Morning Call

0 CommentsFriday • May 22, 2009 • by alwaters

Morning Call
May 22, 2009

“Prosperity cannot be restored by raids upon the public Treasury.”

Herbert Hoover

Sell Sell Sell was the catchphrase most heard yesterday. The Dow, after falling by as much as 200 points during the day, finished with about a 130 point loss. All sectors averaged lower and even the bond market saw downward pricing movement. Some important groundwork was laid out for today’s trading, however. First of all, some hesitation in the oil market set up a positive start to the day today. Oil is up about a half Dollar this morning to reach the mid-$61 range. This should lead to positive price movement in the drillers and major integrated players today. Those with the largest retracement yesterday will see the biggest upside today. We will be watching Atwood Oceanics (ATW), Union Drilling (UDRL), and Diamond Offshore (DO). Atwood is likely the best candidate after pulling back 2.75% yesterday. This is a somewhat volatile stock with 86% institutional ownership and strong revenue growth.

Gold is also in play with a strong move late yesterday and this morning. Now trading above $956, gold is receiving a lot of attention as the place to be. In fact, the miners were among the few stocks moving higher yesterday and it looks like that trend will accelerate today. We are sticking with the same names for now: Newmont (NEM), Yamana (AUY), and Kinross Gold (KGC). Yamana gained just under 5% yesterday and should be one of the strongest picks today, as well.

Futures are trading higher this morning but without any real conviction. The broader market may simply level off heading into the weekend, but there will be some winners to choose from. Asian equities finished lower by a marginal amount overnight with financials and the tech sector among the weakest. In Europe, the indexes are holding on to modest gains but, in a contrast to Asia, the financials and tech stocks are stronger in European trading.

Besides the positive movement mentioned for gold and oil, most other commodities have managed to move higher also. Copper and Silver have outperformed gold in terms of percentage changes and Platinum, although flat this morning, has been quietly moving higher once again. As might be expected, the Dollar has moved downward against the major currencies in harmony with gold’s upward trend.

We have a very light news day today with no scheduled economic reports and only a few earnings releases on the agenda. Among these, we will have reports coming from British Airways, Mobile Telesystems, and Yingli Green Energy Holding Company.

Sometimes withholding the hard truth is worse than just blurting it out and getting it over with. The UK Treasury has decided it will not release details of stress tests conducted on British banks. Citing the concern that releasing the information would lead to instability and force the government to take further action to shore up the banks, pretty much says it all without saying it out loud. Investors and other citizens will, of course assume the worst. In any case, the banking industry clearly has a rough road ahead. Add to this the fact that Bank United, Florida’s biggest regional bank, was seized by regulators on Thursday, in the largest bank failure this year. Bankers may be about as popular as undertakers and tax collectors these days, but they are a lynchpin in the economy and weakness in the banking system is a concern for all.