Financial Aggregator

The US equity market started on a solid footing after bright earnings news from BNP Paribas and HSBC and from a positive overnight session in China (Shanghai / Hong Kong).

The US mood improved even further after the government reported a strong reading on the ISM Manufacturing Index for July; it came in at a reading of 55.5 (consensus estimate: a reading of 54.2). According to the Commerce Department there was also a surprising 0.1% advance in construction spending in June (consensus estimate: a decline in spending of 0.8%). Here, however, it must be noted that any strength on the index came purely from government building activity. In fact, construction spending data from the private sector – both in housing and nonresidential projects – was in decline.

Also providing a boost for the market were soothing words from Federal Reserve Chairman Ben Bernanke who gave a speech in South Carolina. Bernanke stated that the worst of the financial crisis had been overcome, although he cautioned that ‘… we have a considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings’.

US Treasury Secretary Geithner also spoke comforting words in New York today, promising not to encumber Wall Street with red tape. In return for the favor, he asked the large banks be more forthcoming with business loans. The recent signing into law by President Obama of a 2,300-page package of financial regulatory reforms has the banking sector worried, and Geithner is trying to bring a sense of calm and stability to the industry. Today, he promised that the Obama administration ‘ ….will move as quickly as possible to bring clarity to the new rules of finance,’ adding that ‘We will not risk killing the freedom for innovation that is necessary for economic growth.’

By noreply@noemail.com (HGH Press)

Yesterday, we suggested that there was some sense that equities markets were ‘oversold:’ (on the heels of a seven-day losing streak on the Dow and a ten-session losing streak on the Nasdaq 100). Today, some market commentators suggest there was no real catalyst for today’s strong rally which was the best session on the S&P 500 in over a month (on a percentage basis). There were no major corporate or economic data releases to catalyze the move.

Parallel to the market’s strong up-move, we saw a solid decline in the market’s ‘fear gauge’, the Volatility Index (VIX). It was the VIX’s fourth consecutive down-session over which time the index has lost more than 20%. This is typically an indication that investors are less worried about sudden, significant market swings, particularly to the downside.

There were no major economic reports today and no notable earnings releases (Alcoa will start a new earnings season next week). Looking ahead, the government will release the newest data on jobless claims and retailers will report monthly June sales. Both reports are crucial, as investors still fear high unemployment and slowing consumer spending – two key obstacles to a stronger US economic rebound.

By noreply@noemail.com (HGH Press)

It was an ugly session for the bulls today, as outlined above. The indexes are now poised for a re-test of their May / June lows; depending on the index, these occurred during the ‘flash crash’ or in late May / Early June. The S&P 500 today tumbled to its lowest intraday closing levels since November. Notably, only a single stock in the 500 stock index closed up today.

Selling pressure was apparent right from the beginning of today’s trading, catalyzed by news that China reported strongly weaker leading monthly indicators (down to plus 0.3% from the prior month’s reading of plus 1.7% surge). This indication that China’s growth is weakening to such an extent brought out the bears en force. To make the bearish case based on weakening fundamentals even more, the European Central Bank refused to extend liquidity measures to banks, contributing to a potential liquidity squeeze.

In the US, domestic economic data also failed to improve the dour mood on Wall Street. Consumer confidence data for June came in at 52.9, below expectations (consensus estimate: a reading of 62.0 on the index; last month’s reading: a value of 62.7).

A rare bright spot in today’s stock landscape was the first trading day of electric car maker Tesla Motors (based in Palo Alto, CA) which surged more than 40%. The company raised more money than expected in its initial stock offering. Tesla is the first US automaker to go public since Ford Motor held its IPO in 1956. Tesla raised $226.1 million, selling 13.3 million.

By noreply@noemail.com (HGH Press)

Early this morning, persistent fears about Europe’s debt situation and the tensions between North and South Korea led to a strongly bearish market open. Also weighing was the fact that the oil spill in the Gulf is now affecting not only the environment of the Gulf, but more and more impacting fisheries, hotel and leisure industries over wider areas. At this point in the day, 95% of the S&P 500 components showed losses and the S&P 500 itself was at a six-month low, down some 3%.

A combination of an oversold bounce, short-covering, and the releases of positive consumer confidence numbers were seen as the catalyst for the strong bounce that followed, which boosted the S&P 500 all the way to a slightly positive close. May consumer confidence number beat expectations, with the Index coming in at a level of 63.3, a two -year high.

Other economic data released today was however largely dismissed: (1) The March reading of the S&P/CaseShiller 20-City Composite index was off 0.1%; (2) the FHFA Home Price Index for the same month produced a 0.3% gain.

The market found more upside momentum after the chairman of the House Financial Services Committee suggested less stringent wording for parts of the financial reform bill, stating that banks should not be required to sell / spin off their (profitable) derivatives units. The possibility we could see a dilution or elimination of the proposed rules regarding derivatives trading boosted the financial sector.

Wednesday:
	8:30 AM DURABLE GOODS ORDERS M/M (Apr): 1.3% / -0.6% DURABLE GOODS ORDERS EX-TRANS M/M (Apr): 0.3% / 3.5% 10:00 AM NEW HOME SALES SAAR (Apr): 420K / 411K NEW HOME SALES M/M (Apr): 2.2% / 26.9%

Thursday:
	8:30 AM GDP (annualized) (Q1 P): 3.5% / 3.2% GDP DEFLATOR (annualized) (Q1 P): 0.9% / 0.9% CONTINUING CLAIMS May-15: n.a. / 4625K INITIAL CLAIMS May-22: 435K / 471K

Friday:
	8:30 AM PCE DEFLATOR Y/Y (Apr): n.a. / 2.0% PCE DEFLATOR Y/Y (core)(Apr): 1.2% / 1.3% PERSONAL INCOME M/M (Apr): 0.5% / 0.3% PERSONAL SPENDING M/M (Apr): 0.3% / 0.6% 9:45 AM CHICAGO PMI (May): 62.0 / 63.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (May F): 73.5 / 73.3

By noreply@noemail.com (HGH Press)

Weakness in US financials was seen as dragging the market lower, notably in the last half hour of trading where bearish momentum resurfaced after the bulls had tried to get the week off to a good start. The Dow is now at a three-month low. On a positive note, market observers say the selling has become more orderly compared to the last two weeks of panic selling.

The situation in Europe continues to bring doubt to many US equity investors. The latest from Europe suggests more financial stress, with today’s news that four Spanish savings banks plan to merge into that country’s fifth-largest banking group in an effort (supported by the Bank of Spain) to cut losses. In fact, Spain’s central bank took control of a regional savings bank amid financial uncertainty.

In US economic news, the National Association of Realtors announced that sales of previously owned homes were up 7.6% in April (to an annualized 5.77 million units) – their best level in five months. The data still includes buyers seeking to take advantage of a soon-expiring government tax credit.

This week will bring a loaded economic data release calendar (as shown below).

Tuesday:
	9:00 AM S&P CASE SHILLER INDEX (Mar): n.a. / 144.0 S&P CASE SHILLER Y/Y (Mar): 2.4% / 0.6% 10:00 AM CONF.BOARD CONSUMER CONFIDENCE (May): 59.0 / 57.9 HOUSE PRICE INDEX Q/Q (Q1): n.a. / -0.1% HOUSE PRICE INDEX M/M (Mar): n.a. / -0.2% RICHMOND FED MANUF. INDEX (May): 25.0 / 30.0

Wednesday:
	8:30 AM DURABLE GOODS ORDERS M/M (Apr): 1.3% / -0.6% DURABLE GOODS ORDERS EX-TRANS M/M (Apr): 0.3% / 3.5% 10:00 AM NEW HOME SALES SAAR (Apr): 420K / 411K NEW HOME SALES M/M (Apr): 2.2% / 26.9%

Thursday:
	8:30 AM GDP (annualized) (Q1 P): 3.5% / 3.2% GDP DEFLATOR (annualized) (Q1 P): 0.9% / 0.9% CONTINUING CLAIMS May-15: n.a. / 4625K INITIAL CLAIMS May-22: 435K / 471K

Friday:
	8:30 AM PCE DEFLATOR Y/Y (Apr): n.a. / 2.0% PCE DEFLATOR Y/Y (core)(Apr): 1.2% / 1.3% PERSONAL INCOME M/M (Apr): 0.5% / 0.3% PERSONAL SPENDING M/M (Apr): 0.3% / 0.6% 9:45 AM CHICAGO PMI (May): 62.0 / 63.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (May F): 73.5 / 73.3

By noreply@noemail.com (HGH Press)

Wall Street loves to name market events with catchy names. For instance, last week’s crash was not simply a crash but the ‘flash crash’. Today, we noted a new buzzword used in the press: ‘Eurolehman’. The fact that we did not witness a Lehman-style doomsday scenario from the European front gave some market observers hope that a nastier sell-off could be avoided, at least for now. Initially, the day started on a gloomy note for the bulls (on the heels of yesterdays’ strong slide), with the broad market making a three-month low, but that was the worst of it as the market headed higher intraday, apparently catapulted by short-covering namely in the financial sector. Financials had lost some 11% over the last six sessions but rallied today by 3.6% gain. This leadership role helped the broad market find some upside today. Encouraging was the fact that financials rallied even though the Senate has now passed the contentious Financial Reform bill (which now goes to the House for vote). A rumor of a settlement in the Goldman fraud case may also have contributed to a more bullish tone today.

Some money managers suggested investors would be kicking themselves in several months’ time if they failed to pick up stocks on the cheap during the current correction. On the other hand, numerous bearish-minded commentators insist the market is headed significantly lower from current levels, for instance suggesting the Dow will move to 9,000 in the not-too-distant future.

The Labor Department released state-specific unemployment rate data today for April. Jobless rates fell in 34 states and in D.C., but they rose in six states; rates held steady in 10 states. In comparison, in March, 22 states had seen increased unemployment and only 16 states had reported a decline.

Monday:
	8:30 AM CHICAGO FED NAT.ACTIVITY INDEX (Apr): n.a. / -0.1% 10:00 AM EXISTING HOME SALES SAAR (Apr): 5.60M / 5.35M EXISTING HOME SALES M/M (Apr): 4.7% / 6.8%

Tuesday:
	9:00 AM S&P CASE SHILLER INDEX (Mar): n.a. / 144.0 S&P CASE SHILLER Y/Y (Mar): 2.4% / 0.6% 10:00 AM CONF.BOARD CONSUMER CONFIDENCE (May): 59.0 / 57.9 HOUSE PRICE INDEX Q/Q (Q1): n.a. / -0.1% HOUSE PRICE INDEX M/M (Mar): n.a. / -0.2% RICHMOND FED MANUF. INDEX (May): 25.0 / 30.0

Wednesday:
	8:30 AM DURABLE GOODS ORDERS M/M (Apr): 1.3% / -0.6% DURABLE GOODS ORDERS EX-TRANS M/M (Apr): 0.3% / 3.5% 10:00 AM NEW HOME SALES SAAR (Apr): 420K / 411K NEW HOME SALES M/M (Apr): 2.2% / 26.9%

Thursday:
	8:30 AM GDP (annualized) (Q1 P): 3.5% / 3.2% GDP DEFLATOR (annualized) (Q1 P): 0.9% / 0.9% CONTINUING CLAIMS May-15: n.a. / 4625K INITIAL CLAIMS May-22: 435K / 471K

Friday:
	8:30 AM PCE DEFLATOR Y/Y (Apr): n.a. / 2.0% PCE DEFLATOR Y/Y (core)(Apr): 1.2% / 1.3% PERSONAL INCOME M/M (Apr): 0.5% / 0.3% PERSONAL SPENDING M/M (Apr): 0.3% / 0.6% 9:45 AM CHICAGO PMI (May): 62.0 / 63.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (May F): 73.5 / 73.3

By noreply@noemail.com (HGH Press)

The threat that entire countries could potentially default finally caused a strongly bearish session. It had seemed that the ongoing bull run was immune to just about anything, but today’s news of credit-rating downgrades not just of Greece but now of Portugal brought on a rare, unambiguous down-day on the US equity market. Greece’s credit rating now stands at BB+ (from BBB+); Portugal’s is currently at A- (from A+).

The fear has spread that Europe’s growing credit troubles could derail the global economic recovery.

Ironically perhaps, but Goldman Sachs, whose CEO appeared before the Senate Subcommittee investigating the financial crisis was the only financial company (of the 79 listed on the S&P 500) to close positive today. While Goldman has its own set of problems, the entire financial sector is dealing with uncertainty of the outcome of the Obama financial reform legislation currently being debated in the Senate. Among other things, it would separate derivatives trading from other banking (depository) activities.

In a reflection of the soured mood on Wall Street, the Chicago Board Options Exchange Volatility Index – VIX – jumped over 30% to score its largest gain since October 2008 as investors race to buy put protection.

In summary, the market is facing a situation where corporate America has just released very strong earnings and where economic data is pointing to a recovery, but where concerns are coming from sovereign debts spiraling out of control in Europe.

Wednesday:
	2:15 PM FED RATE ANNOUNCEMENT (Apr): 0.25% / 0.25%

Thursday:
	8:30 AM CONTINUING CLAIMS Apr-17 (H): 4613K / 4646K INITIAL CLAIMS Apr-24: 442K / 456K 10:30 AM CHICAGO FED NAT.ACTIVITY INDEX (Mar): n.a. / -0.6%

Friday:
	8:30 AM GDP (annualized) (Q1 A): 3.4% / 5.6%GDP DEFLATOR (annualized) (Q1 A): 0.9% / 0.5% EMPLOYMENT COST INDEX (Q1): 0.5% / 0.5% 9:45 AM CHICAGO PMI (Apr): 60.0 / 58.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (Apr F): 71.0 / 69.5

By noreply@noemail.com (HGH Press)

The threat that entire countries could potentially default finally caused a strongly bearish session. It had seemed that the ongoing bull run was immune to just about anything, but today’s news of credit-rating downgrades not just of Greece but now of Portugal brought on a rare, unambiguous down-day on the US equity market. Greece’s credit rating now stands at BB+ (from BBB+); Portugal’s is currently at A- (from A+).

The fear has spread that Europe’s growing credit troubles could derail the global economic recovery.

Ironically perhaps, but Goldman Sachs, whose CEO appeared before the Senate Subcommittee investigating the financial crisis was the only financial company (of the 79 listed on the S&P 500) to close positive today. While Goldman has its own set of problems, the entire financial sector is dealing with uncertainty of the outcome of the Obama financial reform legislation currently being debated in the Senate. Among other things, it would separate derivatives trading from other banking (depository) activities.

In a reflection of the soured mood on Wall Street, the Chicago Board Options Exchange Volatility Index – VIX – jumped over 30% to score its largest gain since October 2008 as investors race to buy put protection.

In summary, the market is facing a situation where corporate America has just released very strong earnings and where economic data is pointing to a recovery, but where concerns are coming from sovereign debts spiraling out of control in Europe.

Wednesday:
	2:15 PM FED RATE ANNOUNCEMENT (Apr): 0.25% / 0.25%

Thursday:
	8:30 AM CONTINUING CLAIMS Apr-17 (H): 4613K / 4646K INITIAL CLAIMS Apr-24: 442K / 456K 10:30 AM CHICAGO FED NAT.ACTIVITY INDEX (Mar): n.a. / -0.6%

Friday:
	8:30 AM GDP (annualized) (Q1 A): 3.4% / 5.6%GDP DEFLATOR (annualized) (Q1 A): 0.9% / 0.5% EMPLOYMENT COST INDEX (Q1): 0.5% / 0.5% 9:45 AM CHICAGO PMI (Apr): 60.0 / 58.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (Apr F): 71.0 / 69.5

By noreply@noemail.com (HGH Press)

It was a relatively dull session that ended a strong winning streak on the major indexes, with the exception of the Dow, which benefited from strong earnings and a positive global outlook by mining and construction equipment maker Caterpillar and thus extended its winning streak to a 12th gain in thirteen sessions.

In contrast, there was weakness in the financial sector, with names such as Goldman Sachs, JPMorgan Chase, Bank of America, and Citigroup all lower. Citigroup was off more than 5% on the news the Treasury Department plans to sell as many as 1.5 billion shares in order to recoup bailout money. The financial sector was down in general due to uncertainty over the pending derivatives reform bill, with a potentially tougher bill gaining more support after the SEC recently filed civil fraud charges against Goldman Sachs. One of the tenets of the proposed bill is to move complex derivatives deals onto trading platforms, out in the open so to speak. Troubles for Goldman Sachs are not over, as some of its executives and traders will face questioning on Tuesday by a Congressional panel.

In the M&A sector, Hertz Global Holdings announced an agreement to purchase Dollar Thrifty Automotive Group for roughly $1.17 billion in cash and stock. Hertz is currently the world’s largest car rental company (by number of locations), and this acquisition will boost the number of Hertz’s global locations to 9,800.

In Europe, the Greek bailout saga continues, with speculation that Germany may balk at guaranteeing an early release of bailout funds.

Tuesday:
	9:00 AM S&P CASE SHILLER INDEX (Feb): n.a. / 145.3 S&P CASE SHILLER Y/Y (Feb): 0.8% / -0.7% 10:00 AM CONF.BOARD CONSUMER CONFIDENCE (Apr): 53.7 / 52.5 RICHMOND FED MANUF. INDEX (Apr): 9.0 / 6.0

Wednesday:
	2:15 PM FED RATE ANNOUNCEMENT (Apr): 0.25% / 0.25%

Thursday:
	8:30 AM CONTINUING CLAIMS Apr-17 (H): 4613K / 4646K INITIAL CLAIMS Apr-24: 442K / 456K 10:30 AM CHICAGO FED NAT.ACTIVITY INDEX (Mar): n.a. / -0.6%

Friday:
	8:30 AM GDP (annualized) (Q1 A): 3.4% / 5.6%GDP DEFLATOR (annualized) (Q1 A): 0.9% / 0.5% EMPLOYMENT COST INDEX (Q1): 0.5% / 0.5% 9:45 AM CHICAGO PMI (Apr): 60.0 / 58.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (Apr F): 71.0 / 69.5

By noreply@noemail.com (HGH Press)

Headlines and many market observers suggest that everything is coming up roses and that the market can simply only continue to go up from here. For instance, an article today suggests investors who missed the now roughly 80% rally off the March 2009 lows should act now – while there is still a chance to get in. The fear of missing out on further gains explains well why this market seemingly never corrects. This pattern of no retracements lasting more than a few hours, or perhaps a day or so, has just given the Dow its longest weekly winning streak in six years.

Today’s market-boosting headline was that we just saw the biggest jump in new home sales in close to 50 years. New data shows that new homes purchases were up 27% in March, the largest such gain since 1963. This may appear at odds with other recent data suggesting foreclosures at near record highs, but can be explained by the fact that government tax credits for home purchases are about to expire which has triggered a rush to close on deals quickly. The new homes sales data is based on contracts signed whereas existing home sales data (just recently released and not nearly as strong) are based on actual closings.

In other economic data, durable goods orders excluding transportation rose 2.8% in March, advancing by the greatest margin since December 2007, significantly higher than consensus estimates. However, total durable goods orders declined 1.3% (consensus estimate: a rise of 0.2%).

Next week will see a meeting of the Federal Reserve to determine interest rates. Recent strong economic growth, for instance in the durable goods orders, may increase the odds interest rates could rise sooner than believed, some observers suggest. However, the Fed funds futures show only a 25% chance the Fed will raise rates by August (up from 16% odds a week ago). Concerning next week’s meeting, these futures show a zero percent chance of an interest rate hike.

Tuesday:
	9:00 AM S&P CASE SHILLER INDEX (Feb): n.a. / 145.3 S&P CASE SHILLER Y/Y (Feb): 0.8% / -0.7% 10:00 AM CONF.BOARD CONSUMER CONFIDENCE (Apr): 53.7 / 52.5 RICHMOND FED MANUF. INDEX (Apr): 9.0 / 6.0

Wednesday:
	2:15 PM FED RATE ANNOUNCEMENT (Apr): 0.25% / 0.25%

Thursday:
	8:30 AM CONTINUING CLAIMS Apr-17 (H): 4613K / 4646K INITIAL CLAIMS Apr-24: 442K / 456K 10:30 AM CHICAGO FED NAT.ACTIVITY INDEX (Mar): n.a. / -0.6%

Friday:
	8:30 AM GDP (annualized) (Q1 A): 3.4% / 5.6%GDP DEFLATOR (annualized) (Q1 A): 0.9% / 0.5% EMPLOYMENT COST INDEX (Q1): 0.5% / 0.5% 9:45 AM CHICAGO PMI (Apr): 60.0 / 58.8 9:55 AM MICHIGAN CONSUMER SENTIMENT (Apr F): 71.0 / 69.5

By noreply@noemail.com (HGH Press)