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Post by cyclops on May 29, 2011 18:07:41 GMT 10
U.S. equity markets managed to shake off eurozone debt fears to close little changed on the week. The S&P 500 declined 0.2% while small-cap indices like the Russell 2000 (+0.9%) outperformed.
Seven of the 10 S&P sectors finished negative on the week, with the declines led by defensive sectors such as utilities (-1.7%), health care (-1.2%) and consumer staples (-1.0%). Of the three outperformers, materials (+2.1%) and energy (+2.0%) showed strong gains.
The market ended last week worried about the eurozone debt crisis, and picked up where it left off on Monday. U.S. equity markets fell sharply after Standard & Poor's cut its ratings outlook on Italy from stable to negative and following weaker-than-expected manufacturing PMI data in both China and Europe.
But U.S. markets stabilized on Tuesday and experienced modest rebounds on Wednesday, Thursday and Friday to close around unchanged on the week.
The headlines out of Europe initially sent the euro lower this week, but it also rebounded, albeit in volatile trade. The subsequent weakness in the dollar did not have it usual effect on the commodity market, however. Metals traded higher, but energy and agricultural futures experienced mixed, directionless trade.
Treasuries continued to extend higher, with the exception of some profit-taking on Wednesday, aided by three longer-term auctions that experienced strong demand. The U.S. Treasury sold $99 billion in 2-, 5- and 7-year Notes, with each auction experiencing strong bid-to-cover ratios as the combination of weak U.S. economic data and the eurozone debt crisis has investors piling into the relative safety of Treasuries.
This week's economic calendar was thin ahead of the long weekend. New Home Sales surprised to the upside in April, but that merely offset the weak Existing Home Sales figure. The market shrugged off weak Durable Goods Orders in April due to strong upward revisions in March, but could not look past an increase in the Initial Claims level to 424,000. If claims remain elevated next week, it may suggest that the labor market recovery is weakening.
U.S. markets are closed Monday for Memorial Day. For the remainder of the week, new developments in Europe and employment data in the U.S. will be in focus. In addition to the jobless claims report, the May employment report will be released on June 3. It remains to be seen whether that will be enough to offset the summer doldrums.
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Post by cyclops on Jun 4, 2011 20:23:43 GMT 10
The stock market tumbled 2.3% during the holiday-shortened week following weaker-than-expected job growth in the U.S. and continued concerns over Greece. Treasury yields tumbled and the dollar index declined.
All 10 sectors fell at least 1.0%. Cyclical sectors consumer discretionary (-3.2%), materials (-3.2%) and industrials (-3.1%) saw the biggest declines. The materials sector is now in negative territory for the year, joining the financial sector.
The bulk of this week's decline occurred Wednesday as stocks dropped 2.2%. Risky assets came under pressure following a disappointing private employment reading and a weaker-than-expected ISM manufacturing reading. While the overall ISM number is still indicative of expansion, the pace of change proved to be the upsetting factor.
Negative news regarding Greece pushed stocks even lower late in the day.
Moody's. Rating Service cut the rating of Greek debt to Caa1 from B1, and assigned a negative outlook, noting a high probability of default. Historically, sovereign debt that is downgraded to Caa1 or below typically defaults around 20% of the time within one year and 35% of the time within three years.
The May employment report marked the big economic item of the week. Total nonfarm payrolls rose just 54,000 (Briefing.com consensus +169,000) while private sector payrolls rose 83,000 (Briefing.com consensus +180,000). Both numbers were well below averages for the prior three months, which were 220,000 and 244,000 respectively.
The unemployment rate ticked up to 9.1% from 9.0% (Briefing.com consensus 9.0%); the average workweek held steady at 34.4 hours (Briefing.com consensus 34.3); and average hourly earnings increased 0.3% (Briefing.com consensus +0.2%). The latter was the most welcome surprise, yet the enthusiasm for the result is mitigated by the understanding that average hourly earnings over the last 12 months are up 1.8%, meaning they are negative on an inflation-adjusted basis.
The long-term unemployed (i.e., those workers unemployed 27 weeks or more) now account for 45.1% of the unemployed versus 43.1% in April.
Payroll gains in May were confined mostly to professional and business services and health care. Government shed 29,000 workers, most at the local level and concentrated in the education sector.
The positive is that there is still job growth, yet the prevailing negative today is that the job growth isn't strong enough to bring down the unemployment rate and it isn't strong enough to lift consumer confidence and consumer spending by a meaningful degree. Ironically, the latter understanding is a key reason why businesses are reluctant to hire in aggressive fashion.
The defensive posturing was evident in Treasuries, which were a favorite among market players as buying across the complex ran maturities to their best levels since early December. The 10-year yield dropped below 3.00% for the first time since December 6, and when it was all said and done the benchmark yield ended at 2.99%.
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Post by cyclops on Jun 11, 2011 18:30:13 GMT 10
The stock market suffered wide-spread selling, pushing the Nasdaq and Russell 2000 in negative territory for the year. As stocks stumbled, market participant sought the relative safety of Treasuries and the dollar.
All 10 of the S&P 500 sectors fell. Defensive investments outperformed on a relative basis with utilities down just 0.5%. On the downside, financials (-3.9%) and tech (-3.1%) got hit the hardest. Selling was broad-based with only 57 companies trading higher in the S&P 500. Heavyweight Apple (AAPL, -5.0%) weighed on the market. The company faced selling after it revealed its iCloud service and new mobile operating system.
Texas Instruments (TXN, -4.2%) issued a second quarter earnings warning, though losses from the announcement were limited on word the weakness is due to Nokia (NOK).
The major financials all saw selling pressure. Bank of America (BAC) fell 7.6% and Citigroup (C) shed 7.5%.
Fed Chairman Bernanke issued an economic outlook that failed to lift stocks because he didn't say anything all that surprising to alter a negative mood, and a trend, that has been prevailing for the last five weeks or so.
The Fed Chairman began his remarks with an acknowledgment that U.S. economic growth has been slower than expected so far this year, but that wasn't anything the market didn't already know. On balance, he kept to the party line that (a) commodity-based inflation pressures are transitory (b) the economy should regain momentum in the second half of the year and (c) economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
There was no hint of QE3, but anyone truly expecting him to go down that road with this speech was way ahead of themselves.
In economic developments, economic releases were mixed. The not-so-good news is that initial claims remained above 400,000 for the week ending June 4 while the good news is that the U.S. trade deficit narrowed to $43.7 bln in April from $46.8 bln in March, which was revised from an originally reported deficit of $48.2 bln, which will factor positively for GDP growth.
Briefly, initial claims rose 1,000 from the prior week to 427,000 and were slightly weaker than the Briefing.com consensus estimate of 423,000. A level above 400,000 is not typically consistent with strong labor growth. Although the latest reading doesn't cover the survey period for the June household survey on employment, it will nonetheless feed ongoing concerns about the frustratingly slow pace of recovery in the labor market.
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Post by cyclops on Jun 18, 2011 18:26:31 GMT 10
The S&P 500 was touch and go to the finish, fluctuating between a weekly loss and gain in the final minutes of trade but when it was all said and down it broke a six week losing streak with a slight advance of less than 0.1%. As the flat finish would suggest, performance was mixed. Materials and energy were the primary laggards, shedding 2.0% and 1.7%, respectively as commodity prices tumbled. The heavy-weight tech sector also acted as a drag with a decline of 1.2%. On the upside, consumer staples rose 1.2% followed by a 1.0% return in utilities. Retailers were among the top percent gainers thanks to a better-than-expected retail sales figure for May and upside earnings from and reassuring guidance from Best Buy (BBY). Best Buy rallied 9.3%, Sears Holdings (SHLD) gained 9.8% and JCPenney (JCP) advanced 15.0%. The underperformance of tech stocks acted as a drag on the Nasdaq, the worst performing of the major indices with a loss of 1.1%. Research In Motion (RIMM) plunged 24% after the maker of BlackBerry devices warned that revenue and earnings guidance will fall well short analyst estimates. The dollar gained and commodities fell, with crude oil shedding 6.2%. Treasury yields also declined with the 10-year yield at 2.93%. In economic news, initial claims for the week ending June 11 fell 16,000 to 414,000 (Briefing.com consensus 421,000) while continuing claims for the week ending June 4 were 3.675 mln (Briefing.com consensus 3.690 mln), a decrease of 21,000 from the preceding week. The four-week moving average for both series was little changed at 424,750 and 3.724 mln, respectively. The housing starts and building permits data also checked in better than consensus estimates. Starts in May rose 3.5% to a seasonally adjusted annual rate of 560,000 (Briefing.com consensus 540,000) while building permits jumped 8.7% to a seasonally adjusted annual rate of 612,000 (Briefing.com consensus 548,000). In overseas action, Europe settled mixed, recovering from sharp losses on news that German Chancellor Merkel and French President Sarkozy reached a new deal for a second bailout for Greece. They agreed that involvement of private bondholders should be voluntary. Asian indices posted sharp losses, with the Shanghai Composite shedding 2.3% as Chinese CPI came-in-hotter-than-expected and the People’s Bank of China raised its required reserve ratio for banks by 50 bps to 21.5%. The situation in Greece will continue to be in focus in the coming week in addition to earnings results from the likes of FedEx (FDX) and Oracle (ORCL).
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Post by cyclops on Jun 25, 2011 18:49:17 GMT 10
What a long, strange trip it has been -- and we're only talking about the last five days for the equity market. Once again, things were volatile, only this week it wasn't due entirely to Greece. Greece was certainly a big part of the trading equation, but if you'll allow us some acronymic license, the FOMC, the IEA, and the GOP also played prominent roles as well.
To begin, the week started on an upbeat note. The major averages advanced Monday and Tuesday on light volume in an anticipation trade rooted in the belief that (a) the Greek prime minister and his new cabinet would survive a no confidence vote at midnight on Tuesday and (b) the FOMC's policy directive and subsequent remarks from Fed Chairman Bernanke at the press conference would have a calming effect in an angst-ridden environment.
Participants got it half right. The Greek prime minister and his cabinet survived in a party-line vote, yet the FOMC and the Fed chairman in particular failed in their supporting role. The Fed's failings were as much about what it said as what it didn't say. In truth, the policy directive read almost exactly as conventional wisdom said it would.
There was an acknowledgment that the economic recovery was unfolding more slowly than previously expected, but that the slowdown reflected in part factors that are likely to be temporary. Commodity-based inflation pressures are expected to dissipate; QE2 will be complete at the end of June; and economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
The added wrinkle for the market is that Mr. Bernanke acknowledged at the press conference that the Fed does not have a precise read on why the slow pace of economic growth is persisting. Furthermore, the Fed's central tendency projections for real GDP growth in 2011 and 2012 were lowered from their April projections, yet the Fed chairman downplayed the likelihood of QE3 coming to fruition anytime soon. Mr. Bernanke said?the Fed is in a position of waiting and watching the incoming data to determine its next move (or non move). That is a fair and defensible position, but the market nonetheless would rather think the Fed is in a position of being ahead of the curve, particularly at this sensitive time for the employment picture and the Greek debt crisis. The sense that it isn't created some nervousness that the Fed isn't waiting and watching as much as it is waiting and wishing for the data to confirm its temporary slowdown views.
The market had been little changed for most of Wednesday, but it rolled over after the press conference and closed at its lows for the day. We suspect the late sell-off, which carried over into a 200+ point decline in the Dow early Thursday, emanated also from the unsatisfying thought that the market is going to be handcuffed by the economic calendar here and abroad for an extended period of time.
Sure enough, weaker-than-expected readings for purchasing manager indexes in China and the eurozone on Thursday, along with another disappointing initial claims report in the U.S.,helped grease the wheels of Wednesday's closing slide. At its low on Thursday, the S&P 500 was down 1.9% as the weight of the Fed's debatable outlook and the aforementioned data flattened investor sentiment. It didn't help matters either that press reports indicated GOP leaders walked out of budget deficit negotiations with Vice President Biden, saying talks had reached an impasse. That may just be political gamesmanship, but in this uncertain period, it can also be labeled poor timing. The market needs closure on the issue of the debt ceiling being raised by August 2 and the?current deficit attention disorder that is afflicting both parties is clouding the prospect of the debt ceiling being raised in time.? Undoubtedly, the ratings agencies aren't too keen on the latest developments. Still, it would be remiss not to add that the Treasury market barely batted an eye, even if the equity market did, at word of the impasse. That is because it continues to be fueled by safety trades related to Greece and signs of an economic slowdown, while at the same time persisting in the belief that a debt ceiling compromise will be achieved before it's too late. The yield on the 10-year note fell seven basis points this week to 2.87%.
Another big storyline from Thursday was the news that the IEA is releasing 60 mll barrels from strategic petroleum reserves (30 mll from the U.S.). That decision, it was said, flowed from worries about longer-lasting supply disruptions in Libya, although it was interpreted by many to be a tactical strike against speculators who are long the oil market. Oil prices, which were already down sharply in response to the data, remained under pressure in the wake of the announcement. Crude oil futures for August delivery, which sat above $114 per barrel at the start of May, settled the week just under $91 per barrel.
Attention will now be paid to whether the IEA intervention, and the threat of more to come, can keep prices from rising sharply from current levels. That will be a tall order if incoming economic data show improvement or further uprisings in the Middle East develop.
For now, though, the drop in oil prices has to be considered a positive change at the margin insomuch as it is helping to bring down gas prices and helping to quell inflation expectations.
But, wait, there was still more when it came to Thursday's action. We said earlier the S&P 500 was down as much as 1.9%, yet it ultimately ended the day down just 0.3%. The reported catalyst for the recovery bid was news that Greece reached an agreement with the EU and IMF on a new five-year austerity plan. We're not sure why it would react so strongly to the Greece headline. We guess it was the type of thing that sounded just good enough for a market that tested key technical support at the 200-day moving average to force weak-handed short sellers to cover their positions. It beat the alternative, we suppose, of hearing on a day like Thursday that they failed to reach an agreement.
The fact of the matter is that the Greek parliament still hasn't passed the plan. That vote comes next week and the outcome is as up in the clouds right now as the Greek gods. In brief, nothing got settled Thursday, but the idea that things didn't get any worse with respect to Greece held sway in the rebound effort.
The recovery vibes didn't last long though. Despite an upward revision to Q1 GDP (to 1.9% from 1.8%) and a durable orders report showing renewed growth in orders for nearly every sector in May, the market struggled on Friday. Basically, it gave back most of the ground it made up in Thursday's late rally, which is consistent with our thought that we were not quite sure why the market rallied like it did on the Greece headline on Thursday.
Friday's selling led to a 1.2% decline in the S&P 500 that left it down 0.2%?for the week. The Dow Jones Industrial Average slipped 0.6% for the week, but the Nasdaq, S&P 400 Midcap Index, and Russell 2000 rose 1.4%, 1.4% and 2.1%, respectively. Notwithstanding the concerns about Greece and an economic slowdown, risk aversion was not the default trade in the equity market.
Cyclical sectors outperformed noncyclical sectors by and large and growth stocks?outperformed value stocks. The sustainability of those trends in the coming week will likely hinge on Greece's austerity vote and the economic data that the Fed and everyone else are watching day-by-volatile day.
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Post by cyclops on Jul 2, 2011 22:33:27 GMT 10
As a reminder, the stock market is closed Monday in observance of the Fourth of July holiday.
The stock market rallied the most in two years ahead of the holiday shortened week. The major indices advanced ahead of and after the Greek parliament successfully voted on austerity measures that are needed in order to get a bailout and avoid default. As stocks rallied, the dollar fell, commodities gained and yields on Treasuries bounced higher.
Buying interest was broad-based – only seven stocks within the S&P 500 posted a loss. The 10 sectors gained at least 2.9%. Tech led the way, rallying 6.9%, followed by a 6.4% gain in industrials. Defensive sectors underperformed on a relative basis with Consumer staples up 2.9% and utilities gaining 3.4%.
The rally this week leaves only financials in the red for the year (-2.0%). The healthcare sector is still the top gainer (+14.1%) despite underperforming this week.
In corporate items, news that Bank of America (BAC) agreed to an $8.5 bln mortgage settlement with a bevy of influential investors. Shares rose 5.4%.
Credit/debit card companies rallied the most this week after the interchange fee cap was lowered by a lower-than-expected amount. MasterCard (MA) gained 15.4% and Visa (V) climbed 19.8%.
The market had a relatively limited reaction to economic data this week, though an upside surprise on ISM helped extend gains Friday.
Initial claims have levitated above 400,000 for many weeks now without any special factors to account for the uptick. The latest report didn't show anything different, as claims for the week ending June 25 were 428,000 (Briefing.com consensus 420,000), down a mere 1,000 from the week before. The 4-week moving average rose slightly to 426,750.
Although this initial claims report will not factor into the upcoming employment report for June, the persistent levitation above 400,000 will keep expectations for strong, nonfarm payroll growth in check. Payroll gains in excess of 100,000 are needed to support normal labor force growth and a stable unemployment rate.
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Post by cyclops on Jul 11, 2011 14:58:03 GMT 10
The stock market managed to squeeze out a modest gain during the holiday-shortened week despite disappointing employment figures.
Trade was mixed with five of the 10 sectors within S&P 500 posting a gain. Cyclical sectors energy (+0.8%), tech (+1.6%) and materials (+1.3%) all outperformed. Telecom (-1.3%) and financials (-1.1%), underperformed as they have year-to-date (telecom is up 4.4% and financials are down 3.1% for the year).
Retailers outperformed following solid same-store sales reports. Target (TGT) advanced 6.6%, Kohl's (KSS) climbed 6.5% and Abercrombie (ANF) gained 6.3%.
The main item this week was the employment report for July, which disappointed on every front.
Nonfarm payrolls rose a meager 18,000 (Briefing.com consensus +80,000); nonfarm private payrolls increased 57,000 (Briefing.com consensus +110,000); the unemployment rate rose to 9.2% (Briefing.com consensus 9.1%); the average workweek dipped 0.1 to 34.3 hours (Briefing.com consensus 34.4); and hourly earnings were flat (Briefing.com consensus +0.2%).
Separately, nonfarm payrolls for April and May were revised lower, with the former month going from 232,000 to 217,000 and the latter month going from 54,000 to 25,000.
The "real" unemployment rate, which factors for the total unemployed plus marginally attached workers and persons working part-time for economic reasons, jumped from 15.8% in May to 16.2% in June. That is tantamount to saying one in six workers over the age of 16 is either unemployed or underemployed.
In overseas news, Moody's downgraded Portugal's debt to junk status and the People's Bank of China again raised its one year lending rate Asian markets ended the week higher while European shares posted modest losses. In commodity action, gold prices rallied 4.1% as the CRB Index gained 2.0%. The dollar also advanced--climbing 1.8% against the euro and 1.1% against a basket of currencies.
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Post by cyclops on Jul 16, 2011 15:42:46 GMT 10
Stocks tumbled more than 2% as Europe debt concerns and the inability of U.S. lawmakers to reach a debt ceiling agreement weighed on sentiment. The major indices suffered broad-based losses, with less than 50 stocks within the S&P 500 advancing. Nine of the 10 sectors fell more than 1%. Financials (-4.1%) and industrials (-3.6%) faced the most selling pressure. The energy sector outperformed on a relative basis after settling unchanged. Fed Chairman Bernanke gave his semi-annual testimony to lawmakers. Bernanke stated that the Fed remains prepared to adjust monetary policy in the event that economic developments warrant such a move. Bernanke also noted that the Fed has reached a consensus on the steps involved in an exit strategy from current policy. European sovereign debt concerns continues to weigh on stocks. An emergency EU meeting prompted speculation that the EU may be considering including Italy in any new bailout packages. Meanwhile, Moody’s downgraded Ireland’s debt to junk. While the U.S. has extremely low borrowing rates currently, the country has debt concerns of its own. Major rating agencies Moody’s and S&P 500 both put the U.S. on review for a possible downgrade as uncertainty regarding the debt ceiling persists. S&P gave it a 50% chance that it will lower its long-term U.S. rating within the next 90 days. In corporate news, second quarter earnings reporting season unofficially started this week with Alcoa's (AA) report after the close Monday. A total of 13 S&P 500 companies reported earnings. Although 10 of them topped earnings expectations, only two of the reporting stocks posted a weekly share price advance. Alcoa missed EPS estimates by a penny, but posted better-than-expected revenue and offered a reassuring outlook. Shares fell 5.8% for the week. Banking giants JPMorgan Chase (JPM -2.0%) and Citigroup (C -8.7%) both saw their share prices decline despite posting upside EPS results. Shares of Google (GOOG 12.7%) rallied after the company handily topped EPS expectations. Revenue increased 24% y/y and EPS gained 36%. Earnings reporting season speeds up in the coming week. Operating earnings are projected to increase 14% y/y. Given the current uncertainty in the capital markets, guidance will be a key factor.
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Post by cyclops on Jul 23, 2011 20:33:04 GMT 10
Stocks rallied more than 2% as European leaders reached an agreement to bail out Greece. The main thrust (and surprise) of the headlines was not so much that a solution had been worked out for Greece, but that leaders were focused on controlling contagion risk by enhancing the flexibility of the European Financial Stability Facility (EFSF).
While details of Greece’s new bailout package continue to emerge, reports indicate EU leaders agreed to allow the EFSF to intervene in the secondary markets and provide liquidity, thereby aiding the European Central Bank and helping countries like Greece. In addition, the terms on the EFSF loans will be doubled from 7.5 years to 15 years and decrease interest rates from 5-6% to 3.5%. Private sector holders of Greek debt have agreed to take a 21% haircut on their bond holdings, equivalent to 37 bln euros.
The news gave a boost to stocks as nine of 10 sectors advanced. Tech, energy and financials outperformed. Defensive sectors underperformed, with telecom down 0.1%.
Among other investable assets, crude gained 2.6%, the dollar fell 1.2% and Treasury yields increased from 2.90% to 2.98%.
U.S. lawmakers are still trying to reach agreement on a deal to raise the debt ceiling. Current indications from prediction market Intrade suggest there is lower probability that a deal will be reached compared to one week ago.
In corporate news, it was a busy week on the earnings front with roughly 20% of S&P 500 companies reporting. Results were generally better than expected with about 75% of companies topping EPS estimates.
Widely-held names Apple (AAPL), IBM (IBM), Johnson & Johnson (JNJ), AT&T (T), Coca-Cola (KO) and Microsoft (MSFT) all topped EPS estimates. Apple was especially a standout, gaining 7.8% after blowing by estimates in its best quarter ever and on trailing basis surpassing Microsoft (MSFT) net income for the first time.
Investment banking giants Goldman Sacs (GS) missed estimates but its shares still rose 4.2% for the week.
The coming week brings another bevy of earnings reports, advance second quarter GDP, new home sales and consumer confidence.
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Post by countrylad on Jul 25, 2011 0:55:28 GMT 10
U.S. lawmakers are still trying to reach agreement on a deal to raise the debt ceiling. Current indications from prediction market Intrade suggest there is lower probability that a deal will be reached compared to one week ago. Bugger the country, politics is far more important. CL
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Post by cyclops on Jul 25, 2011 12:18:15 GMT 10
U.S. lawmakers are still trying to reach agreement on a deal to raise the debt ceiling. Current indications from prediction market Intrade suggest there is lower probability that a deal will be reached compared to one week ago. Bugger the country, politics is far more important. CL It appears that no matter where in the World you are politics takes precedence
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Post by cyclops on Aug 1, 2011 17:53:05 GMT 10
The major indices tumbled on concerns regarding the inability of Congress to reach a deal on raising the debt ceiling and sluggish second quarter GDP growth. Roughly one third of S&P 500 companies reported earnings this week, though the market's focus was on the debt situation. All 10 sectors within the S&P 500 ended in the red. Industrials tumbled 6%, materials gave up 5% and energy shed 4.6%. Despite the lack of debt deal, selling pressure in the equity market and risk of a debt downgrade, the 10-year Treasury surprisingly rallied, with the yield ending the week at 2.80%, a decrease of 18 bps. Equities have been taking the brunt of the punishment on the uncertainty regarding the U.S. debt situation. Prediction market InTrade places only a 7% chance the debt ceiling will be raised prior to July 31. There is an 82% chance for the ceiling to be increased by the end of August, so the market is pricing in a chance that the deal could be reached prior to the Aug. 2 deadline. In economic news, second quarter GDP rose just 1.3% (Briefing.com consensus +1.7%) on the heels of a downwardly revised and scant 0.4% increase in the first quarter.
With respect to second quarter GDP, the growth scales were tipped higher by positive contributions from exports, nonresidential fixed investment, private inventory investment, and federal government spending that was offset partly by negative contributions from state and local government spending. Real PCE was up just 0.1% after a 2.1% increase in the first quarter and contributed 0.07 percentage points to the overall change in real GDP. Real final sales of domestic product, however, were up 1.1% after increasing less than 0.1% in the first quarter. Real final sales is GDP less the change in inventories. The latest initial claims report brought a measure of good news. Claims for the week ending July 23 dropped by 24,000 to 398,000. That is the first week below 400,000 since early April; importantly, there were no special factors behind the improvement. In corporate news, it was a busy week in terms of earnings reports. Roughly one third of S&P 500 posted their quarterly results and now about 70% of companies have reported. About 68% of companies have posted earnings ahead of analyst expectations.
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Post by cyclops on Aug 6, 2011 13:33:22 GMT 10
Aggressive selling this week took the S&P 500 more than 7% lower for its worst weekly performance in more than two years. The rout was rooted in concerns about the global economy, the lingering threat that the U.S. could lose its coveted AAA credit rating, and tenuous fiscal and financial conditions in Europe.
Efforts by legislative leaders to raise the debt ceiling and institute new fiscal measures were discarded early this week when a disappointing ISM Manufacturing Index reading of 50.9 was released. That was followed by an ISM Services Index reading of 52.7. The consensus among economists polled by Briefing.com had called for respective readings of 54.0 and 53.7.
The latest personal spending figures also disappointed. Spending reportedly slipped 0.2% during June, but had been broadly expected to increase by 0.1%. As a corollary, initial weekly jobless claims for the week ended July 23 failed to crack the 400,000 level. Still, by coming in at 400,000 on the nose, the tally remained below the upper bound (410,000) of the "Recovery Zone" for the second consecutive week.
The ADP Employment Change proved to be a directionally accurate indicator of the nonfarm payrolls report that was released on Friday. The 117,000 positions added to nonfarm payrolls during July exceeds the 84,000 job additions that had been broadly expected. More impressive is that private payrolls spiked by 154,000, which is greater than the consensus call for private payrolls to increase by 100,000.
The surprisingly strong pick up in hiring played a part in the headline unemployment rate's move to 9.1% from 9.2%, which is where it was widely expected to stay, but the dip is actually mostly due to a reduced labor force count.
The better-than-expected jobs data aren't necessarily enough to protect the U.S. from a debt rating downgrade by S&P, though. Even though the other agencies have affirmed their AAA rating on the U.S., S&P, which is the most influential outfit among the agencies, has yet to issue a decision. The threat that S&P could cut its rating on the U.S. was also factored into trade this week.
Fiscal and financial instability in the eurozone periphery not only spurred aggressive selling among the region's bourses, but imbued domestic trade as the threat of contagion exacerbated skittishness. Some of that concern was assuaged by an announcement on Friday that the European Central Bank will provide support to Spanish and Italian bonds if the two countries commit to specific reforms.
That announcement helped stocks rebound from the 2011 lows that were set during trade on Friday. From its early May high to its low on Friday, the S&P 500 was down almost 15%, which more than makes for an official correction. Even though the broad market measure was able to work its way up from the depths of its intraday low, it still suffered a weekly loss of more than 7%. That makes for its poorest weekly performance in since November 2008
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Post by cyclops on Aug 14, 2011 0:34:29 GMT 10
Following a week of extreme volatility, trading calmed down Friday. The U.S. major averages ended the week with two positive sessions, the first back-to-back gains since the recent correction began. That helped minimize the weekly decline following Monday's plunge and Wednesday's extension lower. The S&P 500 lost 1.7% on the week, with nine of the 10 sectors declining. Financials (-5.0%) saw by far the largest decline after Bank of America (BAC) led U.S. banks lower on worries regarding its Countrywide segment and potential capital issues and European financials sold off aggressively on concerns regarding the banking systems in a number of countries, particularly France. Materials eked out a gain of 0.2%. The market's focus to begin the week was domestic after Standard & Poor's became the first agency to downgrade the sovereign credit rating of the United States. The downgrade over the weekend from AAA to AA+ on political risks and the country's rising debt burden caused U.S. equity markets to nosedive Monday. The S&P 500 lost 6.7%. The FOMC responded on Tuesday when it attached a time frame to its federal funds target for the first time, calling for exceptionally low levels at least through mid-2013. Treasury yields did not spike following the S&P downgrade, and then surged to record lows on Tuesday (10-year 2.03%) after the FOMC made monetary policy more accommodative for a longer-than-expected period. Treasury auctions were also in focus this week, with mixed results. Following fairly solid support for the 3-year sale on Tuesday, the 10-year auction experienced strong demand on Wednesday, only to have the 30-year sale see exceptionally low demand on Thursday. Those results did not impact equity trading, though, as the U.S. major averages extended their recent declines Wednesday on the European banking concerns, only to regain that sharp sell-off on Thursday. The economic calendar was thin this week, but contained some notable results. Initial jobless claims hung around 400,000 for a third straight week, suggesting nonfarm payrolls could exceed 100,000 again in August, while retail sales was a second positive report for July. Somewhat offsetting that data was Michigan sentiment. The first economic data point for August plunged to 54.9, the lowest level since April 1980, though it is not surprising when one considers the survey was conducted during the debt ceiling fiasco. With fears of a slowing U.S. economy rising, next week's economic calendar takes on added importance. It includes housing starts and industrial production on Tuesday, PPI on Wednesday and CPI, jobless claims and existing home sales on Thursday. Developments out of Europe will also be in focus. Finally, even though second quarter earnings season has drawn to a close, a number of notable retailers report next week, including Lowe's (LOW), Home Depot (HD), Wal-Mart (WMT), Dell (DELL), Target (TGT) and HP (HPQ).
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Post by cyclops on Aug 20, 2011 20:51:09 GMT 10
Stocks started the week strong, but economic uncertainty took hold and sank risky assets across the world with the S&P 500 falling 4.7%. Treasuries rallied, with the 10-year yield hitting a record low below 2.0% and gold advanced to an all-time nominal high. Uncertainty regarding the state of Europe pressured stocks, especially financials. Germany's economy grew by just 0.1% in the second quarter and the eurozone GDP increased by just 0.2%. Germany's DAX equity index fell 8.6% for the week and is now down 21% this year. Asian indices also posted steep losses. Japan's Nikkei fell 2.7%. Cyclical sectors took a pounding, while defensive sectors outperformed as investors positioned themselves for a potential downturn. Tech dropped 8.0%, industrials gave up 7.1% and materials shed 6.9%. Defensive investments utilities climbed 1.9%, consumer staples and telecom ended with slight losses near the unchanged mark. Within the tech sector Google (GOOG -12.9%) shed 13% after the company announced it will acquire Motorola Mobility (MMI 54.7%) for $60 a share, a 60% premium. Dell (DELL -5.9%) came under pressure as the company's downside guidance cast a pall over its upside earnings surprise. Pessimism about the company's near-term prospects lends credence to concerns that some analysts have about tech spending amid a slowdown in macro activity. Hewlett-Packard (HPQ -27.0%) plunged 27% on word that the company plans to sell its PC business and purchase UK-based data analytics company Autonomy for $11 bln. HP also is pulling its devices based of a WebOS, which it acquired with the $1.2 bln purchase of Palm. In other corporate news, retailers Home Depot (HD 4.3%), Target (TGT 3.0%) and Wal-Mart (WMT 5.1%) posted better-than-expected EPS. Treasuries rallied as investors sought a safe haven. The 10-year yield dipped below 2.0% and settled the week at 2.07%, a decline of roughly 20 basis points from the start of the week. Gold prices rallied 6.3% as the precious metal broke through another all-time nominal high. Crude oil fell 3.8% on concerns of a slowing global economy. The dollar index fell 0.8%.
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