Morning Call

0 CommentsThursday • June 25, 2009 • by alwaters

“It’s not the bulls and bears you need to avoid — it’s the bum steers.”

Chuck Hillis

Sometimes those that stand by and watch a witch hunt unfold later find themselves accused. During the virtual unraveling of the financial system, many a finger has been waved in the faces of corporate executives, regulators, and the like. Now the accusing eye has turned toward the very top of the food chain. Fed Chairman Ben Bernanke will be up for reappointment or replacement in January and has received only lukewarm support from the President and his administration. Whether Bernanke did too much, too little, or in any case the right things during the unfolding crisis are now being questioned. Further jeopardizing his job security is the investigation into whether the Federal Reserve engaged in a cover up of pertinent details and coercively pushed Merrill Lynch into the hands of Bank of America. The more conspiracy oriented thinkers believe that Larry Summers may be waiting in the shadows for a shot at the Fed Chairman’s seat.

Market View

The Dow finished slightly lower yesterday, but the NASDAQ and S&P actually managed decent gains. A breakdown of industry sectors showed that most finished higher on the day. Basic Materials, Technology, and Transportation were among the leaders. Our solar picks yesterday saw positive results, with LDK Solar up by 2.5% and JA Solar Holdings up nearly 8%. Our third pick, Rene Solar gained a notable 11% during the day. All three have moved even higher during aftermarket trading, so we expect another positive day in this sector. We may also see some momentum gather later in the day for the major integrated oil stocks and some of the drillers. Afterhours trading has been mixed in this sector, but with oil heading higher this morning, these stocks should start to benefit.

Overseas, it has been two opposing stories in Europe and Asia. Starting in Asia, the indexes moved higher by an average of about 2% with financials and some industrials leading the way higher. Today in Europe, however, the indexes moved downward at the opening and are presently down by an average of 1.5%. Price performance on the most actively traded stocks in Europe has also been inconclusive within sectors. For the US markets, it is important to note that short selling on the S&P has risen for the first time since March in an indication of growing negative sentiment among traders. Interestingly, some healthcare stocks are seeing the highest short selling, while banks are seeing a decline in their short ratios.

In a bit of a red flag regarding economic sentiment, commodities are somewhat weak this morning. Both gold and oil, however, are higher. Crude prices have crept steadily higher throughout the morning; up by 1% to just over $69. Gold has floated on either side of even most of the morning and is presently up by $3 at $937. Industrial metals are also slightly higher. The Dollar is higher against the Yen and Pound this morning, but is down on the Euro.

In another important day for economic news, it will be GDP numbers and Initial Jobless Claims grabbing the spotlight. For earnings, ConAgra, Lennar Corporation, McCormick and Company, and Micron Technology will report today.

This morning’s economic reports will have a lot do with market movement today. Initial Jobless Claims will certainly fluctuate in the coming months, but rising continuing claims may be the most concerning factor. We are essentially between rounds in what will certainly be a long economic fight. We tend to disagree with those that dismiss jobless claims as a lagging indicator while proudly holding up the latest green shoot. We pointed out recently that, while unemployment may in fact be a lagging indicator, but that doesn’t mean it is irrelevant. The numbers are in fact catching up with the first leg down in the economy, but there is still plenty of concern that the head could lead the tail down even further.

Posted in: Morning Call: Daily Analysis of the Global Markets and Economy

Tagged with: bonds, economy, gold, money management, oil, stocks, wall street