Briefing excerpts 2008

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I found fun read Briefing (via. Yahoo Finance) market summary, esp. on an eventful day.

06-22-2009 Back to bear?
4:30 pm : The S&P 500 moved sharply lower in broad-based fashion, which took it below the key 900 level for the first time this month. With sellers in control, the session culminated in the stock market’s worst single-session percentage loss in two months.

Declining issues outnumbered advancers by 10-to-1 in the S&P 500. Losses were steepest among financial issues, which shed 6.2% as they steadily descended throughout the entire session. Diversified financial services (-7.5%) and specialized finance (-7.3%) made up some of the weakest performing stocks in the financial sector. Financial stocks are down more than 7% month-to-date, but still up nearly 50% from their March lows, making them ripe for plenty more profit taking.

Energy stocks and materials stocks showed weakness for the entire session. The lost a respective 4.6% and 5.3% amid broader market weakness and a drop in commodities prices, which were undercut by a stronger U.S. dollar.

With the greenback up 0.7% against a basket of major foreign currencies, the CRB Commodity Index dropped 2.7% in its sharpest downward move in more than two weeks. Oil prices showed particular weakness; July contract prices shed 3.6% to settle at $67.06 per barrel before expiring, while August contract prices settled 3.8% lower at $67.33 per barrel.

The negative bias in the broader market certainly wasn’t helped by news that the World Bank cut its forecast for major economies like that of the U.S. The news seemed to embolden the efforts of sellers, who just last week handed stocks their first weekly decline in five weeks. The latest selling effort led the S&P 500 to breach the 900 level, which marks the approximate intersection of the downward sloping 200-day moving average and the upward sloping 50-day moving average.

The only pockets of strength this session were found among defensive-oriented sectors. Utilities had been sporting enviable gains for most of the session, but surrendered them into the close and finished unchanged.

Telecom tacked on 0.5% as the only major sector to finish in the green.

Consumer staples stocks, also considered defensive, slipped 0.8%. Drug retailer Walgreen (WAG 29.64, -1.79) weighed on the group after posting quarterly earnings results that missed the consensus estimate.

Health care stocks, which have shown relative strength in recent sessions, fell 2.0%. Pharmaceutical stocks finished 1.5% lower amid news from The Wall Street Journal that the group will cut Medicaid costs as a proactive measure against more damaging industry reform.

There weren’t any economic reports released today, but the release of May existing home sales data on Tuesday will start a steady flow of reports for the coming days. DJ30 -200.72 NASDAQ -61.78 NQ100 -3.0% R2K -3.9% SP400 -3.7% SP500 -28.19 NASDAQ Adv/Vol/Dec 415/2.32 bln/2264 NYSE Adv/Vol/Dec 345/1.40 bln/2703

04-03-2009 Confirmed rally?
4:30 pm : Unmoved by the latest jobs report, participants traded stocks in low volume and in a limited range, until a late rally by financial stocks helped take the broader market to session highs heading into the close. Stocks slipped into the red in early action due to an absence of leadership.

Participants were content to let a recent string of gains consolidate after receiving word from the Labor Department that 663,000 jobs were slashed in March, lifting the unemployment rate to 8.5% from 8.1%. The data were on par with expectations.

The March ISM Nonmanufacturing Index was also given a cool response. The index showed continued contraction by coming in at 40.8, which was a bit worse than the reading of 42.0 that was widely expected, and down from 41.6 in February.

After falling to a loss of 0.8% stocks began their upward turn, which ran into a couple of resistance efforts but gathered momentum heading into the close as bids came in from the sideline, lifting share volume on the NYSE to 1.5 billion shares. That helped stocks close 1.0% higher at their best levels of the session, bringing stocks to their best closing level in more than one month.

Financials underpinned the late rally effort and closed 4.2% higher as the best performing sector. Financials had traded in a quiet manner for most of the session, uninspired by strength in European bank shares, which were bid higher after Royal Bank of Scotland (RBS 9.42, +1.27) indicated it is targeting considerable annual cost savings and plans to resume dividend payments as soon as possible.

03-23-2009 Second time is a charm
4:30 pm : The Treasury Department released details related to its plan to remove bad assets from banks’ balance sheets, sparking a massive surge in the stock market. In addition, the market benefited from a better-than-expected existing home sales report.

In the end, the S&P 500 spiked 7.1%, settling at session highs thanks to a late afternoon rally.

The Treasury plans to create a series of public-private investments funds to buy $500 billion to $1000 billion in legacy loans and securities. To encourage participation from the private sector, the government is taking on much of the risk and offering subsidies. In a show of support, Bill Gross, co-Chief Investment Officer of the world’s largest bond fund, told Reuters that Pimco plans to participate in the program.

Meanwhile, FDIC Chairman Bair said that the public-private investment program will likely make money for the FDIC, according to Reuters. Bair also said that 6-to-1 is the outer range of leverage it will provide for the program, Reuters reported.

The financial sector rallied a massive 17% on the news, with diversified financial services climbing 24.5% and diversified banks up 22.3%.

The move was broad-based as all ten of the economic sectors rose, with gains of at least 3.8%. The energy sector (+7.8%) finished second to financials, outperforming as May crude oil futures climbed 3.5%. Defensive sectors however, underperformed on a relative basis, but still posted solid advances.

101508: bear came back
4:30 pm : The stock market plunged the most since the crash of 1987 as disappointing retail sales data and credit concerns renewed economic fears. Specifically, the S&P 500 plunged 9.0%, settling near session lows.

Consumers continue to curtail spending in the face of economic headwinds. Retail sales in September tumbled 1.2% month-over-month, the third consecutive monthly drop and largest decline in three years. The decrease was larger than the expected drop of 0.7%. Sales are down 1.0% compared to last year, marking the first year-over-year decline since October 2002.

Separately, the Producer Price Index, an inflation reading, fell 0.4% in September due to a decrease in commodity prices. Excluding food and energy, PPI rose 0.4%, which was more than the expected increase of 0.2%.

Although credit markets are showing signs of improvement, there are concerns that a recovery will take longer than hoped for. Dollar Libor, which is the rate banks charge each other for short-term dollar loans, slightly declined across all terms for the second straight session, but remain at highly elevated states. This indicates banks are more willing to lend to each other, but are still showing extreme caution. In addition, there was a high demand for Treasuries as investors seek safety.

An afternoon speech from Fed Chairman Bernanke and the release of the Fed’s Beige Book did not give the market any real surprises, but painted a sobering economic picture and indicated that a recovery will take time.

Economic concerns sparked broad-based selling, with 99% of the S&P 500 posting a loss and all ten of the economic sectors ending the day deep in the red.

101308 Crazy Monday
4:20 pm : The S&P 500 posted its largest percent gain in 69-years on Monday, snapping an eight session losing streak in the process. The rebound was fueled by several governments taking steps to shore up the financial system and Morgan Stanley (MS 17.99, +8.31) completing its deal to receive a capital infusion from a Japanese bank.

The S&P 500 surged 11.6% in broad-based buying interest and ended the day at sessions highs following a late-session surge. The Dow rose 936 points — its largest point gain ever and largest percent gain since 1933. All ten of the economic sectors rallied, with gains ranging from 7.2% (industrials) and 18.5% (energy). Overseas markets also rallied, Hong Kong’s Hang Seng spiked 10.1%, and Europe’s Eurostoxx 600 rose 9.9%.

With regard to the global efforts to help the financial markets, the Fed and other central banks announced plans to provide as much dollar liquidity as needed in short-term funding markets. The 15 eurozone countries said they will guarantee new bank debt until the end of 2009. In addition, several European countries announced plans to guarantee interbank landing and directly inject capital in financial firms. The U.K. government plans to inject up to $63 billion in three U.K. banks.

The U.S. is expected to outline a comprehensive plan of its own as soon as Tuesday, and is likely to include interbank lending and bank debt guarantees, and direct capital injections in financial institutions.

Investors will have a clearer picture of how credit markets will react to the measures on Tuesday when banks and the Treasury markets reopen. They were closed on Monday in observance of Columbus Day.

Morgan Stanley and Mitsubishi UFJ Financial confirmed the closing of a $9 billion, or 21%, investment in MS, relieving some market concerns that the deal would fall apart due to a recent plunge in shares of MS. Under the terms of the renegotiated deal, MUFG acquired $7.8 billion perpetual noncumulative convertible preferred stock at a 10% dividend and a conversion price of $25.25. MUFG also acquired $1.2 billion of perpetual noncumulative nonconvertible preferred stock with a 10% dividend.

The financial sector rose 10.2% with the investment banking and brokerage industry group soaring 26.8%.

The improved outlook of investors was apparent in commodity trading, with the CRB Index climbing 3.0% as oil rose 5.3% to $81.85 per barrel. Conversely, gold prices fell 1.9% to $838.90 per ounce.

Although buying interest was mostly broad-based with 96% S&P 500 components posting a gain, not all stocks participated. General Electric (GE 21.37, -0.13) fell 0.6% despite its diversified business. GE considered seeking a bank charter in order to access government lending channels, Reuters reported, citing sources familiar with the situation.

The S&P 500 has spiked 19.5% from its multi-year intraday low reached on Friday. The index is down 31.7% year-to-date and down 36.3% from its October 2007 all-time high.DJ30 +936.42 NASDAQ +194.74 NQ100 +12.6% R2K +9.3% SP400 +10.5% SP500 +104.13 NASDAQ Adv/Vol/Dec 2166/2.60 bln/357 NYSE Adv/Vol/Dec 3029/1.82 bln/158

080508 Biggest gain in 4 months
4:25 pm : The stock market posted its largest percent gain in four months on Tuesday in a broad-based rally that was aided by favorable wording in the Fed’s latest directive, a drop in crude prices and a better-than-expected economic reading on the services sector.

All ten of the economic sectors posted a gain, with seven sectors advancing more than 2%. The S&P 500 surged 2.9%, with 91% of its components ending the session in positive territory.

The FOMC left the fed funds rate at 2.00%, and the discount rate at 2.25%, as expected. The Fed noted that there are both risks to inflation and growth. The FOMC said that although the economy grew in the second quarter, labor markets have “softened further” and financial markets remain under “considerable stress.”

Most of the directive was very similar to June, when the Fed also kept rates unchanged. However, there were some subtle changes in the final paragraph.

In June the Fed said downside risks to growth remain, although they have “diminished somewhat” and that upside inflation risks have “increased.” In the latest directive, the Fed said downside risks to growth remain, and inflation is a significant concern — removing the comments related to diminishing downside risks and increasing upside inflation risks.

Traders took this as a sign that a Fed rate hike is not imminent, causing stocks to soar to their session highs in late afternoon trade. The FOMC decision does not deserve all the credit for the market’s rally this session, as stocks were already up 1.9% prior to the announcement.

A portion of the buying interest this session was due to a 2.3% drop in the price of crude oil to $118.64 per barrel, which follows the previous session’s drop of 3.0%.

080408 Commodity crash
4:20 pm : The stock market posted a steep decline on Monday as plunging crude oil and commodity prices caused a steep sell off in energy and material names, but did not translate into large gains in the broader market. Selling interest was also fueled by continued concerns regarding financials and a June personal income and spending report that showed higher-than-expected inflation.

Crude prices plunged 3.0% to $121.30 per barrel and commodities as a whole tumbled 3.4%. There was no specific news item to account for the retreat, although there was speculation that a large hedge fund had to liquidate its positions.

The energy sector (4.9%) fell on the retreat in crude prices. Likewise, material stocks slipped 4.2%, with Freeport-McMoRan (FCX 80.44, -10.87) getting hit especially hard.

Lately, the stock market as a whole has rallied when the price of crude oil declined. This session, however, only saw modest buying interest on the drop in crude — the transportation sector (-0.8%) was not even able to muster a gain. As a result, weakness in the materials and energy sectors offset the benefit that the rest of the stock market saw due to the drop in crude and commodity prices.

Only three sectors posted a gain — consumer discretionary (+0.5%), consumer staples (+1.2%) and health care (+1.3%). The health care sector got a boost after Humana (HUM 46.75, +2.11) posted better-than-expected second quarter earnings and gave a full-year earnings outlook that topped Wall Street’s forecast.

071108 FNM FRE
4:59PM Fannie Mae issues statement confirming its capital adequacy (FNM) 10.25 -2.95 : FNM says “the co raised $7.4 bln of additional capital in May, for a total of more than $14 bln in new capital since November of 2007. Our capital level is substantially above both our statutory minimum capital and the OFHEO-required 15% surplus over minimum capital. In fact, we have more core capital, and a higher surplus over our regulatory requirement, than at any time in this co’s history. As we work through this tough housing market, we are maintaining a strong capital base, building reserves for our credit losses, and generating solid revenues as our business continues to serve the market. We also have access to ample sources of liquidity, including access to the debt markets. The co issued more than $24 bln in debt this week alone, including a $3 billion Benchmark Note sale that was oversubscribed. In short, FNM remains well equipped to fulfill our critical role in the housing finance system, today and in the future. We will provide a full financial update and outlook when we report second-quarter results in early August. OFHEO has reiterated that Fannie Mae is adequately capitalized, the highest capital designation given by our regulator. More broadly, Treasury Secretary Henry Paulson and leaders in Congress have also issued statements of support, for which we are appreciative.”

4:58PM Freddie Mac issues statement saying they are adequately capitalized (FRE) 7.75 -0.25 : FRE says “the co is adequately capitalized, highly liquid and an essential part of the nation’s housing system. We are in the process of finalizing our results and we estimate that at June 30, 2008, we will have a substantial capital cushion above the 20% mandatory target surplus established by our regulator, the Office of Federal Housing Enterprise Oversight (“OFHEO”) and a much greater surplus above the statutory minimum capital requirement. We are not under any mandate to raise capital in the near term. OFHEO has stated that we are adequately capitalized and that we hold capital well in excess of regulatory minimums. The Director of OFHEO confirmed yesterday that we are adequately capitalized and have liquidity resources to perform our important public mission, and we are continuing to do so. Beyond that, there are a number of options to manage our capital position. The average rate of run-off on our retained portfolio is currently about $10 bln per month, and not replacing that run-off would free up ~$250 mln of capital per month. Over the course of a year, this would free up ~$2.5-3 bln of additional capital if this run-off rate remains constant. We also could consider reducing our common stock dividend. Our current annual common stock dividend is ~$650 mln . Currently, FRE’s liquidity position remains strong. This is a result of the combination of two factors: access to the debt markets at attractive spreads and an unencumbered agency MBS portfolio of ~$550 bln which could serve as collateral for short-term borrowings. We believe current speculation in the media around the issue of conservatorship does not accurately reflect the facts. FRE is not on the threshold of conservatorship because we are adequately capitalized. The preliminary indications of our expected financial performance for Q2, while reflecting the challenges that face the industry, do not point to an immediate need to raise additional capital. As the Director of OFHEO stated, we remain committed to our agreement with OFHEO to raise additional capital given appropriate conditions.”

4:25 pm : Friday’s trading concluded with hefty gains for investors. The stock market finished the session 1.8% higher, which positioned it to end the week 4.3% higher.

The positive tone to Friday’s trading was apparent from the start. A positive earnings surprise from Google (GOOG 539.41, +89.87) helped set the tone. The company announced after yesterday’s close that earnings for its most recent quarter totaled $4.84 per share, which was better than the $4.52 per share that analysts expected. Google’s strong performance helped the tech sector (+3.4%) outperform the other major economic sectors.

Citigroup (C 25.11, +1.08) announced this morning a $5 billion loss, or $1.02 per share, for its most recent quarter, amid $12 billion in write-downs and asset adjustments. Though the quarter’s loss was worse than Wall Street expected, investors viewed the news as better than feared. In turn, Citi traded noticeably higher, providing leadership to the financial sector (+1.8%).

Investment banks and brokerages (+3.4%) also lent support to the financial sector, helping it for the second consecutive session. Goldman Sachs (GS 179.93, +7.83) and Lehman Brothers (LEH 45.50, +1.86) were leaders in the group.

The session’s broad-based buying interest was helped by industrial players Honeywell (HON 60.99, +3.59) and Caterpillar (CAT 85.28, +6.69). Both companies announced better than expected quarterly profits this morning.

Crude oil hit $117 per barrel in electronic trading, which is a new all-time high. The commodity closed up $1.68 at $116.54 per barrel on the Nymex, which is a new closing high.

Oil driller Schlumberger (SLB 101.85, +6.55) made sizeable gains Friday. The company actually reported earnings for its most recent quarter that missed expectations. But investors considered the miss and the rise in oil as a buying opportunity. The energy sector finished 1.9% higher.

With the buying interest strongly focused on stocks, the 10-year Treasury note was largely out of favor Friday. The yield on the 10-year note climbed to more than 3.8%, its highest level in more than a month. However, buying interest returned to the 10-year Treasury late in the day; it finished one tick higher, yielding 3.72%.DJ30 +228.87 NASDAQ +61.14 NQ100 +3.2% R2K +1.8% SP400 +1.5% SP500 +24.77 NASDAQ Dec/Adv/Vol 810/2132/2.21 bln NYSE Dec/Adv/Vol 692/2434/1.48 bln

4:15 pm : On Friday, the stock market closed out a strong week on a dull note, ending the day near the unchanged mark. However, the market showed some resilience by not posting a decline, considering employers cut jobs for the third straight month.

Nonfarm payrolls fell 80,000, which was worse than the 50,000 decline economists expected. This marks the largest decline since 2003. In addition, January’s reading was revised lower to -76,000 from -23,000, and February’s reading was revised lower to -76,000 from -63,000.

Meanwhile, the unemployment rate rebounded to 5.1% from 4.8%. Economists expected a rate of 5.0%.

These numbers are not good, however, the numbers do not necessarily fit the recession label. Unemployment and the decline in payrolls have yet to come close to the early 2000s recession level, which saw unemployment top 6.3% and payrolls fall as much as 325,000.

Seven of the ten sectors finished higher.

Agriculture-chemical company Mosaic (MOS 115.07, +10.55) soared 10.1% on Friday. The company posted the hefty gain after reporting third quarter earnings of $0.99 per share ex-items, which topped the expected earnings estimate of $0.95 per share. As a result, the materials sector (+1.4%) provided leadership and posted a strong 6.6% gain for the week.

The energy sector (+1.0%) also lent some support to the broader market. It rose in conjunction with the 2.3% advance in crude oil prices.

The financial sector (-1.4%) acted as limiting factor to the stock market, with another round of earnings estimate cuts. JPMorgan cut its earnings estimates at Citigroup (C 24.08, -0.28), Bank of America (BAC 39.41, -0.96) and Wachovia (WB 27.21, -1.16). Also weighing on financials was word that Deutsche Bank added JPMorgan Chase (JPM 45.57, -0.71), Citigroup , Sun Trust Banks (STI 56.49, -2.60) and PNC Financial (PNC 67.73, -0.77) to their portfolio as short-term sell ideas. Deutsche cited continued issues related to increasing credit losses, capital markets dislocations, and revenue growth at the banks.

For the week, the S&P gained 4.2%, the Dow advanced 3.2%, and the Nasdaq gained 4.2%.
DJ30 -16.61 NASDAQ +7.68 NQ100 +0.6% R2K +0.3% SP400 +0.1% SP500 +1.09 NASDAQ Dec/Adv/Vol 1392/1465/1.95 bln NYSE Dec/Adv/Vol 1386/1712/1.24 bln

Briefing market summary April 1st
4:25 pm : Today marked the start of the second quarter and what a start it was. The stock market recorded some huge gains that were surprising in their own right, and all the more surprising when taking stock of the reported catalysts for the move.

To begin, the futures market exhibited early strength following an update from Swiss bank UBS (UBS 33.01, +4.21) that it expected to incur a $19 billion writedown in the first quarter and report a loss on the order of $12 billion. German bank Deutsche Bank (DB 117.75, +4.70) then added that it anticipated a first quarter writedown of approximately $3.9 billion. For good measure Deutsche Bank clarified that conditions have become significantly more challenging during the last few weeks.

Closer to home Lehman Bros. (LEH 44.34, +6.70) noted it was successful in raising $4 billion worth of new capital through the issuance of convertible preferred shares. The deal, while dilutive in nature, was met with great enthusiasm by investors, and the market, as it helped squelch the liquidity rumors that pummeled the investment firm’s stock in the wake of the Bear Stearns collapse. Separately, UBS said it was preparing to raise as much as $15 billion in new capital.

All in all, there was a proclivity to believe that the confluence of these events implied the financial sector is nearing a bottom. That view, which has been heard before, remains open for debate, yet there was little question today that it served as a catalyst for broad-based buying interest.

The general recognition that the first day of a new quarter is often governed by a bullish bias didn’t hurt either. To this point, it is a period where new cash is often put to work in many of the prior quarter’s worst performers. Fittingly, the financial sector led Tuesday’s rally with a massive 7.5% gain that was compounded with short-covering activity.

Aside from the good vibes surrounding the financial sector, the market also rallied around the March ISM Index, which was released at 10:00 ET. The report on national manufacturing conditions, which is the outcome of a survey done by the Institute for Supply Management, checked in at 48.6 versus the market’s expectation of 47.5 and the February reading of 48.3.

A number below 50 in the ISM Index is meant to signal contraction; nonetheless, the market ran with the news as a hopeful sign that conditions in the manufacturing sector are stabilizing.

From the time the ISM Index was released it was pretty much a one-way trade that saw the major indices close at their highs for the day. A pullback in commodity prices, which was sparked by a strengthening in the dollar, provided an added measure of support.

Gold was a notable lowlight in the commodity arena as it tumbled 3.7% to $887.80 per ounce. Natural gas futures and wheat futures, which dropped 5.2% and 3.7%, respectively, were the other main drags on the CRB Index.

Presumably, money was flowing out of commodities and into stocks. The same can be said for Treasuries, which were weak across the yield curve.

The front-end bore the brunt of today’s selling in the Treasury market as expectations for a more aggressive 50 basis point rate cut at the April FOMC meeting were pared back considerably in the wake of the stock market rally. Specifically, the probability of such a move went from 52% to 20%. There is now a heavy 80% probability the FOMC only cuts by 25 basis points.

On Wednesday traders will turn their attention to the earnings report from Best Buy (BBY 43.47, +2.01) and Fed Chairman Bernanke’s testimony on the U.S. economic outlook before the Joint Economic Committee. In particular, though, they will be looking for follow-through to Tuesday’s rally.DJ30 +391.47 NASDAQ +83.65 NQ100 +4.1% R2K +3.3% SP400 +3.3% SP500 +47.48 NASDAQ Dec/Adv/Vol 733/2202/2.15 bln NYSE Dec/Adv/Vol 500/2681/1.70 bln

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