? Spain and Italy is next. My take is Spain then Italy. What a sovereign mess!

Crude futures tumbled to a seven-session nadir today, thanks to a heftier-than-expected increase in domestic supplies, as well as a strengthening dollar. The Energy Information Administration (EIA) said crude inventories advanced by 7.25 million barrels last week, significantly exceeding economists’ forecast of a 1.4 million barrel surplus. Meanwhile, debt woes out of Europe fueled the greenback higher against most of its rivals, making dollar-denominated commodities – like oil – more expensive for holders of foreign currencies. By the close, May futures crude oil surrendered $1.30, or 1.6%, to finish at $80.61 per barrel.

Gold futures also retreated in the wake of a stronger dollar. Ratings downgrades for Portugal pressured the euro to a 10-month low against the greenback, as commodities traders grow more concerned that the continent’s debt concerns span wider than Greece. Against this backdrop, gold for April delivery gave up $14.90, or 1.4%, to settle at $1,088.80 an ounce.

Treasury prices extended losses as investors soured on the latest round of debt auctions, greeting a sale of five-year notes with low demand. The $42 billion sale fetched a high yield of 2.605 percent, and the bid-to-cover ratio was 2.55. This may be an indication of just how skittish some investors are feeling about the fiscal soundness of the United States, in light of big government spending for health care and other costly programs. The health-care bill will yield trillions of dollars in debt.

On the News Agenda:

THURSDAY: Toyota class-action hearing; weekly jobless claims; Bernanke testifies before House panel on exit strategy; Fed’s Pianalto speaks; seven-year auction; Earnings from Best Buy and Oracle
FRIDAY: Final read on Q4 GDP; consumer sentiment; Fed’s Warsh, Bullard speak

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Stocks Soar to New Highs, Dell on Fire

Tuesday, March 23rd, 2010

The major market indexes continued to explore new heights today, with help from a batch of better-than-expected housing data. More specifically, the National Association of Realtors said existing home sales backpedaled by 0.6% to an annual rate of 5.02 million in February, narrower than the expected decline to 5 million units. While sales of previously owned homes are now at their lowest level in eight months, today’s data left the Street optimistic ahead of the Commerce Department’s monthly report on new home sales, slated for release tomorrow. Against this backdrop and thanks to some long-awaited closure on the health care front stocks extended their rally into the close, with the bulls on pace for a solid first-quarter finale.

The DJIA gained 102.94, or 1 percent, to close at 10,888.83, another 1  1/2-year closing high. Kraft KFT  30.78 and Pfizer PFE  17.54 were the biggest gainers. The S&P 500 gained 0.7 percent, with industrial and technology the best-performing sectors. The tech-heavy Nasdaq climbed 0.8 percent.

Several large caps hit new 52-week highs, including Kraft KFT  30.78, Apple AAPL  228.40 and Cisco CSCO  26.64. Two of my plays mentioned in my Large Cap Fund here.

This came after stocks rose Monday, with the Dow closing at a 1 1/2-year high as investors were relieved that uncertainty surrounding health-care reform was lifted with the weekend passage of the bill. The President signed the legislation into law earlier today. The Senate this week will take up a package of changes suggested by the House.

Commodities

Crude futures finished a choppy session in the black, overcoming an early deficit stemming from a stronger dollar. Helping black gold rebound was a promising report from MasterCard, which indicated that U.S. gasoline demand jumped by 1.4% to 9.66 million barrels in the week ended March 19 – the highest level of weekly consumption since late June 2009. By the close, crude oil for May delivery – which assumed front-month status today – added $0.31, or 0.4%, to settle at $81.91 per barrel.

Gold futures also nudged higher today, snapping a two-session retreat as the greenback trimmed its lead against a basket of foreign currencies. In addition, some analysts attributed the metal’s rebound to steady demand from Asia, with India – the global leader in gold consumption – wrapping up its wedding season. Against this backdrop, April-dated gold futures advanced $4.20, or 0.4%, to finish at $1,103.70 an ounce.

DELL

On March 10, I reported that DELL was set to breakout. Read here. Dell was priced @ $14.18 at the time while the April $15 Calls were priced at .15. Well ladies and gentlemen, sure enough with patience on our side, it has now broken resistance today to close @ $15.22. Dell is now up 7.33% while the call closed up to .53 for a 253% gain. The best part, we’re not done. As I mentioned last week there’s plenty of leg on this run. My target here is $16.50-17 by the April16 expiration which by then should garnish us a +500% gain. Sit tight and enjoy the ride!!! If you haven’t joined us, it’s not too late.

ACE

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