Stock Market Report 3-2-10

US stocks rose on Tuesday after United Parcel Service (UPS) and DR Horton released encouraging earnings reports.

Gains were broad based on Tuesday, with 28 of 30 Dow stocks rising.

UPS reported a drop in fourth-quarter profit, but forecast a sharp increase in 2010 earnings. Its stock rose over 1%.

The National Association of Realtors’ pending home sales index rose 1%, in line with expectations. The index fell 16.4% in the previous month. DR Horton, one of the top five US home builders, reported its first-quarterly profit in almost three years and its stock jumped 11%. Pulte Homes and Lennar Corp rose over 7%.

Amazon.com slid for a second straight day, falling 2%, and limited the Nasdaq’s advance.

The S&P 500 industrial sector rose over 1%. Cummins and Emerson Electric rose between 7% and 8%. Cummins is a US manufacturer of diesel engines and other power generation equipment. Emerson is an industrial conglomerate that produces technology used by the oil and natural gas industries.

Major automakers, including Ford Motor, General Motors and Nissan all reported improved January sales. Toyota, however, saw a bigger-than-expected decline in January sales, impacted by a major recall.

Credit card companies rose after analysts upgraded companies within the industry. American Express, Discover Financial Services and Capital One Financial rose between 2% and 3%.

So far, 48% of the S&P 500 companies have reported results. Analysts expect earnings to have tripled from the prior year, although the improvement is mostly due to cost cutting and easy comparisons to the fourth quarter of 2008. The financial sector is expected to lead the advance.

In other news, Moody’s Investors Service said the outlook for the US’ AAA credit rating remains stable even with the effects of the credit crisis and recession on government debt and fiscal flexibility.

Commodities

Stock Market Report 21-1-10

Wall Street suffered its worst slide of 2010 on Wednesday as investors worried that lending restrictions in China could hurt the global economic recovery.

Market breadth was negative. On the NYSE, losers beat winners by more than three to one. On the NASDAQ, decliners topped advancers three to one.

Commodity-related shares were hurt by concerns that China may curb its economic expansion. A stronger dollar also put pressure on commodity prices and commodity-related stocks.

Technology shares were among the biggest decliners after IBM gave a conservative outlook, despite reporting better-than-forecast quarterly sales and earnings. IBM shares fell 3.8%.

Healthcare stocks were down on Wednesday. An index of pharmaceuticals companies fell 1.1%. Healthcare stocks had risen the prior day on speculation that the healthcare system would face new obstacles following a surprise Republican election to the Massachusetts Senate seat.

Several banks reported earnings. Wells Fargo & Co and US Bancorp reported better-than-expected quarterly earnings, helped by recent acquisitions. The Bank of America reported a wider-than-expected loss, but said its credit problems were beginning to stabilise. The Bank of America said losses widened to US$5.2B in the fourth quarter of last year, partly due to the bank paying back government bailout funds. The company said the repayments shaved off $US4B from its bottom line. US Bancorp shares added 2.3% while the Bank of America gained 0.6%. Morgan Stanley reported its second-straight quarterly profit, one year after posting a significant loss. The financial firm said it earned US$617M for the quarter versus a loss of $11B a year ago. The result missed expectations, and shares in the company fell around 1%.

In economic news, building permits, a measure of builder confidence, rose to a 653,000 unit annual rate in December, from a 589,000 rate in November, the government reported. Permits were expected to rise to a 590,000 rate, according to a consensus of economists. However, housing starts fell to a 557,000 unit annual rate, from a 580,000 unit rate in November.

The Producer Price Index (PPI), a measure of wholesale inflation, rose 0.2% after climbing 1.8% in the previous month. Economists expected it to hold steady. The so-called core PPI, which strips out volatile food and energy prices, was flat versus forecasts for a gain of 0.1%.

Overseas Markets

Dow down 137 pts to 10,588 (10,517 – 10,720)

S&P 500 down 14 pts to 1,136 (1,129 – 1,148)

Nasdaq down 33 pts to 2,287 (2,269 – 2,304)

SPI 200 Futures down 31 pts to 4,806 (4,776 – 4,840)

FTSE down 92 pts to 5,421 (5,404 – 5,513)

Nikkei down 27 pts to 10,738 (10,725 – 10,861)

Shanghai SE Comp down 95 pts to 3,152 (3,148 – 3,255)

Commodities

WTI Oil down 2.0% to US$77.43/bbl

Gold down 2.4% to US$1,113/oz

Sugar (NY) up 0.4% to USc29.11/lb

Corn down 0.3% to US$3.32/bushel

Wheat down 0.6% to US$4.67/bushel

Natural Gas (Henry Hub) up 0.6% to US$5.54/MMbtu

Silver down 4.5% to US$17.91/oz

Platinum down 0.9% to US$1,630/oz

Palladium up 0.6% to US$469.25/oz

Copper (NY) down 2.6% to US$3.35/lb

Currency

A$ / US$ down 1.7USc to US$0.91 /A$

EUR / US$ down 2.8USc to US$1.41 /EUR

GBP / US$ down 0.6USc to US$1.63 /GBP

US$ / Yen up 0.5 Yen to 91.24 Yen/US$

Stock Market Report 20-1-10

US stocks rose in a broad-based rally as investors bought healthcare shares on bets that a potential Republican victory in Massachusetts’ Senate race could stall President Obama’s reforms and remove a threat to profits in the sector.

The S&P Healthcare Index climbed nearly 2%. Drug maker Eli Lilly rose 5%. Health insurers Humana and Aetna gained 3.6% and 4%, respectively.

All 10 S&P 500 industry groups traded in positive territory.

The Dow also received a boost from McDonald’s, which gained 2.3% on an analyst upgrade. 3M was another notable mover, rising 2%.

Kraft Foods was the biggest drag on the Dow, declining 1.1% after it agreed to a revised cash-and-stock deal to buy Cadbury for about US$19.6B.

In other deal news, Tyco International agreed to buy Brink’s Home Security Holdings for US$1.9B. Brink’s shares surged almost 31.6%.

Large-cap technology companies buoyed the NASDAQ. IBM is expected to report its quarterly earnings after market close. Apple was up 4.2% while IBM advanced 1%.

Citigroup reported a fourth-quarter loss that met analysts’ expectations as the third-largest US bank took charges linked to repaying government bailout funds. On the upside, the company said consumer credit losses dropped in the quarter and that it also set aside less money for bad loans during the quarter. Shares gained 3%.

The Bank of America and Morgan Stanley will report on Wednesday. Goldman Sachs and Google will report earnings on Thursday.

S&P 500 earnings are expected to have almost tripled versus those a year ago and revenue is expected to have risen 7%. However, the jump is largely due to a spike in financial sector results versus an easy comparison to the fourth quarter of 2008 amid the height of the financial crisis. Without the financial sector, earnings are expected to be down 8% and revenue is expected to decline 1%.

Overseas Markets

Dow up 116 pts to 10,725 (10,592 – 10,730)

S&P 500 up 14 pts to 1,150 (1,136 – 1,150)

Nasdaq up 31 pts to 2,319 (2,291 – 2,320)

FTSE up 19 pts to 5,513 (5,431 – 5,532)

Nikkei down 90 pts to 10,765 (10,749 – 10,867)

Shanghai SE Comp up 10 pts to 3,247 (3,237 – 3,269)

Commodities

WTI Oil up 0.8% to US$78.66/bbl

Gold up 0.7% to US$1,138/oz

Sugar (NY) up 4.9% to USc28.98/lb

Corn down 2.6% to US$3.33/bushel

Wheat down 1.7% to US$4.70/bushel

Natural Gas (Henry Hub) down 2.7% to US$5.51/MMbtu

Silver up 1.0% to US$18.82/oz

Platinum up 1.7% to US$1,650/oz

Currency

A$ / US$ up 0.1USc to US$0.92 /A$

EUR / US$ down 0.9USc to US$1.43 /EUR

GBP / US$ up 1.1USc to US$1.64 /GBP

US$ / Yen up 0.4 Yen to 91.14 Yen/US$

Stock Market Report 19-1-10

US markets were closed for the Martin Luther King Day.

Major US companies reporting later this week include the Bank of America, Citigroup, Morgan Stanley, Goldman Sachs, IBM, General Electric and Google.

European shares rose, lifted by a rally in mining and oil shares on the back of firmer commodity prices.

National benchmark indexes gained in all of the 18 western European markets, except Greece, Iceland and Luxembourg. Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 rose between 0.7% and 0.8%.

Trading was subdued, as US markets were closed for the Martin Luther King Day. Volumes on the European index were just 65% of its 90-day daily average volume.

Miners topped the gainers’ list as commodity prices advanced. BHP, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose between 1% and 4%.

Cadbury rose 1.8% on media reports that the Kraft Foods will increase its offer to at least 820 pence per share. Kraft Foods must make a revised bid for Cadbury by Tuesday. The Hershey Co., which is reportedly working on a possible bid as well, has until Saturday to make a bid under UK takeover rules.

International Power dropped 3.4% after saying talks with GDF Suez on combining some assets are no longer continuing. The biggest UK-based electricity producer had earlier rallied on speculation that GDF Suez is considering a tie up with International Power that may lead to a partnership.

Greece’s ASE Index slid 2.5%. Finance ministers from the 16 nations using the euro are meeting in Brussels as Greece struggles to cut a 2009 budget deficit that may reach almost 13% of GDP. Among notable movers, Titan Cement, Greece’s largest cement maker, sank 7.9%. Alpha Bank, the country’s third-largest bank, tumbled 7.7%.

L’Oreal, Nokia and Zodiac Aerospace advanced on analyst upgrades. L’Oreal added 2.1%, Nokia was up 1.6% and Zodiac Aerospace gained 5.4%.

Overseas Markets

FTSE up 39 pts to 5,494 (5,454 – 5,504)

Nikkei down 127 pts to 10,855 (10,781 – 10,895)

Shanghai SE Comp up 13 pts to 3,237 (3,202 – 3,238)

Rio Tinto plc up 0.89% to A$63.68 eq.; a 19% discount to prev Aust close A$78.32

BHP plc up 1.47% to A$36.54 eq.; a 16% discount to prev Aust close A$43.44

Commodities

WTI Oil down 1.8% to US$78.00/bbl

Gold up 0.3% to US$1,134/oz

Silver up 1.2% to US$18.64/oz

Platinum up 1.4% to US$1,622/oz

Currency

A$ / US$ down 0.5USc to US$0.93 /A$

EUR / US$ down 1.1USc to US$1.44 /EUR

GBP / US$ down 0.1USc to US$1.63 /GBP

US$ / Yen down 0.5 Yen to 90.74 Yen/US$

Weekly Commodity Update – Futures Trading

After the New Year rush to initiate long positions commodity markets ran out of steam this week. The CRB index showing a flat return after a near four percent gain during the first week of trading.

The “frost” premium that helped drive energy prices higher at the beginning of the month has begun to evaporate as forecast for milder weather combined with another rise in inventories has taken prices lower. Market moves caused by weather shocks are by nature temporary but the surge in demand has helped reduce booming inventories somewhat.

The Energy information Administration (EIA) this week released their monthly OPEC surplus oil production capacity data. Excluding Nigeria and Iraq they now have 4.7 million barrels per day of surplus capacity, the highest level since 2002.

Despite robust demand from Emerging markets the slower than expected recovery among the developed economies leaves little room for further upside near term. With the current surplus capacity OPEC has signaled satisfaction with current price levels knowing that higher prices might damage the ongoing slow recovery. On top of this we have the risk of potential overheating of the Chinese economy, something that the government took the first steps to address this week by reining in lending , and raising the cost of funds for lenders.

The long awaited report from the CFTC on how they would curb excessive risk taking in energy markets were released on Thursday. The new rules would affect crude oil, natural gas, heating oil and gasoline but as it turned out the new limits would probably only impact the ten biggest position holders. So a pretty measured response with the main impact being felt by hedge funds and index-funds.

Technically Crude Oil for near month delivery made a new 15 months high at USD 83.95 but the subsequent strong sell off indicates that the market is not currently ready for an attempt on USD 85 and beyond. Considering the 18.5% rally since the middle of December last year a correction was overdue. We are currently looking for USD 78.08 and USD 76.27 as good support levels in a market that increasingly looks like it wants to range trade around USD 80 until we see further reduction in the overhang of supply.

The Gold rush of 2009 was put into perspective this week as a leading precious metals consultancy said that the investment demand for gold had doubled to 1,820 tons last year, while jewellery purchases fell 23% to 1,687 tons. This is the first time in three decades that investment demand exceeded that of jewellery demand and it highlights the huge role that investors played in driving gold to a record high in 2009.

Jewellery demand is expected to stay subdued above USD 1,000 according to traders, which puts the focus firmly on the need for continued investment demand in order to drive prices higher over the coming months. Global mine supply only rose by 6% to 2,553 tons, a six year high while net sales from central banks dropped 90% to 24 tons, the lowest level in more than twenty years.

Overall new net investments into commodities rose by USD 50 billion, a new record according to JP Morgan. It illustrates clearly how this growing asset class is being viewed by investors and currently the expectations are for a similar amount to be invested into the sector in 2010.

Gold like energy prices failed to hang onto the gains made early this week. On one hand it is being supported by continued investment interest but worries about a potential revival of the dollar on the back of European woes could hurt the EUR and thereby potentially gold as well. The economic problems facing countries around the Mediterranean and Ireland is well known and a continuation of the dollars month long slide can no longer be taken for granted.

Gold/silver ratio:

Overall the uptrend is still intact above USD 1,055 but gold looks to be in a consolidation phase for the time being. Look for support towards USD 1,115 followed by USD 1,086 and resistance at USD 1,146 and USD 1,162. Silver meanwhile has managed to hold onto its recent gains showing a near 11% gain so far this month with USD 18 proving to be a major support level. The gold to silver ratio has dropped from 65 to 61.2 currently with additional room for silver outperformance down towards 60.

The major moves of the week took place among grain and oilseeds products which tumbled on Tuesday after the USDA released their WASDE report (World agricultural supply and demand estimates), in which they surprisingly raised yield forecasts to record highs. Planting delays last year which delayed the growth window were more than offset by a mild summer and a warm dry September which helped the delayed crop to maturity.

This surprise change in forecast prompted a dramatic sell off across the board with Corn reaching the allowed down limit for the day and continued lower the following day. Because the US exports half the world’s corn, a third of the world’s soybeans, and a fifth of the world’s wheat, changes in output there have a major impact on global prices.

The reason why the upward revision came as such a surprise is due to the bad weather that the Midwest has experienced during these past few months. For exact this reason some worry that the next figures due in March could be revised lower as a portion of this season’s corn crop remains stuck in the ground due to unusually wet weather.

We see some upside to Corn now after speculative long positions have been reduced but favor a relative value trade versus wheat around the current ratio of 0.72 going for a target towards 0.79. Corn will be supported by the continued use in ethanol production while wheat supplies are abundant.

Corn/Wheat ratio

Stock Market Report 15-1-10

US stocks traded slightly higher on Thursday, led by the technology sector.

Market breadth was positive. On the NYSE, winners beat losers by four to three. On the NASDAQ advancers topped decliners eight to five.

The technology sector led gains on the back of positive brokerage comments on Oracle and ahead of an expected profit report from Intel. Shares of Oracle, the world’s second largest business software maker, gained 2.5% and led gains on the NASDAQ. Dow component Intel Corp, the world’s largest chipmaker, is expected to report a quarterly profit after market close. Its stock advanced 1.6%. Analysts expect the company to report earnings of 30cps, compared with 4cps in the previous year. IBM and Hewlett-Packard shares also advanced.

The KBW bank index was up 1.4%, led mainly by regional and midsize banks. President Obama proposed a fee to make big banks repay taxpayers for bailouts. Bank shares had declined earlier in the week on concern about the fee, but on Thursday the sector was higher.

On the downside, US economic data appeared to cast doubt on the strength of the economic recovery. Sales at US retailers unexpectedly fell in December and applications for jobless benefits rose last week. A government report showed that retail sales fell 0.3% in December. Economists were expecting sales to have risen 0.5%. Retail sales excluding autos fell 0.2% versus expectations of a 0.3% rise. Helping to soften the blow, the National Retail Federation said holiday sales for the November – December period rose 1.1%, which was better than the retail group’s expectations for a 1% decline.

The number of American’s filing new claims for unemployment rose last week to 444,000 from 433,000 the previous week. Economists expected claims would rise to 437,000. Continuing claims, a measure of Americans who have been receiving benefits for a week ore more, fell to 4.596M from 4.897M in the previous week.

On the positive side, business inventories rose slightly more than expected in November, up 0.4% as businesses re-stock.

Overseas Markets

Dow up 34 pts to 10,715 (10,667 – 10,724)

S&P 500 up 3 pts to 1,149 (1,144 – 1,150)

Nasdaq up 11 pts to 2,319 (2,303 – 2,323)

Russell 2000 up 3 pts to 647 (642 – 648)

SPI 200 Futures up 11 pts to 4,890 (4,874 – 4,899)

FTSE up 25 pts to 5,498 (5,473 – 5,522)

Nikkei up 173 pts to 10,908 (10,774 – 10,910)

Shanghai SE Comp up 43 pts to 3,216 (3,166 – 3,219)

Commodities

WTI Oil down 0.3% to US$79.39/bbl

Gold up 0.4% to US$1,141/oz

Sugar (NY) down 1.0% to USc27.76/lb

Corn down 0.9% to US$3.45/bushel

Wheat down 1.8% to US$4.95/bushel

Natural Gas (Henry Hub) up 2.8% to US$5.77/MMbtu

Silver up 0.4% to US$18.71/oz

Platinum up 2.1% to US$1,612/oz

Palladium up 5.3% to US$447.13/oz

Copper (NY) down 0.3% to US$3.38/lb

Currency

A$ / US$ up 1.1USc to US$0.93 /A$

EUR / US$ up 0.1USc to US$1.45 /EUR

GBP / US$ up 1.6USc to US$1.63 /GBP

US$ / Yen up 0.1 Yen to 91.07 Yen/US$

Stock Market Report 14-1-10

US stocks rose on Wednesday as investors bought financial and technology shares ahead of earnings results from Intel Corp and JPMorgan later this week.

Market breadth was positive. Winners beat losers over two to one on both the NASDAQ and the NYSE.

The healthcare sector was buoyed by a brokerage upgrade of drug maker Merck & Co. Shares in Merck & Co rose 4.4%.

The consumer sector was aided by an upbeat outlook from Kraft Foods, gaining 0.4%. Chocolate maker Hershey is still considering a potential bid for Cadbury, but has not decided whether it will proceed with a formal offer.

JPMorgan, up 1.8%, led gains in the KBW bank index. JPMorgan reports its results later this week. In other news in the sector, the White House is debating taxing companies that took bailout funds to make sure they pay the money back. President Obama is expected to announce the plan on Thursday.

Tech shares gained, with Advance Micro Devices up 5.3% and Intel adding 1.5%. The semiconductor index gained 1.2%.

Google fell 0.9% after the company said it may shut down its China operations over censorship and hacking. Google said on Tuesday it may shut down its Google.cn site after discovering an attempt to gain access to Gmail accounts of Chinese human rights activists. The company said it is one of at least 20 companies that have been attacked. Shares of rival Chinese search engine Baidu jumped 13% and had the biggest percentage gain on the NASDAQ 100. According to figures from tracking firms comScore and Analysis International, Baudi currently controls 64% of the search market in China while Google has 31% of the market.

Energy stocks were under pressure as crude prices slipped. Chevron was the biggest drag on the Dow, falling 0.9%.

The Federal Reserve said in its Beige Book report of economic conditions that while economic activity was at a low level, conditions have improved modestly, and those improvements were broader geographically compared with the last report.

The December Treasury budged showed a deficit of US$91.9B versus $120.3B in November, roughly in line with forecasts for a deficit of US$92B.

Overseas markets

Dow up 74 pts to 10,702 (10,614 – 10,709)

S&P 500 up 11 pts to 1,148 (1,133 – 1,148)

Nasdaq up 30 pts to 2,312 (2,274 – 2,313)

SPI 200 Futures up 27 pts to 4,879 (4,826 – 4,879)

FTSE down 25 pts to 5,473 (5,451 – 5,510)

Nikkei down 144 pts to 10,735 (10,730 – 10,867)

Shanghai SE Comp down 101 pts to 3,173 (3,165 – 3,233)

Commodities

WTI Oil down 0.9% to US$80.08/bbl

Gold up 0.7% to US$1,138/oz

Sugar (NY) up 2.5% to USc28.04/lb

Corn down 8.7% to US$3.48/bushel

Wheat down 6.7% to US$5.02/bushel

Natural Gas (Henry Hub) up 0.7% to US$5.61/MMbtu

Silver up 2.1% to US$18.63/oz

Platinum up 0.4% to US$1,577/oz

Palladium up 0.0% to US$424.00/oz

Copper (NY) up 1.5% to US$3.39/lb

Currency

A$ / US$ down 0.6USc to US$0.92 /A$

EUR / US$ down 0.1USc to US$1.45 /EUR

GBP / US$ up 1.7USc to US$1.63 /GBP

US$ / Yen down 0.6 Yen to 91.48 Yen/US$

Stock Market Report 13-1-10

US stocks slid in a broad sell-off on Tuesday. Financials declined on concerns over a potential government levy on banks, and Alcoa delivered disappointing results that further dampened sentiment.

Banks led the financials sector lower. The KBW bank index was down nearly 2%. Shares of the Bank of America, Citigroup and JPMorgan were off by between 3% and 4%. A senior US official confirmed that the government is considering a levy on financial services firms to recoup bailout losses as part of the fiscal 2011 budget. The banking sector faced another potential hit after the Federal Deposit Insurance Corp floated a proposal that banks whose compensation plans encourage risk-taking would have to pay more for deposit insurance.

Shares of Alcoa fell 11% after the company reported weaker-than-expected results. The company reported a profit of 1cps versus a loss of 28cps a year ago. However, analysts expected earnings of 6cps.

Chevron Corp said its fourth-quarter profit would be sharply lower than that in the previous quarter, sending its shares down nearly 1%. Margins have been under pressure, with the rising price of oil not in sync with the weaker demand globally. A variety of oil stocks fell, with the Amex Oil index losing 2.3%.

Shares of big manufacturers retreated, with Caterpillar sliding nearly 3%.

KB Home reported a quarterly profit for the first time in two years, thanks to a tax benefit. However, the homebuilder’s revenue dropped from that a year ago.

Technology shares also fell, including Apple, which was off 1.6%. Electronics Arts cut its fiscal 2010 forecast, citing weak holiday sales in Europe. The video game publisher lost 8.3%.

Intel and JPMorgan report results this week.

The November trade deficit, released in the morning, widened to US$36.4B, from a revised $33.2B in October. The deficit was expected to widen to US$34.5B.

Overseas markets

Dow down 66 pts to 10,598 (10,569 – 10,663)

S&P 500 down 14 pts to 1,133 (1,132 – 1,144)

Nasdaq down 35 pts to 2,278 (2,273 – 2,299)

Russell 2000 down 10 pts to 634 (634 – 644)

SPI 200 Futures down 52 pts to 4,839 (4,828 – 4,906)

FTSE down 39 pts to 5,499 (5,460 – 5,550)

Nikkei up 81 pts to 10,879 (10,764 – 10,905)

Shanghai SE Comp up 61 pts to 3,274 (3,180 – 3,275)

Commodities

WTI Oil down 2.4% to US$80.55/bbl

Gold down 2.0% to US$1,129/oz

Sugar (NY) up 2.3% to USc27.36/lb

Corn down 0.3% to US$3.81/bushel

Wheat down 6.7% to US$5.02/bushel

Natural Gas (Henry Hub) down 3.5% to US$5.57/MMbtu

Silver down 1.7% to US$18.24/oz

Platinum down 1.4% to US$1,569/oz

Palladium down 2.1% to US$425.25/oz

Copper (NY) down 2.7% to US$3.34/lb

Currency

A$ / US$ down 0.5USc to US$0.92 /A$

EUR / US$ up 0.8USc to US$1.45 /EUR

GBP / US$ up 1.4USc to US$1.62 /GBP

US$ / Yen down 1.7 Yen to 90.97 Yen/US$

Stock Market Report 12-1-10

US technology shares fell on Monday as investors took profits after the NASDAQ touched a 16-month high on Friday. Shares of industrials buoyed the broad market following the release of strong Chinese economic data.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers eight to seven. On the NASDAQ, decliners topped advancers seven to six.

China’s strong trade data lifted US companies with large international operations. Constructions machinery maker and Dow component Caterpillar jumped 6%, its largest daily advance in nearly three months. Aluminium producer Alcoa rose 1.2% ahead of its fourth-quarter earnings announcement expected after market close. Analysts, on average, expect Alcoa to show a profit of 6cps compared to a loss in the previous quarter.

Dow components Intel and JPMorgan report results later this week. S&P 500 earnings are expected to have more than tripled in the fourth quarter of 2009, thanks to easy comparisons to the fourth quarter of 2008. A substantial improvement in financial sector results is expected to fuel gains.

McMoRan and Energy XXI shares jumped after the energy companies announced a key discovery at one of their oil exploration wells in the Gulf of Mexico.

Technology shares, however, weighed on the market. Shares in Apple, Dell and Hewlett-Packard all declined.

UPS and Fedex advanced 4.8% and 2.9%, respectively, on speculation that cold weather affecting parts of the US will drive consumers away from stores and into online shopping, increasing shipment volumes.

Among decliners, Dow component Procter & Gamble shares fell 0.4% on concern that Friday’s currency devaluation in Venezuela could hurt sales and revenue as products will be more expensive.

Overseas Markets

Dow up 48 pts to 10,666 (10,592 – 10,676)

S&P 500 up 2 pts to 1,147 (1,142 – 1,150)

Nasdaq down 5 pts to 2,312 (2,302 – 2,326)

SPI 200 Futures up 6 pts to 4,939 (4,916 – 4,958)

FTSE up 4 pts to 5,538 (5,528 – 5,600)

Nikkei up 117 pts to 10,798 (10,678 – 10,816)

Shanghai SE Comp up 17 pts to 3,213 (3,197 – 3,307)

Commodities

WTI Oil down 0.3% to US$82.52/bbl

Gold up 1.2% to US$1,152/oz

Sugar (NY) down 2.8% to USc26.75/lb

Corn up 1.6% to US$3.82/bushel

Wheat up 1.7% to US$5.38/bushel

Natural Gas (Henry Hub) down 12.0% to US$5.77/MMbtu

Silver up 0.8% to US$18.62/oz

Platinum up 1.1% to US$1,596/oz

Palladium up 1.3% to US$433.75/oz

Copper (NY) up 1.2% to US$3.43/lb

Currency

A$ / US$ up 1.4USc to US$0.93 /A$

EUR / US$ up 2.2USc to US$1.45 /EUR

GBP / US$ up 1.7USc to US$1.61 /GBP

US$ / Yen down 1.3 Yen to 92.07 Yen/US$

Richard Russell (Dow Theory Letters): Silver – “poor man’s gold”

“They call it ‘the poor man’s gold’. But don’t turn your nose up at silver. The dollar was originally defined in terms of silver. When precious metals are on the rise (as now), silver tends to be seen as a monetary metal. When times are bad, silver is seen as an industrial metal. Silver has a huge number of industrial uses, silver is the best conductor of electricity. Unlike gold, silver is actually used (and used up) in industry. Thus, a large amount of silver is lost every year. In contrast, 85% of all the gold ever mined in all history is still around; it’s in your teeth or in your sweeties’ bracelet or in that ancient Egyptian ring that you see in your local museum.

“Historically, when silver gets going, it tends to make huge percentage moves. I think you can see that from the long-term chart below. For instance, back in November 2008, silver was selling for 8.65 an ounce. Today an ounce of silver is selling for 18.10 an ounce, more than double.

“Silver is now climbing back from a drastic correction, as you can see via the chart below. In December silver hit a high of over 19 dollars an ounce. Back in 1980 (and I remember this well) silver climbed wildly (limit up day after day), and it hit $50 dollars an ounce around January of 1980.

“Silver is now in an erratic bull market. How high it may go I don’t know, but I would not be shocked to see silver ultimately climb above its 1980 price of $50 bucks an ounce. Historically, once ounce of gold will buy around 15 ounces of silver. Today an ounce of gold will buy 62 ounces of silver. Silver compared with gold is dirt-cheap today.

“How to invest in silver? I like the 100 ounce bars if you can find them (they weigh about 8.5 pounds each). Or buy the 10 ounce bars. Or you can buy the exchange traded fund SLV.

“Yesterday, both gold and platinum closed at new highs for the move. Silver is lagging behind, but when silver finally catches up, it may be a stunner. Over the last year the price of silver doubled; gold didn’t perform that well.

“Below I show a point & figure chart of silver. The white metal is now in a well-established rising trend. The upside target is the 21 box. If silver hits the 22 box, that will light the fuse. If silver hits the 22 box, I will view the whole structure that you see on this chart as one huge base.

“To put it briefly, I like silver. Gold has one advantage over silver, every central bank owns some gold, and most want more.”

Source: Richard Russell

Weekly Commodity Update 11-1-10

Commodity markets kicked off the New Year by making strong gains as exceptionally cold weather across the Northern hemisphere gave energy and other sectors a boost.

This time of year everyone from hedge funds through to the private investors get back into the markets looking for profitable investment opportunities. Given the strong performance of commodities in 2009 where the CRB index rose by 30% and investment flows into the sector rose by more than USD 60 billion it was and is expected that the sector will have another year with positive returns.

Friday’s unemployment data showed another steep drop in unemployment and gave the market a clear indication that the recovery among developed nations could become a long drawn out event and that we have to look towards the emerging economies for support.  

On that note speculation emerged during the week that the Chinese government would begin to tighten their monetary policy to reduce inflationary risks after a record gain in lending. This could lead to a reduced demand for raw materials and will be watched very closely once it occurs.  What it highlights is that the risk of reversals despite the general bullish attitude to commodities is ever present.

These expectations combined with very cold weather this winter have meant that particularly the energy sector began the week strongly with Crude testing the 2009 highs and Heating Oil breaking well clear and making new highs.  Crude Oil began its rally three weeks ago rallying 18% to a new high of USD 83.52 before profit taking occurred before and after the US unemployment data. The weekly storage numbers did not have a major impact but the cold weather no doubt have given market bulls an extra argument for buying the black gold.

Technically WTI Crude Oil for February delivery reached overbought territory during the week which left the market exposed to a correction. Given the current weather situation support should not be far away. Initial support is located at USD 80 which also coincides with the level OPEC has seen as being sustainable and acceptable given the current economic level of activity. Below that next level is USD 77.80 followed by USD 76.05. Resistance can be found at USD 83 followed by the psychological level of USD 85 and trend line at USD 87.10.

Gold began the week with less conviction than the energy sector but the strong correction seen towards the end of 2009 has given new buyers a better level to enter and some upside pressure to prices was seen during the week. Resistance at USD 1,142 ahead of 50% retracement of the recent sell off at USD 1,151 needs to be negotiated before a new attack on the USD 1,200 level can be initiated. Before that happens look for the market to range trade with support coming in at USD 1,171 ahead of USD 1,142.

 HG Copper continued its strong 2009 performance into 2010 reaching USD 350 on weather and a strike at Codelco, the world’s largest Copper producer before profit taking and the news about a potential fiscal tightening in China saw sellers emerge. The impressive rally that began back in March 2009 looks intact as long we stay above the December high at USD 325.

Stock Market Report 11-1-10

US stocks rose on Friday despite weak December jobs data. The S&P 500, Dow Jones and NASDAQ hit their highest level in at least 15 months. Friday ended a strong week, with the S&P 500 rising in all five sessions.

Volume was light on the NYSE. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about three to two, while advancing stocks beat decliners on the NASDAQ by about seven to four.

Data from the Labour Department showed that 85,000 jobs were cut in December. Analysts expected no non-farm job losses in December from the previous month. However, analysts noted that monthly job losses have declined sharply since the height of the recession. In addition, November’s payrolls report was revised to show a gain of 4,000 jobs, versus the initially reported loss of 11,000. The unemployment rate, generated by a separate survey, held steady at 10%, in line with forecasts.

UPS gave support to the market after it boosted its fourth-quarter outlook and said it will cut 1,800 jobs. Its shares rose nearly 5%. The news also sent shares of rival Fedex Corp higher by 2.5%. It also boosted investor optimism for the reporting season, which starts Monday with Alcoa reporting its results.

On the NASDAQ, biotechnology companies were in favour. Teva Pharmaceutical Industries gained 4.4% after the drug maker set a revenue target of 2015 of US$31B, more than double its current annual amount.

Among other biotechnology companies, Genzyme Corp advanced 5.2% on speculation that billionaire investor Carl Icahn was considering a proxy battle at the biotech company.

The first week of the year got off to a positive start. For the week, the Dow rose 1.8% the S&P 500 added 2.7% and the NASDAQ rose 2%.

In other economic news, wholesale inventories rose 1.5% in November after rising 0.6% in October. Economists expected inventories to fall 0.3%. Another report showed consumer borrowing fell by US$17.5B in November versus expectations of US$5B. Borrowing was down US$3.5B in the previous month.

Since the start of the year, analysts have revised up their earnings estimates for all S&P sectors except healthcare, financials and consumer staples.

Overseas markets

Dow up 11 pts to 10,618 (10,554 – 10,619)

S&P 500 up 3 pts to 1,145 (1,136 – 1,145)

Nasdaq up 17 pts to 2,317 (2,291 – 2,318)

Russell 2000 up 3 pts to 645 (640 – 645)

SPI 200 Futures up 30 pts to 4,925 (4,887 – 4,925)

FTSE up 8 pts to 5,534 (5,495 – 5,549)

Nikkei up 117 pts to 10,798 (10,678 – 10,816)

Shanghai SE Comp up 3 pts to 3,196 (3,149 – 3,199)

Commodities

S&P 500 Metals & Mining Index up 5.3pts (2.8%) to 192.4

Sugar (NY) down 1.7% to USc27.53/lb

Corn up 1.6% to US$3.82/bushel

Wheat up 2.1% to US$5.29/bushel

Natural Gas (Henry Hub) down 13.8% to US$6.47/MMbtu

Silver up 1.3% to US$18.48/oz

Platinum up 1.5% to US$1,579/oz

Palladium up 0.4% to US$428.25/oz

Copper (NY) down 0.7% to US$3.39/lb

Currency

A$ / US$ up 0.5USc to US$0.92 /A$

EUR / US$ up 0.0USc to US$1.44 /EUR

GBP / US$ up 0.0USc to US$1.60 /GBP

US$ / Yen up 0.3 Yen to 92.66 Yen/US$

Stock Market Report 8-1-10

Overseas markets

Dow up 31 pts to 10,605 (10,505 – 10,612)

S&P 500 up 5 pts to 1,142 (1,131 – 1,142)

Nasdaq down 2 pts to 2,299 (2,285 – 2,301)

Russell 2000 up 4 pts to 642 (633 – 642)

SPI 200 Futures up 29 pts to 4,913 (4,875 – 4,913)

FTSE down 3 pts to 5,527 (5,500 – 5,552)

Nikkei down 50 pts to 10,682 (10,637 – 10,774)

Shanghai SE Comp down 61 pts to 3,193 (3,177 – 3,269)

Top 3 US sectors: Financials up 2.3%; Industrials up 1.3%; Consumer Disc. up 0.9%.

Bottom 3 US sectors: Telecom Svcs down 0.9%; Utilities down 0.5%; Materials down 0.5%.

Rio Tinto plc up 0.11% to A$63.22 eq.; a 20% discount to prev Aust close A$79.00

BHP plc down -0.43% to A$36.34 eq.; a 17% discount to prev Aust close A$43.77

BHP ADR down -0.78% to A$43.76 eq.; a 0% discount to prev Aust close A$43.77

Gold: Barrick Gold Corp -1.3%; NewMont -0.4%; Anglogold -0.8%.

Oil: Chevron -0.4%; Exxon -0.3%; Coconophillips -0.5%; Anadarko -0.1%.

Resources: Alcoa -2.2%; Freeport -1.9%.

Steel: Arcelor +1.0%; Nucor -0.8%; US Steel +0.8%; Posco -1.3%.

Commodities

WTI Oil down 0.5% to US$82.75/bbl

Gold down 0.5% to US$1,131/oz

S&P 500 Metals & Mining Index down 2.1pts (1.1%) to 187.2

Sugar (NY) down 1.4% to USc28.00/lb

Corn up 0.8% to US$3.80/bushel

Wheat down 1.9% to US$5.18/bushel

Natural Gas (Henry Hub) up 16.0% to US$7.50/MMbtu

Silver up 0.4% to US$18.28/oz

Platinum up 0.0% to US$1,557/oz

Palladium down 0.5% to US$426.00/oz

Copper (NY) down 1.9% to US$3.41/lb

Currency

A$ / US$ up 0.5USc to US$0.92 /A$

EUR / US$ down 0.5USc to US$1.43 /EUR

GBP / US$ down 0.5USc to US$1.59 /GBP

US$ / Yen up 1.6 Yen to 93.31 Yen/US$

2010 Stock Market S&P 500 Strategist Predictions

Below is a list of the 2010 S&P 500 year-end price targets of major Wall Street strategists as surveyed by Bloomberg prior to the first trading day of the new year.  As a whole, strategists are looking for a year-end price of 1,225 for the S&P 500, which translates into a gain of 9.82%.  Deutsche Bank’s Binky Chadha has the highest target at 1,325, while Barclays’ Barry Knapp has the lowest at 1,120.  All strategists are forecasting a 2010 gain.

Source: Bespoken Research

IS THE BALTIC DRY FORECASTING MARKET WEAKNESS?

As we mentioned last week the Shanghai equity markets have served as a leading indicator of U.S. stocks over the last year.  While Shanghai has broken down and moved sideways over the last few months we have seen similar sideways action in the Baltic Dry Index.  Not surprisingly, the fundamental correlation between China’s export driven economy and this shipping index are high.  With a 30%+ sell-off currently in process in the Baltic Dry Index we have to ask ourselves if the fundamentals in China and the global shipping industry aren’t weaker than many equity markets would have you believe.

S&P 500 Index Stays in the Range While Nasdaq Index Breaks Out 22-12-09

While the Nasdaq was finally able to break out of its long-standing range today, the S&P 500 once again traded to the top of its range and then pulled back.  That makes it 29 trading days that the S&P 500 has now traded in a 36-point range between 1083 and 1119. 

Source: Bespoken Research

2010 Country GDP Growth Estimates

Below we highlight consensus 2010 GDP growth estimates for 28 countries (+Europe) based on Bloomberg’s survey of economists.  As shown, all but one country is expected to see GDP growth in 2010.  Spain is the lone country expected to see a decline in GDP at -0.40%.  China is expected to see the most growth by a wide margin at 9.40%.  Indonesia and Singapore rank second and third as 5.55% and 5.50% respectively.  The US is tied with Canada for the best GDP growth estimate (+2.6%) of the G-7 countries.  European G-7 countries and Japan are expected to see growth in the 1%-1.5% range.

Our research shows that in the four quarters coming out of a recession, the US has averaged GDP growth of 5.4%.  With a consensus estimate of +2.6%, economists are clearly expecting a weak recovery in the US.  However, does anyone remember a time when economists weren’t expecting a weak recovery?

Source: Bespoken Research

All Three Major US Indices Hit New Highs; Uptrend Confirmed

Even though the Dow made a new bull market high last week, the S&P 500 and Nasdaq Composite had yet to do so.  After this morning’s 1% plus gains across the board, both the S&P 500 and Nasdaq have now also traded to new intraday bull market highs.  With all three major indices breaking to new highs today, the market uptrend has once again been confirmed.

Source: Bespoken Research

Gold Soars to New Highs

The price of gold has broken out to another new high this morning following news that India’s Central Bank purchased 200 tons of the metal from the IMF. Previously, the IMF had announced that it would sell around 400 tons, raising speculation that the planned sale would cause a glut of gold in the market. Based on India’s $6.7 billion 200-ton purchase, the market may have an easier time digesting the increased supply than previously thought. The average price per ounce for the Indian Central Bank’s purchase works out to around $1,045. With gold now trading at $1,079, they have already made $218 million (3.25%). Not bad for a few days work!

Source: Bespoken Research

Will The Vix Crack 20 Soon?

The VIX volatility index slipped below 21 earlier today and currently stands at 21.15.  This is the closest the VIX has gotten to 20 throughout the entire bull market, and marks a 75% decline from the closing high of 80.86 seen during the financial crisis.

The VIX has now been above 20 for 287 consecutive trading days, which is the longest streak since 1990 when our daily VIX data begins.  In the bottom chart, we provide a historical look at the VIX along with all of its streaks of daily closings above 20.  We’ve only seen two other periods where the VIX was above 20 for 200 straight trading days or more, and those ended at 239 days in June 1999, and 236 days in May 2003.  In terms of market performance following these long periods of high volatility, the S&P 500 was on the verge of making a mutli-year peak when the VIX broke below 20 in 1999, but it did very well in the months and years following the drop below 20 in May 2003.

Source: Bespoken Research