Archive for April, 2010
Morning Call
“The undertaking of a new action brings new strength.”
Evenus
Morning Call
April 22, 2010
Gold Update
Gold has hovered near even throughout the morning. For that matter, stocks and commodities have also. Consolidation at this level is expected and any stronger moves will be short-lived.
One significant factor supporting the price of gold right now is high expectations of inflation increasing globally. Economic indicators out of Asia, particularly China and India, and other developing economies are already pointing in that direction.
Gold should trend higher over the next few quarters, driven by investment demand based on inflation concerns; particularly in the emerging economies.
Hot Stocks
Procter & Gamble Co., (PG) the world’s largest consumer products company, declared a 9.5% increase in its quarterly dividend. The maker of Tide laundry detergent and Crest toothpaste has increased its dividend for 54 straight years. Shares are rapidly approaching their 52 week high and the broader consumer sector has been performing rather well.
Public Finance Update
The bill to regulate over-the-counter derivatives and impose a fiduciary duty on swap dealers for municipal issuers, proposed by Senator Blanch Lincoln, passed the Senate Agriculture Committee yesterday. The bill is intended to be added to the massive financial regulatory reform bill pending before the full Senate. The Senate is expected to begin procedural votes on the measure as early as today. President Obama will also be speaking today about regulation reform and to urge the Senate to move ahead.
Meanwhile Securities and Exchange Commission Chairman Mary Schapiro expressed mixed feelings about some portions of the proposal, as did a large number of municipal market participants.
Market Outlook
Stocks moved a little higher and a little lower during the day yesterday, only to finish right back where they started. This morning, futures indicate very little movement either; ahead of an important round of economic data. We should see a stronger move during the day that will be largely determined by those figures and how investors interpret them. What did move yesterday were banks, which lost an average of about 1%, and consumer discretionary stocks which gained slightly. So far in pre-market activity, bank shares appear ready to extend their decline. Here and overseas, stocks are showing some weakness on concern regarding Washington’s plans to increase oversight of financial companies and force separation of derivatives trading from other businesses, which will likely impact earnings. President Obama will speak today about regulatory efforts after a Senate panel, yesterday, approved draft legislation that would force lenders to separate swaps trading from commercial bank operations.
The Asian indexes fell by an average of about 1% last night; led lower by bank shares and some industrial stocks. Technology shares were actually relatively strong during the session. Measures taken by Chinese authorities to cool off the burgeoning real estate market are also weighing on investor sentiment in Asia and elsewhere. Reportedly, some banks in Beijing are requiring down payments equal to 60% of a property’s value for loans to buy third homes.
In Europe this morning, stocks have started to move higher in the first hour of trading. Most of the major indexes in Europe are up by about 0.5%, although the banks and most other sectors are relatively mixed. Conditions in Greece are, if anything, getting worse. Greek and EU officials began talks yesterday on activating a 45 Billion-Euro ($60 Billion) emergency aid package as Greece’s benchmark 10-year bond yield soared to 8.13%, the highest since 1998 and more than double the comparable German rate. Meanwhile, More than 500,000 workers were called on to strike in protest of extreme austerity measures.
Commodities are mixed and trading in a relatively tight range today as economic sentiment has flattened out. Oil has moved slightly higher; approaching the $84 mark in early trading. Gold, on the other hand, is hovering near the flat-line at $1147. The currency markets are also very tight this morning. The Dollar is slightly higher on the Yen and down a few pips on the Euro and Yen.
The economic calendar is full of important data today. On the agenda is Initial Jobless Claims, Producer Price Index data, and Existing Homes Sales. Earnings reports will be coming from Amazon, American Express, Baxter International, Capital One Financial, Eastman Chemical, Diamond Offshore Drilling, Federated Investors, Fifth Third Bancorp, Goodrich Corporation, Microsoft, Nucor, Peabody Energy, PepsiCo, Raytheon, Reynolds American, Southwest Airlines, Hershey, the New York Times and quite a few others.
The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.
Morning Call
“We will either find a way, or make one.”
Hannibal
Morning Call
April 21, 2010
Gold Update
Gold prices are trending very much as expected. The range of movement has narrowed somewhat and we are unlikely to see any sharp moves the rest of this week.
The disruption of flights in Europe has actually effected gold shipments to India, which could push up local prices ahead of a gold-buying festival next month.
Hot Stocks
Bank stocks and the energy sector should lead the way today. Morgan Stanley (MS) reports earnings today and shares should benefit from what is expected to be strong numbers. Wall Street analysts’ consensus calls for a profit of $0.57 a share on $7.94 Billion revenue. The actual range of estimates is relatively wide and investors are likely to look positively on figures anywhere in that range. We also point out a positive trend for TransOcean (RIG). The energy sector is performing well and drilling company TransOcean had led its peers; including a gain of more than 4% yesterday.
Public Finance Update
Senator Blanche Lincoln and other Democrats continue their fight to impose a fiduciary duty on dealers that act as swap ¬counterparties to state and local governments. Some believe that some of the counterparties have misled municipalities into entering swaps they didn’t understand. If the bill moves ahead, it is expected to face strong opposition from market participants and many Republican lawmakers, as well. An alternative proposal has been suggested by the Securities Industry and Financial Markets Association to mandate that states and localities hire registered and regulated swap advisers who do have a fiduciary obligation towards their state and local clients.
Market Outlook
Stocks stayed in positive territory yesterday, but gains on the Dow were minimal. Russell 2000 small cap stocks were the best performers, finishing higher by well over 1.5% on the day. The energy sector was the place to be yesterday which, as a group, gained well over 8%. Futures are showing very little movement this morning as some investors, perhaps, await the latest housing data due today. It does look like we will get some positive movement in banking shares today, continuing the upward momentum from yesterday.
In Asia, the Nikkei jumped at the opening bell and leveled off during the day; finishing higher by about 1.75%. The Hang Seng finished flat after a strong day yesterday. For Asian stocks, it was a rather well rounded performance with banks, technology, and industrial shares all sharing the momentum.
In Europe this morning, stocks are running flat as all eyes focus on Greece. Talks are underway in Athens to discuss activating a 45 Billion-Euro ($61 Billion) emergency aid package. Greece needs to raise about 10 Billion Euros before the end of May, while its rising cost of financing in the marketplace is making the talk s more urgent. Officials at the International Monetary Fund state the country’s fiscal crisis is a “wake-up call” on sovereign-debt risks and added that government debt has replaced stress in the financial industry as the biggest threat to the global economy.
Commodities continue to look strong again today. Crude oil is back on track after pulling back recently. Oil has added another half-Dollar to move above the $84 mark once again. As expected, gold is trending along in a relatively tight range; up by about $3 this morning to $1143. The Dollar is mixed today, with a slight gain on the Yen and Euro, but a sharp move lower on the Pound.
The only actual economic data due today is the latest Mortgage Applications figures. The IMF also releases its World Economic Outlook report beginning this morning. On the earnings side, we will hear from Abbott, Altria Group, Amgen, AT&T, eBay, EMC, Freeport-McMoRan, Genzyme, Massey Energy, McDonalds, Morgan Stanley, Starbucks, Boeing, Wells Fargo, and several others.
The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.
Morning Call
“Do not despise the bottom rungs in the ascent to greatness.”
Publilius Syrus
Morning Call
April 20, 2010
Gold Update
Gold prices will continue to be somewhat volatile until investors sift through the fallout from the fraud charges filed by the U.S. Securities and Exchange Commission against Goldman Sachs. Investors continued to move toward less risky assets yesterday, fleeing equities and other commodities, including gold. Although gold is sometimes seen as a safe haven in itself, recent volatility has taken away some of the stability that investors are seeking at this point.
Prices began to recovery late yesterday and continue to climb this morning. Up by about $7 to $1143, there should be strong support at this level. Upside potential, however, will be very limited for the rest of the week.
Hot Stocks
Biogen Idec, a biotechnology company located in Cambridge, Massachusetts will report its latest earnings today. Shares climbed 2% higher yesterday in anticipation of today’s report. The consensus is that Biogen (BIIB) will post a 7.6% jump in EPS accompanied by an 8.1% advance in revenue on a year-over-year basis. Shares have been trading at a relatively low multiple and may have room to move if the earnings hold up.
Public Finance Update
On the regulatory front, a proposal to charge the nation’s largest banks a “financial crisis responsibility fee” is gaining momentum in Washington. This is only a small part of the broad regulatory reform that the Obama administration has urged the Senate to pass as soon as this week.
In the housing market, mortgage lenders are concerned that new applications will fall sharply as the federal tax credit expires on April 30th. With mortgage rates low and the tax credit available to homebuyers, insiders believe the market recovery should have been a little stronger than it has been. In fact, a Fannie Mae report just released suggests the program has been a failure. Fannie Mae cites the fact that there has been no sign of a flurry of activity in home sales despite the looming deadline. In fact, Fannie mae also revised its 2010 growth forecast downward from 9% to 6%.
Market Outlook
Strangely, the stock market is breathing a sigh of relief over a split vote at the SEC regarding its allegations of fraud directed at Goldman Sachs. Securities and Exchange Commission officials voted 3-2 to pursue the case, but the close vote suggests that the trend toward excessive regulation may not be as strong as some had feared; thereby easing concern about the impact increased scrutiny on banks will have on profits. Meanwhile, however, financial regulators in Britain and Germany will also open an investigation into whether Goldman Sachs’s sale of mortgage securities broke any local laws after the disclosure that two European banks suffered losses on what the SEC alleges were fraudulent deals.
A strong late day rally yesterday allowed the Dow to finish higher by 73 points, led by Consumer Staples and a reasonably strong energy sector. Futures indicate a flat opening this morning. Most bank shares faltered yesterday with the exception of Citigroup which soared 7% higher. Citigroup swung to a better than expected first quarter profit as trading revenue offset loan losses. Added to the list of growing profits in the banking industry, investors have become more optimistic toward the financial sector.
Most of the Asian indexes fell flat during the night, except in China where the Hang Seng gained 1%. Banks were modestly higher while most other trading was relatively mixed. Morgan Stanley upgraded Japanese Banks and this had a positive effect on banks throughout Asia.
Stocks started the day higher in Europe this morning, although the trend has drifted toward the flat-line after an hour of trading. The UK inflation rate came in higher than expected and higher than the central bank’s self imposed limit. Consumer prices climbed 3.4% from a year earlier, compared with a 3% increase in February. Trading has been very selective within sectors, thus far.
Commodities have benefitted from modest optimism in Asia this morning. Crude oil has recovered some momentum, adding more than a Dollar in early trading to move comfortably above $82. Gold began its recovery late yesterday and is showing an upside of more than $7 this morning at $1143. The Dollar has reversed its recent trend by gaining on the Yen and giving up some ground against the Pound and Euro.
While the economic calendar is void of new data, there will be several key earnings reports coming out during the day. On the agenda today is AK Steel, Amphenol, Apple, BNY Mellon, Biogen Idec, Coach Inc., Delta Airlines, Eaton, Forest Laboratories, Goldman Sachs, Johnson and Johnson, State Street, US Bancorp, Coca Cola, Yahoo!, and a few others.
The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.
Market Data
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